Padmini Technology Ltd. vs Jyoti Sarup Mittal
2014 Latest Caselaw 1337 Del

$~11

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         FAO 12/2007 & CM 269/2007

%                                                          12th March, 2014


PADMINI TECHNOLOGY LTD.                             ..... Appellant

                          Through:       Ms. Seema Sundd, Mr. Saurabh Seth,
                                         Ms. Ritika, Mr. Akarshan Sahay,
                                         Advocates

                          versus

JYOTI SARUP MITTAL                                  ..... Respondent

Through Mr. K. Sunil, Advocate

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

1. This matter was passed over on the first call and adjournment prayed

was refused as it was opposed. Even on the second call the counsel for the

appellant refuses to argue the appeal. Counsel for the respondent very

vehemently opposes the adjournment and says that the hue and cry of

compromise talk is urged although no compromise talks have taken place

and just a few minutes back some suggestions were given for compromise as

a basis to seek adjournment. It is stated that the object of the appellant is to

delay and drag the case and not make payments to the respondent under the

Award, although, work has been completed long back and the respondent is

out of pocket with respect to amounts spent since the year 1997. Since

learned counsel appearing on behalf of the appellant refuses to argue the

case, I have heard the counsel for the respondent and am proceeding to

dispose of this appeal which is pending since seven years.

2. This first appeal is filed under Section 37 of the Arbitration and

Conciliation Act, 1996 against the order of the court below dated 25.11.2006

dismissing the objections under Section 34 of the Act filed by the appellant

herein, respondent in the arbitration proceedings and objector before the

court below, against the Award dated 8.9.2004 as per which a decree has

been passed against the appellant for payment of Rs. 9,67,425/- along with

interest @ 12% per annum from 1.7.1998. Award has been passed with

respect to the amount claimed by the respondent herein, claimant in the

arbitration proceedings, for construction work of the factory of the appellant

done by the respondent.

3. The facts of the case are that a contract was entered into between the

parties whereby respondent agreed to construct a factory building of the

appellant at 23-B, Industrial Area, Shahibabad, U.P. The case of the

respondent was that he regularly progressed with the completion of the work

but the petitioner/appellant did not make the payment of the running bills.

Respondent also complained that time and again work had to be stopped

because cheques of the appellant either bounced or the appellant was not

making payment. Problem of the bills started from 10 th and 11th running

bills. The relevant facts in this regard are noted in paras 5 and 6 of the

impugned order and which read as under :

"5. After referring to the communication between the parties, the learned Arbitrator concluded that the problem of payment of dues started from 10th and 11th running bills. Numerous cheques issued by the petitioner in payment came to be bounced. Thereafter in pursuance of meeting held in May, 1997, the petitioner proceeded to execute remaining work in May, 1997 but the petitioner did not settle these bills on one pretext or the other. The claimant was apprised of certain defects and these defects were also rectified by the claimant. Learned Arbitrator also noted that the dispute lingered on and the petitioner did not reply to the letters of the claimant asking for payments. In these circumstances, learned Arbitrator concluded that the respondent was liable to make the payment. Further noting that the claimant itself had reduced amount of 12th running bill to Rs. 4,67,425/- learned Arbitrator ordered accordingly. The learned Arbitrator also allowed refund of Rs. 5,00,000/- which had been retained by petitioner to ensure that the defects if any found in the work are rectified. The learned Arbitrator noted that no defect was pointed out during the defect liability period. Learned

Arbitrator allowed interest @ 12% per annum on the above claims as per the law laid down by Hon'ble Supreme Court in Executive Engineer Dhenkand Minor Irrigation Division Vs. N.C. Budharaj (2001) 2 SCC 721.

6. Coming to the counter claim, learned Arbitrator dismissed the counter claim nothing that there was no evidence to show that the petitioner had given any notice specifying remaining defects or claimant was put to notice of his cost and risk. The learned Arbitrator noted that the alleged expenses or rectification for remaining defects was raised by the petitioner/claimant for the first time during the arbitration proceedings and never before. Coming to the next head of the counter claim raised in the subsequent written statement of defence, learned arbitrator noticed as follows:

"This counter claim is also not tenable. Firstly the claimant was not responsible for the remaining work of the contract being not executed; secondly even if the claimant could be held to be in breach of the contract, even then the respondent would have been entitled to get executed the remaining work at the risk and cost of the claimant after serving a notice. No notice was given by the respondent to the claimant in this respect after the respondent raised the last bill. Moreover, the respondent in that even would have been entitled to be reimbursed for the extra expense if any incurred by the respondent in executing such remaining work. The respondent is not entitled to claim the value of the remaining work as damages from claimant. In case of remaining had been executed by the claimant, the respondent was in any case bound to bear expenses for the same in terms of the contract.

Thus this counter claim is also rejected." (underlining added)

4. The court below has held all the objections which are raised are really

grounds of appeal against the Award and which is not permissible in law. I

agree. An Award of the arbitrator can only be interfered if the Award is

against the law or violative of the contractual provisions or wholly perverse

vide Section 28(1)(a) & (3) of the Arbitration & Conciliation Act, 1996 and

as held by the ratio of the judgment of the Supreme Court in the case of

ONGC Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705. Issues pertaining to

finding of facts and appreciation of evidence are very much within the realm

of action or within the jurisdiction of the arbitrator. Even the Award of the

arbitrator shows that it was the appellant who caused stoppage of the work

by failing to release payment. The relevant paras of the Award of the

Arbitrator are paras 14,15,20, 25,26 and 27 and which read as under :

" 14. In a letter dated 24.10.1996, the respondent pointed out that the claimant was not adhering to its commitment and should boost up the work as per revised schedule dated 4.10.1996. The letter dated 29.11.1996 against points out the failure of the claimant to make any progress in the work as per schedule agreed upon. This letter shows that the 10th running bill was still to be got checked up and payment yet to be released. It appears that the claimant at that stage had threatened to stop the work as its payment was not being released.

