Madras High Court
M/S.Karismaa Foundations Pvt. ... vs M/S.Olympia Tech Park (Chennai) ... on 23 September, 2021
OSA Nos.102, 2 and 3 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23.09.2021
CORAM :
THE HON'BLE MR.SANJIB BANERJEE, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE P.D.AUDIKESAVALU
OSA Nos.102, 2 and 3 of 2021
and CMP Nos.4837, 81 and 75 of 2021
M/s.Karismaa Foundations Pvt. Ltd.,
Rep. by its Director, Mr.C.Rajesh,
No.340, 1st South Main Road, Kapaleswarar
Nagar, Neelankarai, Chennai 115. ... Appellant in
OSA.102/21 &
Respondent in
OSAs 2 & 3/21
-vs-
M/s.Olympia Tech Park (Chennai) Pvt. Ltd,
Plot No.1, SIDCO Industrial Estate,
Guindy, Chennai-32
(Respondent is substituted in place of
M/s.Olympia Infratech Pvt. Ltd.
M/s.Opaline Hotels Pvt. Ltd. based on
the memo filed) ... Respondent in
OSA.102/21 &
Appellant in
OSAs 2 & 3/21
Appeals filed Order XXXVI Rule 11 of O.S. Rules read with
Section 37 of the Arbitration and Conciliation Act, 1996, against the
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OSA Nos.102, 2 and 3 of 2021
common order of this Court dated 08.05.2020 passed in O.P.Nos.435
and 633 of 2019 on the file of original side of this court.
For the Appellant in
OSAs 102/21 &
Respondent in
OSAs 2 & 3/21 : Mr.Nithyaesh Natraj
For the Respondent in
OSAs 102/21 &
Appellant in
OSAs 2 & 3/21 : Mr.AR.L.Sundaresan
Senior Counsel
for Mr.C.T.Murugappan.
*****
COMMON JUDGMENT
(Delivered by the Hon'ble Chief Justice)
The dispute falls within a very limited ambit. Both parties to the
arbitral reference have carried appeals from the rejection or partial
rejection of their petitions under Section 34 of the Arbitration and
Conciliation Act, 1996.
2. There were several agreements between the parties, seven
work orders in all, for the construction of several lots of villas. The
appellant in OSA Nos.2 and 3 of 2021 is the owner and the appellant in
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OSA Nos.102, 2 and 3 of 2021
OSA No.102 of 2021 is the contractor. Under a common order passed
in respect of the arbitration clauses contained in the seven work
orders, a sole Arbitrator was appointed by the Chief Justice's Designate
on April 29, 2018. Despite such order and it being apparent that there
would be a single reference in respect of the entirety of the work, the
owner continued to initially contend before the Arbitrator that the
several work orders had to be treated distinctly. An objection on such
count has been carried even up to this stage. Indeed, the owner filed a
limited counter-claim at the initial stage before filing the further
counter-claim in 2018, which has prompted a minor point to be taken
by the contractor on the ground of limitation. But there is no merit in
the owner's suggestion that the claims under the seven perceived
independent work orders had to be dealt with distinctly nor in the
contractor's objection on the ground of limitation.
3. The Arbitrator, in course of rendering the award of April 8,
2019, held that the reference had always been taken up pertaining to
the entirety of the work, notwithstanding the initial murmurs to the
contrary on the part of the owner. The Arbitrator also noticed that a
combined counter-claim was fashioned by the owner towards the end
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OSA Nos.102, 2 and 3 of 2021
of the reference where all the heads of counter-claim were clubbed. As
to the ground of limitation taken by the contractor, there does not
appear to be any discussion in the award. However, it is evident that
the owner called upon the contractor to agree to refer the balance
claims of the owner pertaining to some of the work orders by a writing
which the contractor received in or about March, 2018. Upon the
contractor’s failure to act in terms of the request, the owner applied
under Section 11(6) of the said Act and obtained an ex parte order,
which was subsequently recalled and the owner was permitted to carry
a counter-claim to the continuing arbitral reference. It was in such
circumstances that the counter-claim came to be filed late in 2018.
