State Of Chhattisgarh vs M/S Learn Nature Consultants
2022 Latest Caselaw 7491 Chatt

                                      1
                                                         ARBA No.27 of 2019

                                                                      AFR

          HIGH COURT OF CHHATTISGARH, BILASPUR
                   (Judgment Reserved on 14.10.2022)
                  (Judgment Delivered on 13.12.2022)

                             ARBA No. 27 of 2019
  1. State Of Chhattisgarh Through The Secretary Government of
     Chhattisgarh, Department of Forest, Mahnadi Bhawan, Mantralaya Atal
     Nagar, Raipur Chhattisgarh

  2. Director Cum Divisional Forest Officer (DFO) Nadanvan Zoo Safari,
     Naya Raipur, Forest Office Campus Rajatalab, Gaurav Path, Raipur
     Chhattisgarh.

                                                            ---- Appellants

                                   Versus

    M/s Learn Nature Consultants Partnership Firm, Through Its Partner
     Shri Abhisekh Sharma, Office Situated At D-8, Sector 2, Avanti Vihar
     Raipur, Tehsil And District Raipur Chhattisgarh

                                                          ---- Respondent

For Appellants/State: Ms. Meena Shastri, Additional AG along with Shri Ashutosh Mishra, PL

For Respondent : Shri Anup Majumdar, Advocate along with Shri Saket Pandey, Advocate

Hon'ble Shri Justice Goutam Bhaduri

& Hon'ble Shri Justice Radhakishan Agrawal

CAV JUDGMENT

Per Goutam Bhaduri, J

Heard.

1. The present appeal is against the judgment dated 30.10.2018 passed by

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the Commercial Court, Raipur, whereby the Court below has affirmed

the arbitral award dated 11.12.2017 passed by the sole arbitrator under

Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter

referred to as 'the Act, 1996').

2. The brief facts falls for consideration in this appeal is that the non-

applicant herein M/s. Learn Nature Consultants, which is said to be a

consultancy partnership firm, entered into an agreement with the

department of Forest to develop a World Class Jungle Safari as per the

Central Zoo Authority (hereinafter referred to as 'CZA') norms and

guidelines at Naya Raipur. The consultancy was for preparation of

master plan followed by Detailed Project Report (DPR) and supervision

for development of Jungle Safari project at Naya Raipur, Chhattisgarh.

The non-applicant being the successful bidder entered into an

agreement vide Ex. P-1 on 27.03.2012. The non-applicant, who filed a

petition before the sole arbitrator claimed that they have prepared a

master plan for Jungle Safari and submitted the copy as per the

agreement, the said master plan was approved by the forest department

authorities and thereafter was forwarded to CZA. Initially, for such

work an amount of Rs.69,07,504/- was raised out of which

Rs.66,00,000/- was paid to the Learn Nature Consultants. Thereafter,

after approval, the master plan was required to be followed by Detailed

Project Report (DPR).

3. Master plan includes the over all layout and the location, thereafter this

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was to be followed by the Detailed Project Report which includes the

minutes and particular of a construction and the layout to be carried out

for the zoo purpose. The Learn Nature Consultants as per the

requirement contended that they had filed the Detailed Project Report

(DPR) which was required to be approved by the CZA and after

submission of the Detailed Project Report, since it was to be routed

through the forest department they waited for the approval but for some

reason or the other no approval was given. Eventually when work was

started they raised a bill of Rs.1,32,16,814/- which is a total consultancy

fees for preparation of DPR. The same having not been paid and after

notice to pay, agreement was eventually terminated by the department,

the respondent raised the clause for arbitration, consequent thereof

arbitration clause has been invoked.

4. State filed their reply and contended that the claimant failed to submit

the necessary layout according to the guidelines of CZA, consequently,

after the master plan the subsequent stage of Detailed Project Report

was never approved. It further contended that the respondent was given

chance to rectify the defect and despite communication when it was not

done, the department on its own level got the master plan-Detailed

Project Report approved and since the respondent failed to comply the

terms of contract, the contract was terminated.

