Calcutta High Court
Mintech Global Private Limited vs Kesoram Industries Limited - ... on 8 November, 2024
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
In the High Court at Calcutta
Ordinary Original Civil Jurisdiction
Original Side
(Commercial Division)
The Hon'ble Justice Sabyasachi Bhattacharyya
EC 335 of 2023
IA NO: GA-COM/2/2024
MINTECH GLOBAL PRIVATE LIMITED
VS
KESORAM INDUSTRIES LIMITED - CEMENTDIVISION
With
AP-COM 334 of 2024
KESORAM INDUSTRIES LIMITED
VS
MINTECH GLOBAL PRIVATE LIMITED
With
AP-COM 335 of 2024
MINTECH GLOBAL PRIVATE LIMITED
VS
KESORAM INDUSTRIES LIMITED -CEMENT DIVISION
With
AP-COM 563 of 2024
KESORAM INDUSTRIES LIMITED
VS
MINTECH GLOBAL PRIVATE LIMITED
For the claimant/award-holder : Mr. Kalyan Bandopadhyaya, Sr. Adv.,
Mr. Sirsanya Bandopahyaya, Adv.,
Mr. Avishek Guha, Adv.,
Mr. Rahul Kr. Singh, Adv.,
Mr. Subhajit Das, Adv.
For the
award-debtor/
Kesoram Industries Ltd. : Mr. S. N. Mookherjee, Sr. Adv.,
Mr. Mainak Bose, Adv.,
Mr. Arvind Jhunjhunwala, Adv.,
Mr. Debjyoti Saha, Adv.,
Mr. Anirud Goyal, Adv.,
Mr. S. J. Mookherjee, Adv
Hearing concluded on : 05.10.2024
Judgment on : 08.11.2024
2
Sabyasachi Bhattacharyya, J:-
1. AP-COM No. 334 of 2024 has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996 (for short "the 1996 Act"), by
Kesoram Industry Limited, the respondent in the Arbitral Proceedings
(hereinafter referred to as the "respondent") whereas Mintech Global
Private Limited has filed AP-COM No.335 of 2024 challenging a
different portion of the same award, being the claimant in the Arbitral
Proceeding (hereinafter referred to as the "claimant"). Both the said
challenges have been preferred against the same award whereby some
of the claims and counter claims have been allowed by the Arbitral
Tribunal (AT) comprised of three members.
2. The short backdrop of the case is that an agreement was entered into
in writing on January 27, 2016 between the parties, whereby the
claimant was to set up and commission a manufacturing unit to make
and produce the end products of cement ready mix mortar, AAC
blocks, fly ash bricks and allied products as per requirement of the
respondent and to manufacture, make and deliver such end products
to the respondent.
3. A dispute having arisen between the parties following the issuance of
two letters dated March 7, 2017 and March 8, 2017 by the respondent
to the claimant asking the latter to stop further manufacture and
production of the end products, the arbitral proceeding was initiated
by the claimant alleging that the termination was invalid and making
several claims, inter alia towards outstanding sum and interest, future
commitment charges, loss of future earning and ancillary reliefs. The
respondent, on the other hand, took out a counter claim with the
statement of defence, praying for recovery of mobilization advance and
interests, damage to reputation, recovery of commitment charges
allegedly paid under mistaken belief and fraudulent inducement and
damages due to breach.
4. By the impugned arbitral award dated March 20, 2023, the majority
members of the AT granted the claims towards outstanding sum and
interest at the rate of 9 per cent per annum from March 2017 till the
date of the award, future commitment charges and costs to the tune of
Rs.3.50 Crore. On the other hand, the counter claims of recovery of
mobilisation advance and interest thereon at the same rate of 9 per
cent per annum were also granted. Being aggrieved by the respective
portions of the award affecting them, both the parties have preferred
the present challenges.
5. Learned senior counsel for the respondent seeks to defend the
termination of contract on the ground that the AT failed to advert to
several subsequent communications between the parties dated April
24, 2017, May 10, 2017 and August 7, 2017, which according to the
respondent disclosed the discussions between the parties regarding
the terms of exiting the contract in terms of the contractual clauses.
