Madras High Court
M/S. Dharani Hi-Tech Projects (P) ... vs The General Manager on 2 December, 2021
O.S.A.(CAD) No. 120 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 02.12.2021
CORAM :
THE HON'BLE MR.MUNISHWAR NATH BHANDARI,
ACTING CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE P.D.AUDIKESAVALU
O.S.A.(CAD) No. 120 of 2021
M/s. Dharani Hi-tech Projects (P) Ltd.,
Railway Contractors,
No. 28, Annavasal Street,
Maargudi - 614 001,
Tiruvarur District,
Tamil nadu,
Represented by its Managing Director .. Appellant/Respondent
vs
1. The General Manager,
Southern Railway,
Head Quarters Office,
Park Town,
Chennai - 600 003.
2. The Deputy Chief Engineer/II,
Gauge Conversion,
Southern Railway, Construction,
Thiruchirappalli - 620 001. .. Respondents/Petitioners
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O.S.A.(CAD) No. 120 of 2021
Prayer: Appeal under Clause 15 of the Letter Patent read with Order
XXXVI, Rule 1 of O.S. Rules to set aside the Judgment and Decree
dated 11.05.2020 passed by the Learned Judge passed in O.P. No.
1045 of 2017 on the file of the Original Side of this Court and thereby
upholding the award of the Learned Arbitrator dated 11.09.2017 as far
as the award related to claim for damages for non-execution of the
contract, Claim No. 3 concerned.
For the Appellant : Ms. K.Aparna Devi
For the Respondents : Mr. P.T.Ramkumar,
Standing Counsel
ORDER
(Order of the Court was made by
the Hon'ble Acting Chief Justice)
The appeal has been filed under Section 37 of the Arbitration and
Conciliation Act, 1996 to challenge the order dated 11.05.2020 in
O.P.No.1045 of 2017 passed by the learned single Judge on an
application under Section 34 of the Act of 1996.
2. It is a case where the appellant after invoking the clause of
arbitration, made an application thereupon submitting a claim. After
completion of the pleading, the learned Arbitrator framed the issues
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and considered the matter in reference to different claims. An award
thereupon was passed on 11.09.2017 accepting the claim in the
manner indicated therein.
3. The respondents herein made an application under Section 34
of the Act of 1996 raising objection against the award. While pressing
the application, the respondents restricted the application under
Section 34 of the Act of 1996 only in reference to claim no.3 decided
by the learned arbitrator. The learned single Judge accepted the
application and, accordingly, the claim awarded by the learned
Arbitrator in regard to claim no. 3 was set aside.
4. The facts of the case show that the agreement between the
parties was for performance of work. It is stated that the railways
defaulted in making the land available for performance of the work
and, accordingly, they granted seven extensions from time to time to
perform the work. The appellant had undertaken the work and even
completed the same to the extent of 80%, but thereupon the
agreement was terminated by the railways in an arbitrary and
unreasonable manner. The learned Arbitrator was approached not only
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to challenge the termination of the agreement, but to claim
consequential benefits, apart from claims made towards loss of profit
occurred due to termination of the agreement by the railways in an
illegal manner. The learned Arbitrator found the termination of the
contract to be illegal and, accordingly, allowed the claim for loss of
profit assessing it to be 15% of the amount of unexecuted value of
work. The determination of the amount of loss of profit was after
recording the finding that the termination of the contract was illegal
and considering the facts given therein. However, the learned single
Judge interfered with the award and held that there was no pleading to
show basis for the claim for loss of profit and even no factual basis was
disclosed by the learned Arbitrator for the award of amount towards
loss of profit. Accordingly, the application under Section 34 of the Act
of 1996 was accepted to that extent, while not accepting the prayer of
the appellant for remand of the case to the learned Arbitrator if no
reason was assigned for the same.
5. Learned counsel for the appellant submits that once the
termination of contract was held to be illegal, the appellant was
entitled to get the claim on loss of profit as determined by the learned
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Arbitrator. It was after taking into consideration the finding with regard
to issue in claim nos. 1 and 2 holding that the termination of contract
is illegal that the claim no.3 was allowed by the learned Arbitrator and,
therefore, the order of the learned single Judge should be set aside
making award of the learned Arbitrator to be absolute. Reference of
few judgments was given to justify the award of loss of profit to the
extent of 15% of the amount of unexecuted value of work. Those
judgments could be considered by the Court while dealing with the
argument of the non-appellants.