4. Thus, for the purpose of assessing whether the additional
counter-claim which was carried by the owner to the reference in 2018
was barred by limitation, it is necessary to see whether there was a
live claim possible as on the date of the receipt of request for the
reference in or about March, 2018 since such is the date which is
relevant under Section 21 of the Act and the clock of limitation stops
upon the request being received. It is evident from the correspondence
exchanged between the parties that at least in respect of one head of
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OSA Nos.102, 2 and 3 of 2021
claim, pertaining to defects being rectified, there were
acknowledgments in writing on behalf of the contractor executed on or
about June 13, 2015. Since the request for the reminder of the
disputes to be carried to arbitration was received by the contractor
within three years of such date of June 13, 2015, it is evident that no
part of the counter-claim carried by the owner to the reference was
barred by limitation.
5. As to the merits of the matter, it is evident that the
contractor, as the claimant in the reference, made a total claim of
Rs.2,39,97,236/- comprising a claim in excess of Rs.95 lakh on
account of retention money; another Rs.7.40 lakh on account of non-
conformity report; a third head of Rs.1.40 lakh on account of penalty;
a further amount in excess of Rs.55 lakh for cement coefficient and an
ex-gratia amount in excess of Rs.45 lakh apart from the two amounts
on account of final bills for sums in excess of Rs.25 lakh and Rs.7.65
lakh. The counter-claim was in respect of two heads: penalty at the
rate of 2.5 per cent of the value of the work for the period of delay
amounting to Rs.79,20,738/-; and, defective work which required to
be attended to by a third party for rectification for a sum of
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OSA Nos.102, 2 and 3 of 2021
Rs.63,72,000/-.
6. The Arbitrator awarded a net amount of Rs.1,18,56,028/- in
favour of the contractor after allowing both heads for which counter-
claim had been filed by the owner, albeit a reduced amount on account
of penalty for the delayed completion of the work. The award also
provided for interest at 12 per cent per annum on the principal sum
awarded with pendente lite interest and interest at the same rate on
the total amount with effect from April 1, 2019.
7. Both parties were aggrieved by the award. The contractor was
dissatisfied that the counter-claim had been allowed. The principal
complaints of the employer were in respect of the amounts awarded
under the heads of non-conformity, ex-gratia and cement coefficient.
By the common judgment and order dated May 8, 2020, the
arbitration court set aside the award of the sum claimed by the owner
on account of defect rectification on the ground that there was no
proof of the amount and no evidence on the basis of which the sum
was claimed or awarded.
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OSA Nos.102, 2 and 3 of 2021
8. In course of the hearing at this appellate stage, the owner
refers to the arbitral award and the recognition therein that the claim
on account of defective work had been admitted by the contractor
through an employee by the name of Jaganathan. It is evident from
the award that though the contractor had claimed that the documents
in support of the claim on account of defective work were forged and
fabricated, such documents carried the signature of Jaganathan.
Despite Jaganathan being the contractor's employee, he was not called
upon to disown his apparent signature or discredit the three
documents. Thus, there was sufficient basis indicated in such regard to
award the amount on account of defect rectification. The court of the
first instance was clearly mistaken in perceiving Jaganathan to be the
owner's employee.
9. As for the sums awarded in favour of the contractor, the
owner limits the challenge to the three heads of the non-conformity
report, the ex-gratia amount and the cement coefficient.
10. In the award, the Arbitrator alludes to a document marked
as Ex.C9 in the reference to indicate that the ex-gratia amount had
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OSA Nos.102, 2 and 3 of 2021
been agreed to be paid. The documents pertaining to the claim on
account of ex-gratia reveal a promise made by the owner to the
contractor to release the additional amount and, to such extent, the
claim can be seen to have been admitted. However, the owner
suggests that the amount was payable subject to the project being
completed within time and since the Arbitrator ultimately held that
there was a delay in the completion of the project for which the
Arbitrator awarded a sum in excess of Rs.53 lakh in favour of the
owner and such part of the award has not been interfered with by the
arbitration court, there was no question of the contractor being
entitled to the ex-gratia payment. However, it is apparent that the
overall rate was enhanced and that was referred to as “ex-gratia” in
the relevant correspondence between the parties.
