Msource (India) Private Limited vs Nag Interiors Private Limited
2022 Latest Caselaw 11073 Kant

                                  COMAP No.57/2021

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

     DATED THIS THE 22ND DAY OF JULY, 2022

                     PRESENT

   THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR

                       AND
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE

             COMAP No.57 OF 2021

BETWEEN :

MSOURCE (INDIA) PRIVATE LIMITED
A PRIVATE LIMITED COMPANY
LIMITED BY SHARES INCORPORATED
UNDER THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
BAGMANE WORLD TECHNOLOGY CENTER
MARATHAHALLI OUTER RING ROAD
DODDENAKUNDI VILLAGE
MAHADEVAPURA, BANGALORE-560 048
REPRESENTED BY MR. SILVI JOSEPH        ... APPELLANT

(BY SHRI. DHANANJAY JOSHI, SENIOR ADVOCATE FOR
    SHRI. VACHAN AND VARSHA, ADVOCATES)

AND :

NAG INTERIORS PRIVATE LIMITED
A PRIVATE COMPANY LIMITED BY SHARES
INCORPORATED UNDER THE
COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
NO.83, NISA ENCLAVE, II FLOOR
MM ROAD, FRASER TOWN
BANGALORE-560 005
REPRESENTED BY ITS MANAGER.           ... RESPONDENT

(BY SHRI. DHYAN CHINNAPPA, SENIOR ADVOCATE FOR
    SHI. PRADEEP NAYAK, ADVOCATE FOR C/R)
                                      COMAP No.57/2021

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      THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1A) OF THE COMMERCIAL COURTS ACT, 2015 R/W
SECTION    37(1)(C)   OF   THE    ARBITRATION   AND
CONCILIATION         ACT,        1996       PRAYING
(A). SET    ASIDE THE IMPUGNED JUDGMENT DATED
09.03.2021 IN COMM.A.S.NO.137/2015 PASSED BY THE
LXXXII ADDL. CITY CIVIL AND SESSIONS JUDGE (CCH-83),
BENGALURU (B). DIRECT THE RESPONDENT TO BEAR THE
ENTIRE COSTS OF THE ARBITRATION PROCEEDINGS AS
WELL AS OF THE PRESENT APPEAL; AND (C) ISSUE SUCH
FURTHER AND OTHER ORDERS AND / OR DIRECTIONS AS
THIS HON'BLE COURT MAY DEEM FIT AND PROPER IN THE
FACTS AND CIRCUMSTANCES OF THE CASE.

      THIS COMMERCIAL APPEAL, HAVING BEEN HEARD
AND RESERVED FOR JUDGMENT ON 09.06.2022 COMING ON
FOR    PRONOUNCEMENT  OF   JUDGMENT,   THIS  DAY,
P.S.DINESH KUMAR J, PRONOUNCED THE FOLLOWING:-


                      JUDGMENT

This appeal under Section 37(1)(c) of

Arbitration and Conciliation Act, 1996 is filed by the

respondent before the learned Arbitrator

challenging the order dated March 9, 2021 in Com.

A.S. No.137/2015 on the file of LXXXII Additional

City Civil and Sessions Judge, Bengaluru (CCH-83).

2. We have heard Shri. Dhananjay Joshi,

learned Senior Advocate for the appellant and COMAP No.57/2021

Shri. Dhyan Chinnappa, learned Senior Advocate for

caveator/respondent.

3. Brief facts of the case are, respondent

initiated arbitration proceedings against the

appellant contending inter alia that respondent had

carried out interior works in the Office of the

appellant and the appellant was due and liable to

pay a sum of `2,24,42,250/- with interest and a

sum of `3,08,538/- with interest.

4. Appellant resisted the claim contending

inter alia that there was delay of more than three

months in completion of the work by the

respondent; the PMC1 and the Architect had verified

the invoices and found several discrepancies in the

work done; appellant was not aware of the works

undertaken by the respondent beyond what was

specified in the Contract; notwithstanding the

Project Management Consultant COMAP No.57/2021

same, appellant had offered to pay `83,96,172/- in

full and final settlement of the claims; appellant

was not liable to pay the amounts, nor any

damages claimed by the respondent.

5. On consideration of material on record,

the learned Arbitrator has passed an Award

directing the appellant to pay `2,27,50,788/- with

interest at the rate of 18% p.a.

6. Appellant unsuccessfully challenged the

said Award in the Commercial Court. Hence, this

appeal.

7. Shri. Dhananjay Joshi, learned Senior

Advocate for the appellant mainly contended that:

• the Commercial Court has refused to interfere

with the Award with regard to exchange of

emails on the ground that the same was

neither raised nor argued by either party

before the learned Arbitrator;

COMAP No.57/2021

• without examining the grounds raised by the

appellant, the Commercial Court has held that

there is no illegality in the Award.

