Bombay High Court
Mun.Corpn.Of Greater Bombay vs M/S.Atlanta Construction Company (I) ... on 25 June, 2025
2025:BHC-OS:9407-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.935 OF 2001
IN
ARBITRATION PETITION NO.62 OF 1996
The Municipal Corporation of
Greater Mumbai, having its office at
Mahapalika Marg, Mumbai - 400 001. ...Appellant
V/s.
M/s. Atlanta Construction Company
(India) Limited having its office at
Atlanta B-22/A, V.M. Road,
Vile Parle (West), Mumbai 400 056. ...Respondent
______________
Mr. Yashodeep Deshmukh with Ms. Pooja Yadav i/b. Ms. Komal R. Punjabi
for the Appellant.
Ms. Aparna Devkar i/b. M/s. M.P. Vashi and Associates for the Respondent
______________
CORAM: ALOK ARADHE, CJ. &
SANDEEP V. MARNE, J.
Judgment Reserved on: 19 June 2025.
Judgment Pronounced on: 25 June 2025.
J U D G M E N T :
- (Per : Sandeep V. Marne, J.)
1. The Appellant-Municipal Corporation has filed the present
Appeal challenging the judgment and order dated 11 July 2001 passed by
the learned Single Judge of this Court in Arbitration Petition No.62 of
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1996, by which the Arbitration Petition filed by the Appellant-Municipal
Corporation under Section 30 of the Arbitration Act, 1940 challenging the
Award dated 3 January 1994 has been dismissed.
2. Brief facts leading to filing of the present Appeal are that
Municipal Corporation of Greater Bombay (Appellant) floated a Tender in
May 1989 for execution of work of concretization of Andheri-Kurla Road
from Western Express Highway to Mahakali Caves Road. Respondent
participated in the tender process and was awarded the work. The work
was to be commenced on 11 October 1989 and to be completed within a
period of eight months. Disputes arose between the parties during
execution of the work. It was alleged by the Respondent that the
Municipal Corporation created hindrances in execution of the work. On
the other hand, the Municipal Corporation accused the Respondent of
commission of breaches on account of failure to complete the work
within stipulated time. On 7 May 1990, Respondent addressed a letter to
the Appellant communicating that the work could not progress for
reasons beyond the control of the Respondent and sought extension of
time by four months with 30% increase in costs. Alternatively
Respondent requested for foreclosure of the contract subject to it being
compensated for alleged loss. By letter dated 25 May 1990, Appellant
requested the Respondent to reconsider its decision and to complete the
work without imposing any condition of escalation. By letter dated
4 June 1990, Respondent informed the Petitioner it would not be in a
position to carry out further work and requested the Appellant to
prepare the final bill for work executed upto 30 June 1990.
Correspondence took place between the parties making allegations and
counter-allegations against each other. Ultimately on 11 October 1990, the
Municipal Corporation informed the Respondent that it was inviting
fresh Tender for completion of remaining work and threatened
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imposition of penalty on the Respondent. On 29 October 1990, the
Appellant addressed a letter to the Respondent recording that the
Respondent had requested to treat the contract as foreclosed. By letter
dated 30 October 1990, Respondent informed the Appellant that it was
still ready and willing to carry out the work upon 30% escalation.
3. In the above background, Respondent issued notice dated
25 May 1991 to the Municipal Commissioner under Clause 96 of the
General Conditions of Contract (GCC) raising three claims. Thereafter
Respondent issued notice under Clause 97 of the GCC for appointment of
Arbitrator on 28 September 1992. The Respondent thereafter approached
the Institute of Engineers (India) for appointment of Arbitrator. On 1
December 1992, the Institute of Engineers (India) nominated
Shri S. R. Hosalkar as the sole Arbitrator.