11. As for the non-conformity report, the Arbitrator indicated
some reasons in support of the rather meagre amount of Rs.7.40 lakh.
12. As to the payment claimed on account of cement coefficient,
there is a document exhibited and described as Ex.C24 in the award
which, according to the Arbitrator, amounted to an admission of the
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OSA Nos.102, 2 and 3 of 2021
relevant head of claim. At the highest, the document can be seen to
be an admission that a claim could be made by the contractor against
the owner on account of cement coefficient, but the relevant document
does not indicate any figure for the Arbitrator to arrive at the
conclusion that the contractor was entitled to a sum of Rs.55,29,397/-
on such account.
13. It is elementary that in respect of claims in engineering
contracts or works contracts, the head of claim has first to be justified
before the quantum is assessed and a figure arrived at. Merely
because the head of claim is admitted, it would not justify the making
of the award without ascertaining the quantum that the claimant is
entitled to in respect of such head of claim. Though such aspect of the
matter did not fall for scrutiny before the arbitration court, it is evident
that the Arbitrator erred in treating the admission in principle to an
admission on quantum and making the award for a sum in excess of
Rs.55 lakh without any shred of evidence in such regard or any reason
indicated in support thereof.
14. The arbitration court, of course, committed an error in
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OSA Nos.102, 2 and 3 of 2021
regarding Jaganathan to be an employee of the owner rather than of
the contractor. Upon perceiving Jaganathan to be an employee of the
owner, the arbitration court concluded that the claim on account of the
defect rectification had not been proved. However, the owner has
referred to the relevant documents, marked as Ex.B2, Ex.B7 and
Ex.B10 in the reference and all three documents carry the signature
alleged to be of Jaganathan on behalf of the vendor as indicated in the
documents. It is the admitted position that Jaganathan was an
employee of the contractor at the relevant point of time.
15. In view of the above, the interference by the arbitration
court with the amount awarded by the Arbitrator on account of defect
rectification in favour of the owner cannot be sustained. At the same
time, the award, to the extent of Rs.55,29,397/- in principal on
account of cement coefficient can also not be accepted as there does
not appear to have been any evidence in support thereof nor any
reason indicated in support of the quantum in the award itself.
16. As regards the claim on account of cement coefficient, the
court enquired of the parties that if the dispute in respect of the head
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OSA Nos.102, 2 and 3 of 2021
of claim pertaining to cement coefficient could be resolved, whereupon
counsel appearing for the parties have accepted the court's suggestion
that a principal sum of Rs.25 lakh be paid and received on such
account without the matter being carried any further and given a
closure at this stage. Counsel have agreed to such suggestion upon
instructions for which time was afforded by the court in course of
hearing.
17. Accordingly, the judgment and order dated May 8, 2020 is
set aside insofar as it interdicted the award on the head of defect
rectification in favour of the owner to the extent of Rs.63,72,000/-.
Further, the award is modified by reducing the amount awarded on
account of cement coefficient from Rs.55,29,397/- to Rs.25,00,000/-,
by consent of the parties.
18. Since sufficient reasons have been indicated in the award in
respect of the other heads of claim and the quantum of interest has
been awarded at a reasonable rate of 12 per cent per annum, the
award does not call for any further interference.
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OSA Nos.102, 2 and 3 of 2021
OSA Nos.102, 2 and 3 of 2021 are disposed of. CMP Nos.4837,
81 and 75 of 2021 are closed. In view of the fair stand taken by the
parties at this stage, no costs are awarded.
(S.B., CJ.) (P.D.A., J.)
23.09.2021
Index : yes
sra/kst
To:
The Sub Assistant Registrar
Original Side
High Court, Madras.
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OSA Nos.102, 2 and 3 of 2021
THE HON'BLE CHIEF JUSTICE
AND
P.D.AUDIKESAVALU, J.
(sra)
O.S.A.Nos.102, 2 and 3 of 2021
23.09.2021
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