8. In addition to the above grounds,

assailing the order passed by the Commercial

Court, appellant has raised several grounds in the

Memorandum of Appeal assailing the Award passed

by the learned Arbitrator.

9. In substance, appellant's case is:

• respondent had undertaken work outside the

scope of tender and therefore, appellant was

not liable to make the payment with regard to

such works; and

• there was delay of three months in completion

of the work.

10. Shri. Dhyan Chinnappa, learned Senior

Advocate for the respondent submitted that the

payment in respect of the work/s, which was done COMAP No.57/2021

by the respondent was at the site belonging to the

appellant. The work was continuously monitored by

the PMC and the Architect, who were reporting to

the appellant. Appellant has got the measurement

of work done behind the back of respondent.

Appellant offered to make payment of `83.96 Lakhs

in respect of the work/s done by the respondent.

This itself proves that respondent has done the

work and what remained for consideration before

the learned Arbitrator was to consider the evidence

on record.

11. Shri. Praveen Solapur, R.W.1 has

admitted in his evidence that he was stationed at

the work site. He has further stated that PMC was

also at the site from the commencement of the

project till the end.

12. Learned Arbitrator has recorded findings

on the points for consideration and the same is COMAP No.57/2021

based on the evidence on record. Adverting to para

33 in Associate Builders Vs. Delhi Development

Authority2, Shri. Dhyan Chinnappa submitted that,

an Award based on little evidence or evidence which

does not measure up in quality to a trained legal

mind, would not be held to be invalid on that score.

With these submissions, he prayed for dismissal of

this appeal.

13. We have carefully considered rival

contentions and perused the records.

14. The sum and substance of respective

pleadings of the parties has been recorded by the

learned Arbitrator in the Award. As per the agreed

terms, the work assigned to the respondent was

required to be completed by April 15, 2011.

However, it was completed by May-June, 2011.

Respondent's case before the learned Arbitrator

(2015)3 SCC 49 COMAP No.57/2021

was, delay was not attributable to the respondent

because, firstly, additional works were entrusted;

secondly, there was delay in supply of materials;

and thirdly, the other vendors and Agencies like

electrical, air conditioning, fire, data cable etc.,

caused the delay. Appellant's case before the

Arbitrator was, the PMC and Architect had verified

the invoices and found several discrepancies.

Appellant was not liable to make the payment in

respect of work undertaken beyond what appellant

had prescribed. However, appellant considered

paying a sum of `83.96 Lakhs in respect of non-

tendered items of work to the extent the PMC and

the Architect had certified in full and final

settlement of respondent's claims.

15. Based on the pleadings, learned

Arbitrator has framed following points for

consideration:

COMAP No.57/2021

1. Whether claimant carried out non-tendered works at the instance of respondent and respondent's agents - PMC and the Architect?

2. Whether the said agents of respondent verified and certified some of the non- tendered items also?

3. Whether respondent is liable for payment towards non-tendered works only to the extent they are certified by PMC and Architect?

4. Whether respondent is still due, in all, to the claimant, respect of Purchase Order No.10404000855, Rs.2,24,42,250/-?

5. Whether, in respect of the said Purchase Order, Respondent is due in a sum of only Rs.83,96,172/-?

6. Whether claimant is entitled to interest at 18% p.a. on Rs.2,24,42,250/- from 23.1.2012 till date of payment?

7. Whether there is delay in claimant carrying out the work and therefore is liable for penalty?

8. Whether the delay was for the reasons stated in para-5 of the claim petition and COMAP No.57/2021

whether the said delay is justified and therefore, claimant is not liable for penalty?

9. Whether assigning of additional works / non-tender works implied that the original date of completion stood vacated by mutual consent, and that no fresh date of completion was specifically agreed to between the parties?

10.Whether claimant has suffered loss of profit and is entitled to Rs.60,00,000/- in that regard?

11.Whether respondent is due to the claimant, in respect of Purchase Order No.104040004223, a sum of Rs.3,08,538/-?

12.Is claimant entitled to interest thereon at 18% p.a. from 10.9.2012 till the date of payment?

13.To what reliefs are parties entitled?

16. On behalf of respondent, its Managing

Director, Shri. G.Suryanarayana was examined as

C.W.1 and Exs.P1 to P23 were marked. On behalf

of the appellant, one Praveen Solapur was COMAP No.57/2021

examined as R.W.1 and Exs.R1 to R16 were

marked.

17. Learned Arbitrator has recorded that

R.W.1 had sent an email dated August 1, 2011 to

go ahead with 'other works' and that the rates

would be finalized based on the rate analysis sheet

that would be submitted during the final bill.

18. It is further recorded that in reply to

notice dated February 5, 2013, appellant had stated

that a sum of Rs.34.82 Lakhs was set apart towards

non-tendered items, which were approved by the

Architect and the appellant. Learned Arbitrator has

further rightly recorded that appellant had

knowledge about the 'non-tendered' works.