4. Respondent filed its Statement of Claim raising five claims
viz. i) Rs.24,70,428.75 towards loss incurred on account of overheads and
profits, ii) Rs.17,50,000/- towards loss incurred on account of idling of
labour and machinery and/or reduced productivity, (iii) Rs.8,05,800/-
towards compensation for loss suffered on account of wrongful and
illegal deductions made from bills, etc., (iv) Rs.3,94,959/- towards
settlement of final bill and (v) claim for interest at the rate of 22% per
annum. The claim was resisted by the Appellant. The Appellant also
raised a Counterclaim for Rs.1,84,700/- towards costs. The Arbitrator
passed unreasoned Award dated 3 January 1994 partly awarding four out
of five claims raised by the Respondent. In respect of Claim No.(i)
amount of Rs.17,35,000/- was awarded. In respect of Claim No.(ii)
amount of Rs. 8,75,800/- was awarded. Claim No.(iii) was rejected. Out of
Claim No.(iv), only Rs.23,958/- was awarded. Towards Claim No.(v)
interest at the rate of 16% per annum was awarded. This is how the
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Arbitrator awarded total amount of Rs.26,33,958/- in favour of the
Respondent alongwith interest at the rate of 16% per annum from the
date of the Award. Each party was directed to bear its own costs.
5. Aggrieved by the Award dated 3 January 1994, Appellant
filed Arbitration Petition No.62 of 1996 under provisions of Section 30 of
the Arbitration Act, 1940. The learned Single Judge has proceeded to
dismiss Arbitration Petition No.62 of 1996 and has upheld the Award by
his judgment and order dated 11 July 2001, which is the subject matter of
challenge in the present Petition.
6. By order dated 3 June 2002, the Appeal came to be admitted
and the impugned order was stayed subject to the condition of deposit of
the entire decretal amount. Upon deposit of amount, the Respondent was
permitted to withdraw the same by furnishing security to the satisfaction
of the Prothonotary and Senior Master. If the amount was not
withdrawn, the same was directed to be invested in interest bearing
deposits. In pursuance of order passed by this Court, the Appellant-
Municipal Corporation deposited amount of Rs.62,32,883/- on
15 July 2002, which was invested by the Registry. In pursuance of orders
passed by this Court on 3 June 2002 and 24 September 2002, the
Respondent has withdrawn an amount of Rs.62,00,000/- by way of
cheque dated 30 October 2002. The balance amount has been invested by
the Registry.
7. The learned counsel appearing for the Appellant-Municipal
Corporation would submit that the learned Single Judge has erred in
dismissing the Arbitration Petition filed by the Appellant challenging the
Award. That the Award does not record any reasons and the same is
made in breach of principles of natural justice. That in absence of Award
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disclosing reasons, it is difficult to separate good portion of the Award
from bad portion. In support, reliance is placed on the judgment of the
Hon'ble Apex Court in Union of India vs. Jain Associates and another 1.
Reliance is placed on judgment of this Court in Jaimal Shah vs. Ila
Pandya2 in support of ground of perversity. It is further submitted that
the case involved admitted breach of contract by the Respondent vide
letter dated 7 May 1990. That delay in execution of the work has been
admitted by the Respondent itself and therefore, there is no question of
any breach being committed by the Appellant-Municipal Corporation.
That Clause 94 of the GCC prohibited payment of any damages and in
support, reliance is placed on judgment of Division Bench of this Court in
Maharashtra State Electricity Board, Bombay vs. Sterlite Industries
(India) Limited3. In the light of foreclosure of the contract by the
Respondent, no claim for loss of profit was admissible in addition to
specific prohibition under Clause 94 of the GCC. That therefore the case
involves exceeding of jurisdiction by the learned Arbitrator. In support of
contention that the Arbitrator must act within the bounds of the
agreement, reliance is placed on the judgment of the Apex Court in Steel
Authority of India Ltd. vs. J.C. Budharaja, Government and Mining
Contractor4.