5. On the issues, the parties led their evidence before the sole arbitrator

and after evaluating all the facts & evidence, the award was passed in

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favour of the consultant, which reads as under:-

"E- After considering and appreciating the oral and documentary evidence adduced by both parties the ld. Sole Arbitrator passed an award in favour of the non-applicant, against the applicant Forest Department. The operative para of the impugned award reads as below:-"

(a)The respondent shall make payment of Rs.1,84,76,640/-(Rupees One Crore Eighty Four Lakhs Seventy Six Thousand Six Hundred and Forty) within 3 months from today with interest upon principal sum @ of 12 % per annum from the date of submission of invoice till the date of its payment.

(b) The order dated 27.04.2015 (Exhibit P/28) relating to termination of the contract dated 27.03.2012, between claimant and respondent, passed by Director cum DFO Jungle Safari, Raipur is hereby set aside/quashed being arbitrary and illegal.

(c) The claimant will be entitled to complete the project work as per terms and conditions of the agreement, till the agreement exists/Legally terminated, whichever is earlier.

(d) The respondent is hereby restrained, for future, from illegally extracting or getting performed the works, from GEC Structural Consultants and Contractors K- 6, Agroha Colony, Ring Road no. 1, Raipur (C.G), which are, as per agreement, expected to be extracted/performed by the claimant.

(e) The respondent shall have right to get the various jobs performed by claimant in regard to this project, rectified, if required any, in accordance with rules and regulations and CZA's guidelines/observations and to deduct the amount already paid relating to above mentioned claim of the claimant."

6. The said award having been challenged before the Commercial Court,

the Commercial Court too affirmed the order of the Arbitrator. Hence

this appeal by the State.

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7. (1) Learned counsel for the State/Appellants would submit that Article

of Agreement contains a clause for preparation of master plan which

purports that master plan shall be prepared in consultation with Forest

Official within the Norms, Planning Principles and guidelines issued by

Central Zoo Authority. It is stated that CZA guideline was to supersede

in all respect of planning. It is further submitted that as per the Wild

Life (Protection) Act, 1972 (hereinafter referred to as the Act, 1972)

under chapter IV A, Section 38A, the Central Zoo Authority has been

constituted and in exercise of power under Section 63 of the Act, 1972

the Central Government has framed rules known as the Recognition of

Zoo Rules, 2009. It is further stated that as per the Rules, Rule 10

standard and norms of recognition are required to be specified by the

Central Zoo Authority. Consequently, the guidelines which were to be

given by the Central Zoo Authority would have the statutory effect. It is

contended, in the agreement as per clause 7 C, for preparation of such

Jungle Safari Zoo, it was agreed that the master plan was required to be

prepared according to the guidelines issued by CZA.

7 (2) It is further submitted that the final master plan prepared by the

consultant was not approved and despite intimation given to them by letter Ex.

R/2 dated 16.04.2013 they failed to remove the defect. In a result, the revised

plan was got approved at the behest of the State authorities. It is further

submitted that the said communication of failure to adhere to the master plan

existed at the end of claimant which was revealed from the communication by

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the R-3 and supported by the statement of Ramesh Chandra Dugga (DW-2)

which remained unrebutted. It is further stated that therefore, for all practical

purposes when the master plan was not approved by the CZA, the consultant

respondent failed to adhere to the agreement. It is further submitted that those

circumstances the sole arbitrator and the learned Commercial Court failed to

take into account such issue to grant quantum of loss. She placed her reliance

in the cases of State of Chhattisgarh and another Vs. Sal Udyog Private

Limited {(2022) 2 SCC 275}, Delhi Airport Metro Express Private Limited

Vs. Delhi Metro Rail Corporation Limited {(2022) 1 SCC 131} and also the

judgment passed by this Court in Municipal Corporation Bilaspur Versus

Meinhardt Singapore Pvt. Ltd. (India Branch) {ARBA No.38/2018}.