19. Learned Arbitrator has further recorded

in para 6 of the Award that R.W.1 had admitted

that the work done by claimant as 'non-tendered'

work specified in page 360 of Ex.C6, was in addition COMAP No.57/2021

and not in lieu of 'quoted work' at Serial No.604.

Learned Arbitrator has further recorded that it was

admitted by R.W.1 that he was stationed at the

worksite on behalf of the claimant to monitor the

progress of the work and to manage various

vendors. The PMC used to be in the site from the

date of commencement of the project till the end.

20. Learned Arbitrator has recorded detailed

analysis of evidence and came to the conclusion

that all works were duly authorised and therefore,

claimant is liable to pay the same.

21. It is recorded by the Commercial Court

in the impugned order that the appellant has urged

following grounds in its appeal under Section 34 of

the Act:

COMAP No.57/2021

(i) The Arbitral Award is arbitrary, whimsical and wholly contrary to the facts and the evidence on record.

(ii) The learned Sole Arbitrator has not provided any reasons for his final decision in respect of each of the points that were to be determined in the proceedings.

(iii) The learned Arbitrator does not even make a reference to the terms of the Contract between the parties and has allowed the Claim of the Defendant by adopting a random sampling method of evidence, which is a process unknown to law.

(iv) The learned Arbitrator failed and neglected to take into consideration the only evidence of CW.1 and the same is not corroborated by any other evidence.

(v) The learned Arbitrator acted contrary to settled rules of evidence while observing that the Defendant is not liable to suffer any penalty on account of delayed completion of the project.

(vi)    The learned Arbitrator passed the Award
        without       considering      any        of     the

submissions of the Plaintiff and without there being any discussion thereof and without providing any reasons.

COMAP No.57/2021

(vii) The learned Arbitrator awarded the interest in breach of the mandate of Section 28(2) and (3) of the Arbitration and Conciliation Act, 1996.

(viii) The learned Arbitrator appears to be based on the principles stipulated in Section 70 of the Indian Contract Act, although there is no such pleadings and evidence to make out a Claim under the said provision.

22. The Commercial Court has recorded in

para 40 that it was argued on behalf of the

appellant that Commercial Court has to re-

appreciate the entire evidence. According to the

Commercial Court, the Award did not suffer from

any patent illegality nor was there any

contravention of any substantive law of India.

23. It was argued by Shri. Joshi that as held

by this Court in Union of India Vs. M/s. Warsaw

Engineers3, it is necessary for the Judicial Officer to

precisely record the submissions made by the

ComAp No.25/2021 decided on April 17, 2021 COMAP No.57/2021

learned Counsel for the appellant and the reply to

the specific grounds pleaded by the respondent. He

further contended that the Commercial Court has

not considered appellant's case in the light of

Warsaw Engineer's case.

24. Respondent's case before the Arbitrator

is that, appellant has got the work done but not

paid. It is held by the learned Arbitrator that R.W.1

had admitted that he was stationed in the work site

and PMC were also there right from the date of

commencement of the project. The consistent case

of the appellant is that it has offered to pay `83.96

Lakhs, as full and final settlement. In para (vii) of

the Memorandum of this appeal, appellant has

averred that it had offered to pay `81.09 Lakhs, in

full and final settlement. Thus, the appellant has

conceded to pay the said amount.

COMAP No.57/2021

25. We have carefully perused the Award

passed by the learned Arbitrator and the impugned

order. This appeal is filed under Section 37(1)(c) of

the Act, which provides for an appeal against an

order setting-aside or refusing to set-aside an

Arbitral Award under Section 34 of the Act.

26. In Associate Builders Vs. Delhi

Development Authority4, it is held as follows:

"33. It must clearly be understood that when a court is applying the "public policy"

test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score Very often an arbitrator is a lay person not necessarily trained in law. Lord Mansfield, a famous

(2015)3 SCC 49 (Para 33) COMAP No.57/2021

English Judge, once advised a high military officer in Jamaica who needed to act as a Judge as follows:"General, you have a sound head, and a good heart; take courage and you will do very well, in your occupation, in a court of equity. My advice is, to make your decrees as your head and your heart dictate, to hear both sides patiently, to decide with firmness in the best manner you can; but be careful not to assign your reasons, since your determination may be substantially right, although your reasons may be very bad, or essentially wrong".It is very important to bear this in mind when awards of lay arbitrators are challenged.] . Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594 : (2012) 1 SCC (Civ) 342] , this Court held: (SCC pp. 601-02, para 21) "21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first COMAP No.57/2021

respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."

27. Having perused the Award passed by the

Arbitral Tribunal, we are of the considered view that

the same is based on detailed analysis of the

evidence on record. Therefore, no exception can be

taken to the order of the Commercial Court

dismissing the petition under Section 34 of the Act.

COMAP No.57/2021

Hence, no interference is called for in this appeal

and it is accordingly dismissed.

No costs.

Sd/-

JUDGE

Sd/-

JUDGE

SPS