8. It is further submitted on behalf of the Appellant that once
Claim No.(i) relating to compensation on account of loss of profit is
awarded, there was no question of entertainment of Claim No.(ii) relating
to idling of machinery. That the Respondent had reduced the amount of
Claim No.(ii) from Rs.17,50,000/- to Rs.17,25,000/- which aspect is
ignored by the learned Arbitrator while awarding 50% of the claimed
(1994) 4 SCC 665
2001 (2) Mh.L.J. 297
2000 (2) Mh.L.J. 181
(1999) 8 SCC 122
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amount. Lastly, it is submitted that award of interest at the rate of 16%
per annum is excessive. By relying on judgment of the Apex Court in
State of J & K and another vs. Dev Dutt Pandit 5 it is contended that
interest under the Interest Act, 1976 cannot exceed the highest current
rate. That the learned Judge ought to have reduced the rate of interest to
8%. On above broad submissions, it is contended on behalf of the
Appellant that the impugned judgment and order of the learned Single
Judge as well as the impugned Award are liable to be set aside.
9. The Petition is opposed by the learned counsel appearing for
the Respondent submitting that the learned Single Judge of this Court
has passed detailed and reasoned order within the ambit of Section 30 of
the Arbitration Act, 1940, which does not warrant interference. That the
learned Single Judge has acted within the bounds of Section 30 of the
Arbitration Act, 1940 and that therefore the Appellate Court cannot
interfere in the order passed by the learned Single Judge. That in any case,
grounds urged by the Appellant-Municipal Corporation in its Appeal
were beyond the scope of Section 30 of the Arbitration Act, 1940 and the
learned Single Judge has rightly dismissed the Arbitration Petition. So far
as the merits of the order of the learned Single Judge are concerned, it is
contended that the challenge to award of Claim No.(i) of Rs.17,35,000/-
was orally raised without including any specific ground in the
Arbitration Petition. That the learned Single Judge has rightly held that
the Clause 94 of the GCC had no application in respect of period after
which the contract had come to an end. That there is no bar on claim for
damages under Section 73 of the Indian Contract Act, 1872. That the
Respondent was ready and willing to complete the work on the revised
costs and it was the Appellant who refused to agree to the same. So far
as award of Claim No.(ii) is concerned, there is no bar to award the claim
(1999) 7 SCC 339
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for losses suffered by party due to idling of labour and machinery, since
such a claim is entirely distinct from the claim towards loss of profits.
That the learned Single Judge has rightly relied upon judgment of this
Court in Municipal Corporation of Greater Bombay & Anr. vs. M/s.
Atlanta Construction Company (India) Limited and Anr. 6. So far as the
award of claim towards interest is concerned, it is submitted that the
interest is awarded only from the date of the Award and the Arbitrator
has not awarded interest in respect of period before and during the
arbitration proceedings. That the case involves commercial transaction
and therefore the Arbitrator was justified in awarding 16% rate of interest.
Reliance is placed on judgment of the Apex Court in Associate Builders
vs. Delhi Development Authority7 in support of contention that unless
there is any patent illegality in the award, interference therein is not
permissible. That once the view is considered as plausible, the award
cannot be set aside. The learned counsel for the Respondent has
accordingly prayed for dismissal of the Appeal.
10. Rival contentions of the parties now fall for our
consideration.
11. It must be observed at the outset that the hearing of the
present Appeal remained pending on account of pendency of
Civil Appeal Nos.3872-3874 of 2007 before the Hon'ble Supreme Court,
which arose out of challenge to the judgment and order dated
16 December 2005 passed by the Division Bench of this Court in Appeal
Nos.662 of 1995 and 663 of 1996, by which the judgment and order of the
learned Single Judge dated 18 January 1996 in Arbitration Petition No.184
of 1992 was partly set aside and modified by the Division Bench. In that
Arbitration Petition No.184/1992 decided on 18 January 1996
(2015) 3 SCC 49
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Arbitration Petition, Award dated 6 August 1992 was under challenge.