8. (1) Per contra, learned counsel for the respondent would submit that it is

not in dispute that the respondent being the lowest bidder was issued

with the work order on 27.03.2012 and Article of Agreement was drawn

vide Ex. P/1. It is further submitted that initially the layout master plan

was prepared and approved which too was approved by CZA and

accordingly the initial consultancy fees of .37% of the total project cost

of Rs.226.25 crores was paid. He would further submit that thereafter

the respondent submitted the master plan with Detailed Project Report

which includes the minor development which were required to be

carried out. It is further stated that the said master plan was submitted

and when it was forwarded to the CZA, certain suggestions were given

to change in the master plan and accordingly proposed changes were

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made and revised plan was submitted. Thereafter by the different letters

dated 06.12.2012 (Ex. P/4), 18.02.2013 (Ex. P/5), 05.03.2013 (Ex. P/6)

and 21.04.2013 (Ex. P/7), communications were made, but it was not

reciprocated. It is stated that the last revised plan was given to the

department and as per the agreement and it was the duty of the

department to further get it approved, inasmuch as, the respondent was

not authorized to communicate directly with the CZA. It is stated that

after the last revised plan was submitted, they were not informed about

the development. It is further stated that the alleged letter Ex. R/2 dated

16.04.2013, which in turn was received from CZA, was never

communicated so as to carry out even the minor changes, it was

suggested in absence thereof it could not be accepted that respondent

would be able to carry out the changes and the reciprocal promise which

was on the department was not fulfilled or the department committed

breach.

8 (2) He further submits that as per the statement of Jitendra Singh Thakur

(DW-1) & Ramesh Chandra Dugga (DW-2), the forest department in fact

completely hijacked the master plan prepared by the consultant to forward it to

CZA. He would further submit that when such reciprocal obligation is been

imposed under the agreement it could not have been accepted that without

such communication the consultant would be in a position to carryout the

amendment. Referring to the Terms of Agreement he would submit that the

construction of the Jungle Safari includes the administrative building, zoo and

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the Safari for which the DPR was submitted for approval. The agreement

further purports that the tender documents also were required to be prepared

and after 20.05.2013 (Ex. P/17) when the DPR was sent to the competent

authority for technical sanction thereafter they had not heard and all of a

sudden could recover that the work was being carried out by a third party.

Under these circumstances, a notice was served to State and it was

reciprocated with a termination of agreement. He would submit that the work

for which the resources were used for preparation of master plan are required

to be compensated under Section 73 of the contract Act and the termination of

the contract Ex. P/28 dated 27.04.2015 itself is bad. He further placed his

reliance in the case of Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes

Ltd. {AIR 2003 SC 2629} and would submit that reading of the award would

show that it is a finding of fact has been given by both the Courts below,

therefore, it would be improper for this Court to interfere in such finding in

adjudication of arbitration appeal. He further submits that the clause 6.12

Termination of Contract clause envisages if the resources have been used he

needs to be compensated.

9. Since the appellate power u/s 37 of the Act, 1996 would be controlled

and would be within the purview of limitation provided u/s 34 of the

Act, 1996 to challenge the arbitral award, it would be relevant to refer

the provisions of Section 34 of the Act, 1996 which is reproduced

herein below:

34. Application for setting aside arbitral award.-(1)

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Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

(2)An arbitral award may be set aside by the Court only if -

(a)the party making the application furnishes proof that -

(i)a party was under some incapacity, or

(ii)the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii)the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv)the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted,only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside;or

(v)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or,failing such agreement, was not in accordance with this Part; or

(b) the Court finds that -

(i)the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force,or

(ii)the arbitral award is in conflict with the public policy of India.

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Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if, -

(i)the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81, or

(ii)it is in contravention with the fundamental policy of India law or;

(iii)it is in conflict with the most basic notions of morality or justice.

Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian Law shall not entail a review on the merits of the dispute.] (2A)An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of award:Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

(3)An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4)On receipt of an application under sub-section(1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbiral award.

(5)An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6)An application under his section shall be disposed of expeditiously and in any event, within a period of one

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year from the date on which the notice referred to in sub- section (5) is served upon the other party."