15. The claimant wrote a letter dated 13.12.1996 in which it lamented that the cheques issued by the claimant had bounced and due to uncertainty of cash flow the claimant decided to stop the work although work of the value of Rs. 40 lac remain to be executed. It also referred to the factum of the respondent having forcibly occupied the premises when work was still in progress.

20. On 11.3.1997, the parties held a joint meeting to sort out the matters. The minutes of the said meeting record that the respondent shall release balance payment amounting to Rs. 6,89,240/- against 11th running bill and the claimant shall return the earlier uncleared cheques and the claimant would withdraw the court case filed on account of bounced cheques. The respondent also promised release of payment of Rs. 3 lac to M/s. Ashoka Plywood, a supplier of the claimant - directly by 20.3.1997. The claimant agreed to complete the balance pending work within next two months subject to release of regular fortnightly payments against the bills and commensurate with site progress. The chart of payments filed by the claimant shows that two cheques dated 14.3.1997 for Rs. 1,89,242/- and Rs. 4,85,000/- and one dated 19.3.1997 for Rs. 1,94,000/- were given.

25. From above narrative of facts it is evident that the claimant was always concerned about its payments being not released and the cheques issued by the respondent having bounced, forcing the claimant to stop further work. In joint meeting held in March 1997, the payment problems of the 11th running bill were solved with the respondent making due payment.

26. It is evident that thereafter the claimant resumed the work and raised 12th running bill on 5.5.1997. The respondent did not released payment and did not respond to this bill for many

months. The respondent in October 1997 wanted the claimant depute its engineer for checking the items of the bill. The respondent sent a list of defects and incomplete work. The correspondence shows that the claimant attended to the same. The respondent repeatedly referred to electrical problems which needed to be solved.

27. There is no letter written by the respondent later on as to why the payment of 12th running bill was not released. In case the claimant allegedly had not come forward for getting the bill checked, the respondent could have got verified the bill from its own architect and finalized the payment. The claimant was justified in refusing to do any more work till its payment of 12 th running bill was released."(underlining added)

5. The counter claims of the appellant were dismissed by the arbitrator

by making the following observations:

"35. Rs. 13,25,043/- is claimed by the respondent as the expenses incurred for rectifying the defects and for completing certain works to make the factory functional. As already discussed the correspondence exchanged between the parties do not show that the respondent had given any notice to the claimant specifying remaining defects if any after admittedly the claimant had attended to rectifying defects earlier communicated to the claimant. The respondent did not put the claimant to notice that in case the claimant failed to rectify the defects the respondent would get the same rectified at the cost and risk of the claimant. Moreover, the respondent never communicated to the claimant earlier to the filing of statement of defence in these proceedings that it had incurred any expense in rectifying any defects left unattended by the claimant.

Thus I reject this counter claim.

36. Another amount of Rs.31.80 is claimed as the value of the balance work left by the claimant. This counter-claim is also not tenable. Firstly the claimant was not responsible for the remaining work of the contract being not executed; secondly even if the claimant could be held to be in breach of the contract, even then the respondent would have been entitled to get executed the remaining work at the risk and cost of the claimant after serving a notice. No notice was given by the respondent to the claimant in this respect after the respondent raised the last bill. Moreover, the respondent in that event would have been entitled to be reimbursed for the extra expense if any incurred by the respondent in executing such remaining work. The respondent is not entitled to claim the value of the remaining work as damages from the claimant. In case the remaining had been executed by the claimant, the respondent was in any case bound to bear the expenses for the same in terms of the contract,

Thus this counter claim is also rejected.

In view of the findings given above the respondent is liable to pay to the claimant Rs. 4,67,425 + 5,00,000 = Rs. 9,67,425."

(underlining added)

6. The scope of a Court hearing objections under Section 34 of the Act is

limited. If the scope of hearing before the first Court is limited, then, scope

of an appeal against a judgment dismissing objections is further limited. The

entire object of arbitration is defeated by companies such as the appellant

company keeping on dragging the matter in court and continuing disputes,

although, arbitrator in the present case has given valid reasons that whatever

work respondent had to do, it completed, and the appellant failed to make

payment, and in fact not only the cheques of appellant bounced but also

various promises to make payments were breached.

7. In view of the above, I find no merits in the appeal and the same is

therefore dismissed with costs of Rs. 50,000/-. Supreme Court has observed

in the judgment in the case of Ramrameshwari Devi & Ors. Vs Nirmala

Devi & Ors. (2011) 8 SCC 249 that it is high time that in certain litigations,

actual costs must be imposed and which in my opinion would be more so in

commercial litigations initiated by companies. I am also empowered to

impose actual costs in terms of Volume V of the Punjab High Court Rules

and Orders (as applicable to Delhi) Chapter VI Part I Rule 15. Costs be

paid within six weeks from today. The amount which is lying deposited in

this Court along with accrued interest thereon be released to the respondent

in appropriate satisfaction of the amount due under the Award.

VALMIKI J. MEHTA, J MARCH 12, 2014 godara