The AT placed stressed only on the March 7, 2017 communication
and held that the termination was invalid. It is argued that the
clauses of the agreement indicate that the same could be determined
at will with prior six months‟ notice. It is contended that the
communications between the parties clearly show that the parties
chose to exit the contract, rendering the requirement of prior notice
academic.
6. Secondly, it is argued that the commitment charges could at best be
granted till the expiry of six months after the notice since the contract,
by its very nature, was determinable at will. The AT went beyond its
jurisdiction and re-wrote the contract by granting future commitment
charges for a period of ten years from the respective dates of
commencement in respect of the different end products which, in any
event, would take such award beyond the date of expiry of the
agreement itself.
7. It is further argued that the claimant failed to produce sufficient
documents in support of its claim of damages and in the absence of
any proof in that regard, the provisions of Sections 73 and 74 of the
Contract Act come into play and the claim ought to have been
dismissed.
8. Further, learned senior counsel appearing for the respondent submits
that it was the claimant‟s duty to mitigate the loss. In the absence of
any pleading of proof as to mitigation of loss by the claimant, no
compensation could be granted under any of the heads of claims.
9. It is next argued by the respondent that the Minimum Assured
Production (MAP) as per Clause 1.7 of the contract was not met by the
claimant and as such, there was no scope of the claimant seeking
future commitment charges. The commitment charges would be
conditional upon the claimant producing the minimum assured
quantity and making the same available for consumption by the
respondent. Having not done so and having not proved the
commencement date of commercial production, none of the claims in
that regard ought to have been granted.
10. Learned senior counsel for the respondent further argues that the
contractual rate on interest on mobilisation advance was 14.50 per
cent per annum but only 9 per cent was granted, which is also
contrary to the agreement between the parties.
11. Moreover, since both the parties‟ claims were partially granted, the
burden of entire costs ought not to have been imposed on the
respondent alone.
12. Learned senior counsel cites Associate Builders v. Delhi Development
Authority reported at (2015) 3 SCC 49 and Ssangyong Engineering and
Construction Co. Ltd. v. National Highway Authority of India (NHAI)
reported at (2019) 15 SCC 131 in support of the proposition that an
unreasoned award violates the fundamental policy of Indian law and
amounts to patent illegality under Section 34 of the 1996 Act. Non
consideration of vital evidence tantamounts to perversity, on which
ground the award ought to be set aside insofar as the claimant‟s
claims are concerned.
13. Learned senior counsel next cites Kailash Nath Associates v. Delhi
Development Authority and another reported at (2015) 4 SCC 136 for
the proposition that if the contract specifies a sum for the breach or as
a penalty clause, reasonable compensation can be granted,
irrespective of actual damage, not exceeding the stipulated amount.
14. Mahanagar Telephone Nigam Limited v. Tata Communications Ltd.,
reported at (2019) 5 SCC 341, is next cited for the contention that
under Section 74 of the Contract Act, compensation for breach is
limited to liquidated amount or stipulated penalty and genuine pre-
estimate of damages with proof of actual damage is required for grant
of such damage, unless such proof is difficult or impossible. Here, the
clauses of the contract specifies liquidated damages for delays in
delivery, installation and commissioning with penalties, which ought
to have been adhered to by the AT.
15. Learned senior counsel cites Unibros v. All India Radio reported at
(2023) SCC OnLine SC 1366 where the Supreme Court laid down the
requirements for grant of claims relating to profit, opportunities and
the like. Delay in completion of contract which is not attributable to
the claimant, the claimant‟s status as an established contractor
handling substantial projects and credible evidence to substantiate
the claim of loss of profitability are prerequisites for such ground.
16. Learned counsel next cites Cargill International SA v. Bangladesh
Sugar and Food Industries Corp., a Queen‟s Bench decision of England
reported at (1996) 4 AllER 563, and the judgment of the court of
appeal from the same, reported at (1998) 1 WLR 461, for the
proposition that performance bonds in contracts do not represent
estimate of damages; rather, those guarantee due performance.
Additional damages beyond the bond cannot be granted. Additional
damages, if any, in respect of recovery of overpayments can be
pursued separately.