10. The Supreme Court in In Civil Appeal No.4353 of 2010 (State of

Chhattisgarh Vs. M/s Sal Udyog Private Limited decided on 8th

November, 2021) at para 14 has reiterated the observations made in

Ssangyong Engineering & Construction Co. Ltd. Versus National

Highway Authority of India {(2019) 15 SCC 131}, which spelt out the

contours of the limited scope of judicial interference in reviewing the

Arbiral Awards under the Act. Para 14 is relevant and quoted below :

"34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian Law" as explained in paras 18 and 27 of Associate Builders[Associate Builders v. DDA (2015) 3 SCC 49 : (2015)2 SCC (Civ) 204] i.e., the fundamental policy of Indian law would be relegated to "Renusagar"understanding of his expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 :(2014) 5 SCC (Civ) 12) expansion has been done away with. In short, Western Geco [ONGC v.Western Geco International Ltd., (2014) 9 SCC 263 :(2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA,(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204, would no longer obtain, as under the guise of interfering with an award on the ground hat the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and (34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].

35. It is important to notice that the ground for

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interference insofar as it concerns"interest of India" has since been deleted, and therefore, no longer obtains. Equality, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as aconflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v.

DDA(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], as it is only such Arbitral Awards that shock the conscience of the court that can be set aside on this ground.

36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 :

(2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 :

(2015) 2 SCC (Civ) 204], Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as understood in Associate Builders[Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204, and paras 28 and 29 in particular,is now done away with.

37.Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award,which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely,the contravention of a statute not linked to public policy or public interest, cannot be brought in by the back-door when it comes to setting aside an award on the ground of patent illegality.

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38.Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.

39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 :

(2015) 2 SCC (Civ) 204], namely a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside anArbitral award. Para 42.2 of Associate Builders[Associate Builders v. DDA (2015) 3 SCC 49 : (2015)2 SCC (Civ) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204],namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).

41.What is important to note is that a decision which is perverse, as understood in paras 31and 32 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at is decision would be perverse and liable to be set aside on the ground of patent illegality.

Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would

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also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties,and therefore, would also have to be characterized as perverse."

(emphasis added)

11. Further referring to the facets of the 'patent illegality, the Supreme

Court in Delhi Airport Metro Express Pvt. Ltd.v. Delhi Metro Rail

Corporation Ltd, 2021 SCC Online SC 695 held that the Scope has

been narrowed down but incase of "patent illegality" interference in the

arbitral award would be permissible. At para 26, the Court has observed

asunder :

"26. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbiral Tribunal would not fall within the expression 'patent illegality' Likewise, erroneous application of law cannot be categorized as patent illegality. In addition,contravention of law not linked to public policy or public interest is beyond the scope of the expression' patent illegality'. What is prohibited is for courts tore-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34 (2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair- minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression' patent illegality'.

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12. Applying the aforesaid principles laid down by the Supreme Court,

the records of the case which was produced before the arbitrator was

perused. A finding of fact has been arrived at that a DPR was sent to

the competent authority for technical sanction as per Ex. P-17 on

20.05.2013 by the office of the Divisional Forest Officer.

Subsequent to it the respondent claimant did not hear anything.

According to the State, a letter dated 16.04.2013 (Ex. R-2), which

was received from the CZA wherein certain discrepancies were found

and were pointed out in the master-plan, was communicated to the

claimant and the register was filed as Ex. R-3. The finding has been

arrived at that no such letter was sent to the claimant to carry out the

rectification. Eventually a termination letter dated 19.03.2015 (Ex.

P-25) was served to the claimant. The claimant, in turn, has

submitted that when they saw the work was being carried out by

other agency, they served the notice and in lieu thereof the

termination notice was received. Consequently, for the damages the

claim was preferred.