One of the issues involved in the said proceedings was about
permissibility to simultaneously raise twin claims towards loss of profit
and loss due to idling of labour and machinery as well as permissibility
to award the claim for damages against specific stipulation in the
contract. The Division Bench had modified the award and had reduced
various claims made in favour of the contractor. The contractor
(M/s. Atlanta Construction Company (India) Limited) challenged the
judgment and order dated 16 December 2005 passed by the Division
Bench before the Hon'ble Apex Court in Civil Appeal Nos.3872-3874 of
2007. By order dated 2 November 2017, the Apex Court has allowed the
Appeals and has set aside the judgment of the Division Bench. The
Hon'ble Apex Court has held that claim of a contractor for damages
contrary to the GCC clauses could be awarded. Similarly, the Apex Court
has treated the claim towards loss of profit as distinct from the claim
towards idling of machinery. Therefore, to this extent, the order passed by
the Hon'ble Apex Court on 2 November 2017 in Civil Appeal Nos.3872-
3874 of 2007 settles majority of contentions that are sought to be urged by
the Appellant in the present Appeal. As a matter of fact, the learned
Single Judge has heavily relied upon the judgment dated 18 January 1996
passed in Arbitration Petition No.184 of 1992 (Municipal Corporation of
Greater Bombay & Anr. vs. M/s. Atlanta Construction Company (India)
Limited and Anr.) while passing the impugned order.
12. As observed above, the Arbitrator has allowed only three
claims raised by the Respondent, that too partly. Claim No.(i) towards
compensation for losses suffered on account of overheads and profits has
been only partly allowed to the extent of Rs.17,35,000/-, Claim No.(ii)
towards idling of labour and machinery and/or reduced productivity is
allowed only to the extent of Rs.8,75,000/-, Claim No.(iii) was rejected. So
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far as Claim No.(iv) towards settlement of final bill is concerned, the same
is awarded only to the extent of Rs.23,958/-.
13. It is sought to be contended on behalf of the Appellant-
Municipal Corporation that the Award does not record any reasons. The
Arbitration Act, 1940 does not mandatorily provide for recording of
reasons by the Arbitrator, which is also the requirement under the
Arbitration and Conciliation Act, 1996. Also, perusal of the order passed
by the learned Single Judge would indicate that the Award was not really
challenged on the ground of failure to record reasons. The ground of
failure to record reasons is sought to be raised only with regard to the
finding of the learned Judge that the issue of breach of contract being a
pure question of fact, could not be interfered with in an unreasoned
award. In Raipur Development Authority and others vs. M/s Chokhamal
Contractors and others8, the Apex Court has held that the Arbitrator or
umpire is under no obligation to give reasons in support of decision
reached by him unless the arbitration agreement requires him to give
such reasons. In our view therefore, mere non-assigning of reasons by
the Arbitrator while making the Award, cannot be a reason enough for
setting aside the Award. The learned Single Judge has rightly not gone
into the disputed question of fact about breach of contract as the same is
otherwise beyond the purview of Section 30 of the Arbitration Act, 1940.
Appellant's reliance on judgment of Apex Court in Union of India vs.
Jain Associates (supra) is inapposite as the same deals with the issue of
severability of good portion of award from bad portion of award for
setting aside only the bad portion and setting aside the whole of the
award if it is found that separation is impossible due to non-recording of
reasons by the Arbitrator. The judgment therefore cannot be cited in
(1989) 2 SCC 721
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support of proposition that in every case where the Award is unreasoned,
the same must be set aside.
14. The learned counsel for the Appellant has relied on Clause
94 of the GCC in support of her contention that there was specific
contractual prohibition for award of any amount under the head of loss
of profit when there is a foreclosure. Apart from the fact that the said
contention was found to have been raised directly during the course of
oral hearing in absence of such grounds being pleaded in the Arbitration
Petition, the learned Single Judge has held that Clause 94 of the GCC
could operate only during the period of contract and that the purported
foreclosure occurred after the time for execution of the contract had
expired. This is the plausible view taken by the Arbitrator and by the
learned Single Judge and we are not inclined to interfere in the same.