17. Learned senior counsel also relies on Murlidhar Chiranjilal v.
Harishchandra Dwarkadas and another reported at (1961) SCC OnLine
SC 100 and argues that the damages for breach place the injured
party in a position as if the contract was performed. However, the
injured party must also mitigate its losses. In a Bombay High Court
decision in the matter of M/s Auto Craft Engineers v. Akshar
Automobiles Agencies Private Limited, it was also reiterated that
mitigation efforts are to be demonstrated by the claimant.
18. In Indian Oil Corporation Ltd. v. Amritsar Gas Service and others,
reported at (1991) 1 SCC 533, it was held by the Supreme Court that if
the agreement is revocable, the only relief if there is an invalid
termination is compensation for the period of notice.
19. Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies
Private Limited reported at (2021) 7 SCC 657 is cited for the
proposition that the grounds in a dissenting opinion can be set up as
good grounds for challenging an award.
20. Learned counsel next cites Union of India v. Bright Power Projects
(India) Pvt. Ltd. reported at (2015) 9 SCC 695 and argues that the AT
may award interest from the date of cause of action commencement
till the date of award, subject only to agreement by parties. Delhi
Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation reported
at (2022) 9 SCC 286 is relied on to argue that it is the discretion of the
AT under Section 31(7) of the 1996 Act whether to grant interest or
not and, if so, for what period and what amount, subject to the
agreement.
21. Learned counsel next argues that the proposition that the AT cannot
re-write a contract is a fundamental principle of justice and the AT
cannot interpret beyond the scope of the contract. In support of such
contention, the following judgments are cited:
i) PSA SICAL Terminals Private Limited v. Board of Trustees of V.O.
Chidambranar Port Trust Tuticorin and Others), reported at 2021
SCC OnLine SC 508;
ii) South East Asia Marine Engineering & Constructions Limited
(SEAMEC LTD.) v. Oil India Limited, reported at (2020) 5 SCC
164;
iii) Indian Oil Corporation Limited v. Shree Ganesh Petroleum,
reported at (2022) 4 SCC 463.
22. Refuting the arguments of the respondent, learned senior counsel
appearing for the claimant contends that the termination itself being
invalid, the provision in the contract for repayment of mobilisation
advance and interest thereon were automatically scrapped and hence,
unlawfully granted in the award.
23. It is contended that the claimant was in no way responsible for less
production, if any, as the respondent could not market the minimum
assured quantity in terms of contract. It is argued that the respondent
paid the commitment charges without demur till June, 2017 without
any denial of liability and as such, cannot now claim a refund of the
same.
24. Learned senior counsel relies on the views of the third Arbitrator, who
authored the dissenting opinion, to argue that there were sufficient
materials on record to grant future earnings as claimed by the
claimant.
25. It is argued that the termination being illegal, the claimant was very
much entitled to future commitment charges as well.
26. Learned senior counsel for the claimant then takes the court
elaborately through the materials on record and the evidence in
support of his contention that there was strong material basis to
justify the grant of future commitment charges and the outstanding
payments as well as the interest claims of the claimant.
27. It is contended that there were four components of commitment
charges, being salary and wages, interest on capital (including
working capital), depreciation and sixteen per cent of franchise
manufacture‟s margin, all of which were quantifiable amounts and
sufficiently substantiated by evidence. The commitment charges were
granted on the basis of the revised cost sheets for calculation provided
by the respondent itself to the claimant on May 5, 2017 post-
termination of the contract and were granted on the basis of the input
of material consumption as stated by the respondent‟s witness no.1
(RW1).
28. No reason was attributed by the respondent at any point of time for
asking the claimant to stop production, nor was any clear termination
intended to be conveyed.
29. Learned senior counsel appearing for the claimant cites UHL Power
Company Ltd. v. State of Himachal Pradesh reported at (2022) 4 SCC
116 and Associate Builders v. Delhi Development Authority reported at
(2015) 3 SCC 49 for the proposition that the AT is the final authority
to interpret a contract.
30. Konkan Railway Corporation Ltd. v. Chenab Bridge Project undertaking
reported at (2023) 9 SCC 85 and Parsa Kente Collieries Ltd. v.