6. The appeal has been opposed by learned counsel for the
non-appellants. It is submitted that the learned Single Judge did not
find any pleading or evidence to allow loss of profit and even
otherwise, no reason was assigned by the learned Arbitrator to award
15% of the amount of unexecuted value of work towards loss of profit
and thereby, the learned single Judge rightly set aside the award in
regard to claim no. 3. It is further stated that so far as the award of
other amounts to the appellant is concerned, that has already been
satisfied other than the amount awarded towards loss of profit. The
prayer is to dismiss the appeal for the aforesaid reason.
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7. We have considered the rival submissions of the parties and
perused the records carefully.
8. The main issue for our consideration is as to whether the
learned Arbitrator has disclosed any basis to award loss of profit. It is
in a case where termination of agreement by the railways is held to be
illegal by the learned Arbitrator and as a consequence thereof, the
appellant may be entitled to claim loss of profit, but it is only after
supplying the basis and pleading for it. The award of the amount
towards loss of profit cannot be without any basis. To examine the
aforesaid, we have carefully gone through the award and find that
while considering the claim towards loss of profit, the following facts
were taken into consideration:
"i) Delay caused in the progress of the work during
the execution by the default of the employer;
ii) Failure on the part of the employer to fulfill his
obligations under the contract which has an impact
upon the profitability of the contract;
iii) Non-completion within the stipulated time due to
the default of the employer;
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iv) Abandonment of the work wholly or partly by the
employer."
After recording the facts aforesaid, the learned Arbitrator awarded
15% of the amount of unexecuted value of work. It is after referring to
a judgment where similar benefit was extended by the Court, ignoring
the fact that award of 15% of the amount in the case relied by the
learned Arbitrator was based on the facts earlier considered by the
High Court while determining the amount inter se in other case
between the same parties. Therefore, the award of 15% of the amount
was on the given facts applicable to that case. The award of loss of
profit in this case is not after discussion of facts but in reference to the
judgment referred in award ignoring that award therein was on the
facts of that case. The interference in the award was made by the
learned Single Judge exercising his powers within the four corners of
Section 34 of the Act of 1996. It is in view of the fact that the award of
the amount by the learned Arbitrator, if remains without the reasons,
then can be interfered by the learned single Judge exercising
jurisdiction under Section 34 of the Act of 1996.
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9. It is, no doubt, true that whenever it was found that
termination of the agreement is found to be illegal, the Court can
award reasonable amount towards loss of profit, but before awarding
the benefit, the Court need to disclose the basis and it cannot be
awarded in vaccum. The learned single Judge found that no basis has
been disclosed in the award, apart from the fact that no pleading to
disclose the basis for the claim of loss of profit was made by the
appellant followed by material. The award of loss of profit was not
accepted and, accordingly, interference was made in the award.
10. We do not find any illegality in the order of the learned single
Judge and otherwise, we are having limited jurisdiction while
exercising the appellate jurisdiction under Section 37 of the Act of
1996. Accordingly, we are not inclined to cause interference in the
order passed by the learned single Judge. It is even for the prayer of
the appellant for the remand of case to the learned Arbitrator. The
remand of case can be made only when a case is made out. The
learned counsel for the appellant was given chance to show pleading or
any material forming the basis for the Court to determine the loss of
profit, but despite time granted by the Court, pleading or material
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could not be referred before the Court. Learned counsel for the
appellant though submits that when detailed reasonings have been
given by the learned Arbitrator holding the termination of the contract
to be illegal, the reasonings there may be the basis for determination
of the amount of loss of profit. We have considered the aforesaid
argument also, but find that there is no discussion of that nature in the
award. The learned Arbitrator has not referred to any finding in
reference to other issues and more specifically, regarding termination
of the agreement to be illegal and there is no pleading or material to
make it as the basis for the award of benefit of 15% of the amount of
unexecuted value of work towards the loss of profit.
Accordingly, the appeal fails and the same is dismissed. There
will be no order as to costs.
(M.N.B., ACJ.) (P.D.A., J.)
02.12.2021
Index : Yes/No
vjt
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To:
1. The General Manager,
Southern Railway,
Head Quarters Office,
Park Town,
Chennai - 600 003.
2. The Deputy Chief Engineer/II,
Gauge Covnersion,
Southern Railway, Construction,
Thiruchirappalli - 620 001.
3. The Sub Assistant Registrar,
Original Side,
Madras High Court,
Chennai - 600 104.
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O.S.A.(CAD) No. 120 of 2021
M.N.BHANDARI, ACJ
AND
P.D.AUDIKESAVALU,J.
O.S.A.(CAD) No. 120 of 2021
02.12.2021
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