13. As per the terms of payment, it is not in dispute on submission of

Draft Master Plan stage, the amount has been paid. However,

subsequent to that stage for submission of DPR & Claim the dispute

arose. Since the finding of fact that deficiency letter dated

16.04.2013 was not served by arbitrator, we are not inclined to

interfere in that to disturb the same. The agreement contemplates

6.12 about the termination of contract, which reads as under:

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6.12 TERMINATION OF CONTRACT:

a) The contract herein may be terminated at any time by either party by giving a written notice of one month to the other party.

b) If the Consultant shall close business or die or become incapacitated from acting as such consultant, the contract shall stand terminated.

c) If the Consultant fail to adhere to the time schedule stipulated in the schedule hereto annexed or the extended time which may be granted by the employer at sole discretion and/or in case there is any change in the constitution of the firm of the Consultant for any reason whatsoever, then the employer shall be entitled to terminate this contract and entrust the work to some other Consultant after making proportionate payment to the Consultant for work completed as provided herein.

d) In case of termination under sub-clause (a) (b) or (c), the Consultant shall not be entitled to any fee or compensation except the fee payable for the work actually done, in terms of schedule of professional fee and the decision of Employer in working out the quantum is final and binding in this regard.

e) In case of the termination under sub-clause (a), (b) or (c), the employer shall make use of all or any drawings or other documents prepared by the Consultant, after payment for the services of the Consultant for preparation of the same in full as provided in (d) above, but only for the project referred by this agreement.

14. Perusal of the said clause shows that in case of termination of

contract and entrust of work to some other consultant the

proportionate payment of the work completed would be made to the

earlier contractor. Since the damages was not quantified, as such the

said clause was in conformity to Section 73 of the Indian Contract

Act, 1872 (hereinafter referred to as 'the Act, 1872'). Section 73 of

the Act, 1872 reads as under:-

"73. Compensation for loss or damage caused by breach of contract.--When a contract has been broken, the

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party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract.--When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.

Explanation.--In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non- performance of the contract must be taken into account."

15. The Arbitrator has awarded an amount of Rs.1,84,76,640/- along with

interest @ 18% p.a. till the date of payment. Since the principles laid

down by the Supreme Court allows the interference can be made if there

is a patent illegality in case award is based on no evidence at all. In

order to find out the same, it would be appropriate to look into the

evidence adduced by the claimant before the Arbitrator.

16. In order to ascertain the damages the Supreme Court in the matter of

Kanchan Udyog Limited Versus United Spirits Limited {(2017) 8 SCC

237} has held that under Section 73 of the Contract Act, a party who

suffers breach of contract is entitled to compensation for any loss or

damage caused to him thereby from the party who has broken the

contract. It further held that there must be causal connection between

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the breach of contract and the "loss sustained by the party" who suffers

the breach. The common sense test of causation is whether a breach of

contract is a sufficiently substantial cause of the plaintiff's loss. In

regard to remoteness of damage, in para 27 of the judgment, the Court

has held as under:-

27. In Galoo Ltd. the emphasis was on the common sense approach, holding that the breach may have given the opportunity to incur the loss but did not cause the loss, in the sense in which the word "cause" is used in the law. The following passage extracted therein from Chitty on Contracts, 26th Edn. (1989) Vol. 2, pp. 1128-1129, Para 1785 may be usefully set out: (WLR p. 1370 A - B)

"....'The important issue in remoteness of damage in the law of contract is whether a particular loss was within the reasonable contemplation of the parties, but causation must also be proved: there must be a causal connection between the defendant's breach of contract and the plaintiff's loss. The courts have avoided laying down any formal tests for causation: they have relied on common sense to guide decisions as to whether a breach of contract is a sufficiently substantial cause of the plaintiff's loss."

17. Further the Supreme Court in Kanchan (supra) has reiterated the view

taken in the matter of C. & P. Haulage v. Middleton, (1983) 3 All ER

94 & in the matter of Cullinane v. British Rema Mfg. Co. Ltd. {(1954)

1 QB 292} and held thus in para 31:-

"31. In C & P Haulage, which considers Cullinane also, it has

been observed as follows: (C. & P. Haulage case, All ER

p.99 b-e)

"...The law of contract compensates a plaintiff for damages resulting from the defendant's breach; it does not compensate a plaintiff for

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damages resulting from his making a bad bargain. Where it can be seen that the plaintiff would have incurred a loss on the contract as a whole, the expenses he has incurred are losses flowing from entering into the contract, not losses flowing from the defendant's breach. In these circumstances, the true consequence of the defendant's breach is that the plaintiff is released from his obligation to complete the contract-or in other words, he is saved from incurring further losses. If the law of contract were to move from compensating for the consequences of breach to compensating for the consequences of entering into contracts, the law would run contrary to the normal expectations of the world of commerce. The burden of risk would be shifted from the plaintiff to the defendant. The defendant would become the insurer of the plaintiff's' enterprise. Moreover, the amount of the damages would increase not in relation to the gravity or consequences of the breach but in relation to the inefficiency with which the plaintiff carried out the contract. The greater his expenses owing to inefficiency, the greater the damages."