Rajasthan Rajya Vidyut Utpadan Nigam Ltd. reported at (2019) 7 SCC
236 are relied on for the proposition that a possible view of the AT in
respect of quantity and quality of evidence cannot be interfered with
under Section 34 of the 1996 Act.
31. It is argued that if compensation is not by way of penalty or
unreasonable, the same can be awarded if there is a genuine pre-
estimate by the parties, for which contention learned senior counsel
cites Oil & Natural Gas Corporation Limited v. Saw Pipes Ltd., reported
at (2003) 5 SCC 705.
32. In Tarapore & Company v. Cochin Shipyard Ltd., Cochin and Another
reported at (1984) 2 SCC 680, the Supreme Court held that if an
agreement is predicated upon an agreed fact situation, it becomes
irrelevant or otiose to the extent that it ceases.
33. The claimant cites A.T. Brij Paul Singh and others v. State of Gujarat,
reported at (1984) 4 SCC 59 in support of the contention that the
expectation of profit is implicit in works contracts and the margin of
profits depends on facts. In the present case, Annexure-I to the
agreement stipulates 16% as the manufacturer‟s margin and thus,
future earnings ought to have been granted.
34. Mitigation of loss is a question of fact and was not raised before the
AT. Hence, the same cannot be raised for the first time in the present
challenge under Section 34, for which proposition learned senior
counsel cites MMTC Ltd. v. H.J. Baker& Bros. Inc., reported at 2009
SCC OnLine Del 2143.
35. Learned senior counsel for the claimant also relies on Bombay
Housing Board (Now The Maharashtra Housing Board) v. Karbhase
Naik & Co., Sholapur, reported at (1975) 1 SCC 828 for the argument
that if a written notice is agreed upon for the purpose of termination,
failure to issue the same entitles the other party to compensation.
36. Radhey Shyam Pandey v. Union of India, reported at 2022 SCC OnLine
Cal 683 is cited for the contention that if a notice is required by the
agreement, non-service of the same renders the letter of termination
fall foul of the contract.
37. The claimant relies on Delhi Metro Rail Corporation Limited v. Delhi
Airport Metro Express Private Limited, reported at (2024) 6 SCC 357 for
the proposition that conclusions based on no evidence or ignoring vital
evidence are perverse, amounting to patent illegality under Section
34(2)(b)(ii) and violate Section 28(3) of the 1996 Act.
38. Ssangyong Engineering (supra) is also relied on for the proposition that
an addition or alteration of contract cannot be imposed on an
unwilling party by the AT; if so, it would be contrary to fundamental
principles of justice as understood in India and would shock the
conscience of the court.
39. Patel Engg. Ltd. v. North Eastern Electric Power Corpn. Ltd., reported at
(2020) 7 SCC 167 is relied on by the claimant for the proposition that
if the respondent is held liable to pay commitment charges, future
commitment charges cannot also be refused.
40. It is, thus, argued that the award should be set aside to the extent
that future earnings were not awarded to the claimant and sustained
in respect of the rest.
41. Having heard the parties, the court comes to the following
conclusions:
42. The scope of interference under Section 34 of the 1996 Act has been
quite clearly settled by the Supreme Court, as also reflected in the
judgments cited by both parties. Associate Builders (supra) and UHL
Power Co. Ltd. (supra) make it abundantly clear that the AT is the final
authority to interpret a contract and Konkan Railway Corpn. Ltd.
(supra) and Parsa Kante (supra) also lay down that a possible view of
the AT regarding quantity and quality of evidence cannot be interfered
with.
43. Ssangyong Engineering (supra) and Associate Builders (supra) have
been relied on by both parties. In fact, there cannot be any quarrel
with the proposition that if there is a perversity in the award insofar
as the non-consideration of vital evidence is concerned, the same
tantamounts to violation of the fundamental policy of Indian Law as
well as gives rise to a patent illegality, which is a sufficient ground for
interference under Section 34 of the 1996 Act.
44. Considered in the above backdrop, certain crucial aspects emerge as
determinants in the present case, the first of which is whether the
termination of contract was valid. Although Clause 5 of the agreement
has been relied on by the claimant, the same merely provides that the
respondent could not have the right to the manufacturing unit or
material stock, etc., in the event of termination. The said clause, thus,
has no bearing on the actual termination or its pre-conditions.