15. So far as Claim No.(ii) towards idling of labour and
machinery is concerned, the main ground on which the same is
challenged is impermissibility of award of claim for idling after awarding
claim towards loss of profits. As observed above, the same issue was
pending consideration before the Hon'ble Apex Court in M/s. Atlanta
Construction Company (India) Limited (supra) and it is held that the
two claims are distinct. The learned Single Judge has also recorded the
same finding while dismissing Appellant's Arbitration Petition holding
that the claim towards idling of machinery and labour could be awarded
even in case where the amount has been awarded towards loss of profit.
While doing so, the learned Single Judge has relied on judgment and
order dated 18 January 1996, which has been upheld by the Hon'ble Apex
Court.
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16. Appellant-Municipal Corporation has relied upon the
judgment of the Apex Court in Steel Authority of India Ltd. (supra),
which was also relied upon before the learned Single Judge, in support of
his contention of award of damages ignoring conditions of the contract.
The learned Single Judge has held that there is no express provision in
the GCC excluding award of damages. The learned Single Judge has
interpreted the provisions of Clause 74 of the GCC and has held that the
objection about award of compensation in the light of existence of GCC
Clause 74 was meritless. This again is a plausible finding in which we are
not inclined to interfere.
17. The Appellant has relied on judgment of learned Single
Judge of this Court in Jaimal Shah (supra), which is an authority on the
point of duty of executing court while executing the award, which is not
the issue in the present case. The said judgment was also relied on before
the learned Single Judge in support of the proposition of perversity.
However, the learned Single Judge has distinguished the said judgment
holding that there was sufficient material before the Arbitrator for
making the Award.
18. The learned Single Judge has recorded reasons for upholding
each of the three claims awarded by the learned Arbitrator. It is well
settled position of law that when the contours of jurisdiction of Appellate
Court is circumscribed by the same limitations as are put on the
jurisdiction of the Court under Section 30 of the Arbitration Act, 1940 the
Appellate Court cannot interfere merely because another view is possible.
We are therefore of the view that no ground is made out by the
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Appellant-Municipal Corporation for setting aside well-reasoned
judgment and order of the learned Single Judge. The main ground on
which the present Appeal was filed and kept pending was about
pendency of issue relating to permissibility to award compensation
towards idling of labour and machinery after awarding claim for loss of
profit and permissibility to award compensation/damages contrary to
the provisions of the GCC. Both the issues have been answered against
the Appellant-Municipal Corporation by the Apex Court by order dated
2 November 2017.
19. Coming to the aspect of interest, the learned Arbitrator has
directed payment of interest at the rate of 16% per annum from the date
of the Award. Thus, no interest is awarded before or during pendency of
the arbitration proceedings. The interest is payable only from
3 January 1994 onwards. Thus the Appellant is already relived of liability
to pay interest for about 5 long years from 1989 till 1994. The learned
Single Judge has held the transaction to be commercial one. Considering
the prevailing rates of interest at the relevant time during 1994 to 2002
coupled with the fact that no interest is awarded before and during
arbitration, we are not inclined to interfere in the interest awarded. Also
of relevance is the fact that this Court had directed the Appellant-
Municipal Corporation to deposit the decretal amount by order dated
3 June 2002 and on 15 July 2002 the deposit was made. The Respondent
has already withdrawn almost the entire deposited amount and only
minuscule amount remains deposited in this Court. In that view of the
matter, we are not inclined to interfere even in the matter of award of
interest by the learned Arbitrator as upheld by the learned Single Judge.
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20. Considering the overall conspectus of the case, we are of the
view that no case is made out by the Appellant-Municipal Corporation to
interfere in the order passed by the learned Single Judge upholding the
three-claims awarded by the learned Arbitrator.
21. The Appeal preferred by the Appellant is thus devoid of
merits. It is accordingly dismissed without any order as to costs.
[SANDEEP V. MARNE, J.] [CHIEF JUSTICE]