18. Further the Supreme Court in the matter of R.K. Malik and another Vs.

Kiran Pal and others {(2009) 14 SCC 1} has held that major

quantification of damage is paid to restore the person, who has suffered

damage or loss in the same position, if the breach of contract had not

been committed. The law requires that the party suffering should be put

in the same position, if the contract had been performed or the wrong

had not been committed. The law in all such matters requires payment

of adequate, reasonable and just monetary compensation and not a

windfall.

19. Since the termination clause of the contract contemplates that when the

contract is terminated, proportionate payment would be made.

ARBA No.27 of 2019

Therefore, the damages actually suffered are to be ascertained then

compensation would be granted. In order to ascertain the proportionate

payment, the claimant would be required to place on records the

expenses incurred including for the payment to the expert or third party.

20. Further the Supreme Court in the matter of Mcdermott International

Inc. v. Burn Standard Co. Ltd. & Ors. {2006 AIR SCW 3276} has laid

down that Section 55 and 73 of the Indian Contract Act provided only

for entitlement to compensation and not the mode and manner in which

such compensation is to be quantified. It further held that there is

nothing in Indian law to show that any of the formulae adopted in other

countries is prohibited in law or the same would be inconsistent with

the law prevailing in India. The Court held that in the assessment of

damages, the court must consider only strict legal obligations, and not

''the expectations''. In instant case, the liquidated damages have not

been quantified as such in order to find out the reasonableness a

claimant is required to place on record the facts qua damages suffered

by him.

21. With the aforesaid principles in mind, we refer to the evidence adduced

by Abhishek Sharma, the claimant. In the statement initially to the

master-plan submitted, it was required to be approved by CZA which

was to be routed through the State officials. Certain changes were

suggested in the master-plan, which conveyed by letter dated

24.05.2012 to the applicant. The said changes were incorporated and

submitted to the department, it was sent to CZA and after master-plan

ARBA No.27 of 2019

was approved, a demand of Rs.69,07,504/- was raised, against which

Rs.66,00,000/- have been paid. The claimant has stated that thereafter

they proceeded to work B : DPR 1 & 2 for Jungle Safari and complete

DPR was submitted on 04.04.2013 and thereafter he raised a bill of

Rs.1,32,16,814/-. The agreement contains a clause 7 c. which says that

the CZA guidelines will supersede in all respect of planning. Clause B

of the payment schedule shows that on submission & approval of DPR

comprising of conceptual plan/design basis taking care of/amalgamating

with existing facilities, design/drawings, detailed cost estimate/BOQ

etc. would be made. For sake of brevity, the payment schedule in

respect of DPR is reproduced herein below:-

8.2 PAYMENT SCHEDULE

Sr.   Description of Work                               Percentage of Quoted
No.                                                     Fee

A. Master Plan

XXX                         XXX                                 XXX

B. DPR

1 On submission & approval of Detailed Project 45% Report (DPR) comprising of conceptual plan / design basis taking care of / amalgamating with existing facilities, design/drawings, detailed cost estimate/BQQ etc.

2 On preparation & supply of Tender Documents / 15% Specification, bill of quantities, analysis of rates of various non-schedule items for call of Tender for the complete scheme.

3 On preparation & supply of Good for Construction 20% Drawings for all components of the Scheme.

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4 During progress of work and visits to site till the 10% completion of all works on ground.

5 On submission of (As built drawings) design and 10% approval of the same by authority if any, in soft as well as hard copies and completion report etc.