45. Rather, Clause 1.11 of the agreement is the exit clause which provides
that whichever party withdraws from its respective contractual
obligations under the agreement within the lock-in period [10+6 years,
as provided in Clause 1.10(A)], such party shall fully indemnify the
other party as per the considerations set out in Annexure-III to the
agreement. Thus, Clause 1.11 permits both parties to withdraw from
the agreement at will, which overrides the default tenure of 10 years
(with a possible extension of another 6 years, if agreed mutually).
46. However, Clause 1.11 subjects such exit to the conditions stipulated
in Annexure-III to the agreement. Annexure-III provides two separate
situations, respectively where the first and the second party to the
contract so exits.
47. In the present case, since the respondent (first party) chose to
withdraw from the contract, Clause 2 of Annexure-III applies. Sub-
clause (a) of Clause 2 provides that if the second party (here, the
claimant) agrees to retain manufacturing facility, it will have to return
the balance mobilization advances along with any pending interest
within 1 month from the end of the notice period. Sub-clause (b)
stipulates that if it does not so wish, the facility shall be dispose of
and the mobilization advance settled as per the illustrations therein.
48. Since the claimant opted for the first option of retaining the
manufacturing facility, which is abundantly clear from the materials
on record, there cannot arise any question of disposal of the facility.
49. The exit mechanism and compensation scheme in Annexure-III also
stipulates that if any party wishes to terminate the contract during its
pendency, it has to give the other party six months‟ notice in writing.
The notice period would be deemed to start from the date of
acknowledgment.
50. Thus, it is seen that a prior notice of six months is a mandate
qualifying the determination of contract at will by either party.
Admittedly, there has not been issued any such prior notice, since the
respondent proceeds on the premise that the communication dated
March 7, 2017, asking the claimant to stop production was the
termination notice.
51. Although the AT has observed that the communications dated March
7, 2017 and March 8, 2017 do not clearly disclose the intention to
terminate, the subsequent discussions between the parties, as elicited
from the subsequent correspondence between the parties which are
also part of the record, go on to show that both parties proceeded on
the premise that it was a termination nonetheless.
52. Also, the AT itself directed refund of mobilization advance and interest
thereon, thereby assuming that the agreement between the parties
stood terminated.
53. However, although the modalities of the exit process might have been
discussed between the parties, the claimant, at no point of time,
waived the mandatory contractual requirement of a prior notice of six
months. Hence, it cannot but be said that the termination of the
agreement, in the absence of such a prior notice, was invalid to such
extent.
54. The next question which follows necessarily is whether future
commitment charges could be granted beyond the six months‟ notice
period.
55. Such aspect has been discussed elaborately by the Supreme Court in
the Amritsar Gas case. As per the said judgment, if an agreement is
otherwise revocable, in the event of an invalid termination, the
compensation can be granted only for the period of notice.
56. Such logic is self-evident in the context of the instant lis, since it was
always open for both parties to exit from the contract at will by issuing
a termination letter at any point of time during the pendency of the
contract. No separate reasons were to be assigned for doing so,
making the contract determinable at will. The only rider was to issue
a six months‟ prior notice, which has not been done by the respondent
in the present case. The AT could not look beyond the said mandatory
notice period to assess any entitlement of the claimant beyond the
said period since in any event, it was always open for the respondent
to exit the contract at will.
57. Even if a prior notice was given, the agreement would come to an end
within six months from the same. In the present case, such six
months commenced from March 7, 2017, which was the date
construed to be the date of stoppage of production, never to be
resumed again. In fact the parties, by their subsequent conduct,
made it evident that both of them proceeded on the premise that the
March 7, 2017 communication tantamounted to the expression of
interest by the respondent to exit the contract in terms of Clause 1.11.
58. Even if a notice was given on the date of termination, after the lapse of
six months therefrom, the claimant could not have any further
entitlement on the strength of the contract since all contractual rights
would have come to a dead-end then.
59. Hence, the AT committed patent illegality in acting contrary to the
proposition laid down in Amritsar Gas (supra) to grant future
commitment charges much beyond the said six-months period.
60. The proposition of Patel Engineering (supra) is not applicable in the
present case in view of the agreement here being determinable at will
by either of the parties. Thus, although the respondent could be held
liable for commitment charges during the six months‟ notice period
subsequent to the termination, there was no scope of grant of future
earning or future commitment charges.
61. The Supreme Court has repeatedly held, as reflected in Ssangyong
Engineering (supra) as well, that the AT cannot deviate from the terms
of the contract. In fact, such proposition is premised on Section 28(3)
of the 1996 Act which provides that while deciding and making an
award, the Arbitral Tribunal shall, in all cases, take into account the
terms of the contract and trade usages applicable to the transactions.
62. Moving on to the issue of refund of mobilization advance, the same is
clearly governed by Annexure-III of the agreement.
63. Annexure-II clearly provides in respect of all the end products that
interest would be charged on the mobilization advance repayment at
the rate of 14.50% on the reducing balance of the principal. Notably,
the Tribunal held at Page No.120 of the award that the claimant was
contractually liable to return the mobilization advance to the
respondent with interest at the rate of 14.50% on reducing balance on
principal and further concluded that accordingly, the claimant was
held liable to pay to the respondent the said amount on account of
mobilization advance with interest "at the said rate" from March 7,
2017 till repayment. However, all on a sudden the AT deviated from
its own finding in the concluding portion and granted interest at the
rate of 9% per annum on the outstanding amount awarded from
March, 2017 till the date of award. The direction to pay interest till
the date of the award and not till the repayment, however, is
understandable, since it is covered by Section 31(7), sub-clauses (a)
and (b) of the 1996 Act.
64. The AT, under Sections 31(7)(a), has the discretion to impose interest
at such rate as it deems reasonable only when there is no agreement
otherwise between the parties. Hence, in the present case, the AT was
denuded of such discretion to reduce the rate interest to 9% per
annum on mobilization advance in the teeth of the specific agreement
between the parties, as evidenced in Annexure-III, stipulating the rate
of interest to be 14.5% per annum. Thus, the same tantamounted to
a deviation from the contract, which is violative of the principle laid
down in Ssangyong Engineering (supra) as well as Section 28(3) of the
1996 Act. In addition, the said reduction is also contrary to Section
31(7)(a) of the 1996 Act, thus, rendering such reduction patently
illegal on the face of it and accordingly amenable to interference under
Section 34 of the 1996 Act.
65. Additionally, the conclusion of 9% rate of interest is contrary to the
A.T.‟s own immediately earlier finding that the claimant was liable to
pay interest at the contractual rate of 14.50% per annum. This
amounts to perversity, which comes within the purview of „patent
illegality‟, amenable to interference under Section 34 of the 1996 Act
as well.
66. Insofar as the commitment charges already paid by the respondent
are concerned, the Tribunal did not direct refund of the same. Such
decision on the part of the AT was justified. The respondent based its
claim of refund on alleged mistaken belief and fraudulent inducement,
none of which were specifically pleaded or proved by the respondent.
That apart, the respondent, with its eyes open, participated in the
business transaction and paid commitment charges during the notice
period upon bills being raised by the claimant, much after the
termination, and is thus estopped from challenging the same, having
not raised any demur at the relevant point of time.
67. Insofar as the allegations and counter allegations regarding not
meeting the Minimum Assured Production is concerned, Clause 1.7 of
the agreement has to be looked into. Notably, the caption of the said
Clause is "Minimum Assured Production" and not „Minimum Assured
Consumption/Purchase‟. Thus, the minimum assured production is
seen from the end of the manufacturer/claimant, who has to meet the
said requirement, and not the respondent.
68. Also, the language of Clause 1.5 defines the scope of work as
"manufacture, making and delivering the end products" to the
respondent as per the latter‟s requirement. Since Clause 1.7 defines
minimum assured production as the minimum assured quantity of
end products, such assurance is not linked to the consumption by the
respondent but to the manufacture and delivery of the end product.
69. Hence, it was incumbent upon the claimant to meet the minimum
assured production. The claimant, however, has virtually admitted
that such requirement was not met, although seeking to shift the
blame to the respondent.