Total 100%

22. According to the claimant without the approval of the DPR by the CZA,

he continued the work. As per the statement what nature of work was

carried out and to what extent, it was not substantiated before the

Arbitrator. Admittedly, the DPR was not sanctioned. So any amount of

work if done by claimant it was without any sanction & approval by

CZA which otherwise would have entitled the claimant to raise bills.

Except the oral statement, there is nothing on record as to how the

department directed the claimant to continue with such work in absence

of approval by the CZA. The State through it's department act in

furtherance of any project and are required to follow official

communications to adhere. If a person acts on an oral instruction of a

particular officer, it cannot be stated to be the act of the State, to be

binding on it. Even otherwise, to quantify the damages, it cannot be

presumed only on the oral statement of the claimant in absence of

proper payment vouchers to third party or expert. The agreement

contemplates that proportionate payment of the work done would be

made in case of termination of contract. The payment the claimant

sought for is post master plan for the DPR. The payment for DPR

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(Detailed Project Report) would not materialize only on submission but

condition was attached that payment would be on submission and

approval of DPR. If admittedly, the DPR was not approved by CZA,

the claimant could not claim for expected loss, only on presumption.

23. Lord Goodard, CJ., in Bonham- Carter v. Hyde Park Hotel Ltd.

{(1948) 64 TLR 177} stated:

"Plaintiff must understand that if they bring actions for damages it is for them to prove their damage: it is not enough to write down the particulars, and, so to speak, throw them at the head of the Court saying: 'This is what I have lost; I ask you to give me these damages.' They have to prove it."

The claim for damages would not be admissible if there is a total

absence of specific particulars of the loss allegedly suffered by the plaintiff. In

as suit for quantified damages based on an actionable claim, it is the obligation

of the plaintiff to specify the damages with respect to the individual claims

and to point out precisely the extent of damage, with reference to all material

particulars and the manner in which it was caused.

In a suit for damages caused by the defendant's breach of contract, the

damages must be proved by the plaintiff. He must satisfy the Court both as to

the fact of damage and as to its amount when it claims substantial damages.

24. In all actions accordingly on the case where the damage actually done is

the gist of the action, the character of the acts themselves which

produce the damage, and the circumstances under which these act are

done, must regulate the degree of certainty and particularity with which

the damage done ought to be stated and proved. (See: Ractliffe v.

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Evans, {1982 (2) QB 524}).

25. Section 73 of the Indian Contract Act makes it compulsory for the

plaintiff to prove that he has suffered damages and the extent to which

he as suffered before a Court can award him damages for breach of

contract, and if he does not give the best evidence, every presumption

should be made against him, but this does not relieve the Court

altogether of the duty of assessing the damages. The learned Arbitrator

has assessed the damages only on the basis of bills raised by the

claimant. Raising of bills cannot be equated with loss sustained or

proportionate claim for work done. Looking into the award, as against

the evidence on record, in our view the learned arbitrator has awarded

an expected loss without there being any material /evidence on fact of

record in the backdrop of the fact that DPR of the claimant was never

approved by CZA at any time. In order to avail the damages, the

claimant was required to lay foundation to reciprocate it with the work

done by producing sufficient evidence. In absence thereof the award

passed by the arbitrator would be without evidence and would be within

the ambit of patent illegality and not mere erroneous application of law

to evaluate damages. In view of the aforesaid discussions, we hold that

after termination of the contract the compensation cannot be claimed as

a windfall.

26. In a result, we allow the appeal and set aside the order of dated

30.10.2018 passed by the Commercial Court, Raipur, and the arbitral

award dated 11.12.2017 passed by the sole arbitrator under Section 34

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of the Arbitration and Conciliation Act, 1996.

27. In facts of the case, no order as to cost.

            SD/-                                                     SD/-/-
       (Goutam Bhaduri)                                     (Radhakishan Agrawal)
          Judge                                                    Judge
Ashu

                                             ARBA No.27 of 2019
             HEAD NOTE

To bring action for damages the plaintiff/petitioner is required to prove the actual damages sustained that ought to be stated and proved under Section 73 of the Indian Contract Act.

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