70. Seen from the opposite perspective, as per Clause 1.10(B) of the
contract, the respondent, in order to be liable to pay commitment
charges, must utilize the claimant‟s manufacturing unit capacity to
100% before looking at third parties for the same or similar products.
71. Hence, the "commitment", which is the essential component and pre-
requisite of "commitment charges", can arise only when the Minimum
Assured Production is met by the claimant and made available for
being utilized by the respondent. Hence, there was no scope of grant
of future commitment charges, since no present basis for enforcing
such commitment on the part of the respondent and the associated
charges has been made out by the claimant at any point of time.
72. Accordingly, there was no conceivable reason for the AT to grant
future commitment charges.
73. On such count, the decision of the AT is perverse, having overlooked
the lack of evidence in that regard, the composite effect of the clauses
of the contract insofar as the MAP is concerned (from which
contractual clauses the AT thus deviated), as well as the factor that no
future commitment charges or future earnings could be granted at all
beyond the notice period.
74. In addition, mitigation of loss, contrary to the argument of the
claimant, need not have been pleaded or proved by the respondent in
the first place. A composite reading of Sections 73 and 74 of the
Contract Act implicitly imposes the burden of proof on the claimant in
respect of mitigation of loss, making it a pre-requisite and an
inseparable component of a claim for damages. In the present case,
the claimant has not pleaded any such mitigation of loss, nor is there
any clear finding in the impugned award to that extent. In fact, for a
prolonged period, by virtue of the interim order passed by the Court,
the claimant was permitted to sell its end products without using the
brand name of the respondent, thus impliedly releasing the
respondent from the reciprocal commitment to be bound to the
products manufactured by the claimant. The principle laid down by
the Supreme Court in M/s Murlidhar Chiranjilal (supra) and the
Bombay High Court in M/s Auto Craft Engineers (supra) are thus fully
applicable in such context.
75. Hence, in the absence of consideration of such factors, the grant of
future commitment charges by the AT was patently illegal and ought
to be set aside as well.
76. Insofar as future earnings is concerned, the same logic as that which
applies to future commitment charges is applicable, and the AT was
justified in not granting future earnings to the claimant.
77. The Supreme Court has clearly set out the contours of interference
with an arbitral award, holding time and again that the AT cannot
lend an interpretation beyond the scope of the contract and cannot re-
write the contract itself. In PAC SICAL Terminals (supra), South-East
Asia Marine Engineering (supra) and M/s Shree Ganesh Petroleum
(supra), such proposition has been reiterated repeatedly, apart from
the same proposition being echoed in Ssangyong Engineering (supra).
78. Lastly, insofar as the grant of costs is concerned, the AT has reduced
the claim of the claimant in that regard and granted Rs.3.50 crore
instead of Rs.4,38,12,647/- as claimed originally, which claim was
based on a schedule of costs, which the respondent failed to offer.
Such reduction itself shifts the cost partially to the claimant. In any
event, it was well within the discretion of the AT to grant costs and no
patent illegality or element sufficient to shock the conscience of court
is found in such imposition of costs. As such, the cost component
ought not to be interfered with under Section 34 of the 1996 Act
merely because a different view than that of the AT is possible.
79. In view of the above discussions, the impugned award is liable to be
set aside partially.
80. Accordingly, AP-COM 334 of 2024, AP-COM 335 of 2024 and AP-COM
563 of 2024 are disposed of, thereby setting aside the impugned
award to the extent of Claim No.(iii) to the tune of Rs. 127,12,64,892/-
towards future commitment charges and also modifying the award to
the extent of Counter Claim No.(ii) inasmuch as the interest payable
on the mobilization advance from March, 2017 till the date of award is
to be calculated not at the rate of 9% per annum but at the rate of
14.50% per annum. The said award accordingly stands modified to
such extent.
81. EC No.335 of 2023 along with GA-COM 2 of 2024 shall now be placed
before the regular Bench having determination to take up such
matters. Liberty is granted to the parties to mention the matter before
such Bench.
82. There will be no order as to costs.
83. Urgent certified server copies, if applied for, be issued to the parties
upon compliance of due formalities.
( Sabyasachi Bhattacharyya, J. )
