HON’BLE SMT. JUSTICE T. MEENA KUMARI and HON’BLE SRI JUSTICE G.V.SEETHAPATHY C.M.A.Nos.2800 and 2359 OF 2002 COMMON JUDGMENT: (Per the Hon’ble Smt. Justice T.Meena Kumari) Since the parties and the issue involved in both the C.M.As are one and the same, both the appeals are being disposed of by this Common Judgment. C.M.A.Nos.2800 and 2359 of 2002 are directed against the common order, dated 22.02.2002, passed by the I Senior Civil Judge, City Civil Court, Hyderabad in O.P. Nos.15 of 1999 and 17 of 1999 respectively, whereby the Arbitration Award dated 08.04.1999 passed by the Sole Arbitrator Sri P.V. Rama Sarma, Retired District Judge, in respect of written agreement dated 25.11.1988 was modified, by making the same as rule of the Court. For the sake of convenience, hereinafter, the parties will be referred to as they were arrayed in O.P.No.15 of 1999. The brief facts are that the petitioner-M/s.Message ADS Private Limited (hereinafter referred to as ‘the Contractor”), is doing the business of Advertisement Agency. The Contractor entered into a contract with respondent No.1-the Andhra Pradesh State Road Transport Corporation (hereinafter referred to as “the Corporation”) on 25.11.1988 for displaying advertisements on the properties of the Corporation for a period of six years commencing from 01.01.1989 to 31.12.1994 with certain terms and conditions. As per the said agreement, the Contractor has to pay certain amounts in installments to the Corporation. As the contractor has not adhered to the schedule of dates of payments of monthly instalments and there were delays on its part in making payments of monthly instalments and depositing of security deposit amount and also in furnishing the bank guarantee, the Corporation, after addressing several letters terminated the contract with effect from 31.08.1990. However, on request of the Contractor, the termination was cancelled and he was allowed to continue. On 18.01.1991, the Corporation abruptly seized the advertising material of the Contractor, and subsequently, issued one month's notice dated 02.03.1991 intimating that the contract will be terminated by 02.04.1991. Meanwhile, the Corporation also issued a paper publication dated 07.03.1991 intimating the advertisers that the Contractor has no right to collect any advertisement orders and advising the advertisers not to pay any arrears of amounts to the Contractor. On 02.04.1991, the Corporation sent a notice to the Contractor terminating the agreement with effect from 02.04.1991. Aggrieved by the same, the Contractor filed O.P. No.146 of 1995 on the file of I Senior Civil Judge, City Civil Court, Hyderabad seeking appointment of an Arbitrator. In pursuance of the orders passed in O.P. No.146 of 1995, Sri P.V.Rama Sarma was appointed as an Arbitrator for adjudication of the disputes between the Contractor and the respondent-Corporation, arising out of the contract dated 25.11.1988. After considering the documents filed by both the parties and on hearing the arguments, the learned sole Arbitrator found that the termination of the contract by respondents 1 and 2 with effect from 02.04.1991 is not justified and not legally valid, and accordingly passed an award on 08.04.1999 awarding an amount of Rs.59,74,619- 20 ps as against claim No.1 i.e., the value of the properties of the Contractor illegally seized and not returned; Rs.9,82,102-20 ps towards claim No.2 i.e., for wastage of developed infrastructure; Rs.5,03,893-50 ps towards claim No.3 i.e., loss due to non-execution of orders; Rs.16,37,019.75 ps towards claim No.4 i.e., outstanding dues became irretrievable and unrecoverable; Rs.1,21,700/- towards claim No.6 i.e., for idling of workmen and Rs.5,00,000/- towards claim No.7 i.e., for loss of reputation and goodwill. Aggrieved by the same, the Contractor filed O.P.No.15 of 1999 to make the award dated 08.04.1999 as rule of the Court. Whereas, the Corporation filed O.P.No.17 of 1999 to set aside the Award passed by the Arbitrator. In O.P.No.15 of 1999, the Contractor stated that the Arbitrator, who was appointed to adjudicate the disputes and differences between the parties arising out of the contract dated 25.11.1988, after considering the documents filed by both the parties and having found that the termination of contract by respondents 1 and 2 with effect from 02.04.1991 is not justified, passed the award on 08.04.1999, and the same is without any bias and does not suffer from any arbitrariness. Therefore, the Contractor prayed to pass a decree and judgment in terms of the award of the Arbitrator the as Rule of the Court. Respondents 1 and 2 contested the matter by filing counter stating that the Contractor did not comply with the terms and conditions of the contract in depositing security deposit and committed default, and therefore, his contract was terminated on 02.04.1991. It was further stated that the Contractor without questioning the termination of contract, had filed O.P.No.146 of 1995 for appointment of Arbitrator to decide the alleged disputes between them. In the said counter, with regard to claim No.1, it was stated that the Contractor had taken away 47 hoardings out of 180 hoardings and sold the same to M/s.Uni Ads Pvt. Limited for a sum of Rs.2,85,000/-, but the said sale proceeds were neither paid by the Contractor nor purchaser; that without applying and without going through the counter and correspondence, the Arbitrator erred in awarding such an amount for the costs of advertisement material; and that as the rates of all the movable items were worked out by the Contractor himself, the Arbitrator ought to have taken the rates as the cost of the used material, and instead of doing so, the Arbitrator relied on the purchase invoices, vouchers etc. With regard to claim No.2 i.e., for infrastructure facility, it was stated that the Corporation issued letter dated 02.03.1991 informing the Contractor about the termination of contract under the terms of the agreement, and accordingly issued final order of termination on 02.04.1991; that the Contractor has not questioned the said termination order before the Vice Chairman and Managing Director; and that the termination of the agreement is legally valid and binding by the conduct of the Contractor. With regard to claim No.3 i.e., loss due to non-execution of work orders, it was stated that in several letters the Contractor stated that they were suffering loss, and therefore, the claim of the Contractor with 30% profit for the alleged non-execution of order is totally erroneous and frivolous and that the fault lies with the Contractor in termination of the contract and as such non execution of orders by him to be attributable for his own fault and the Corporation cannot be tagged with the liability to make good of such alleged loss of profits to the petitioner. With regard to claim No.4, i.e., outstanding dues became irretrievable and unrecoverable it was stated that no steps were taken by the Contractor to recover his dues, which shows that there were no recoveries to be made by him. With regard to claim No.6 i.e., for idling of workmen, it was stated that as per the terms of the agreement, the Corporation has every right to stop the Contractor from carrying on the business activity when he became defaulter in payment of premiums and that no damages or compensation can be claimed in such event by the Contractor against the Corporation. With regard to claim No.7 i.e., for loss of reputation and profit, it was stated that the Contractor is a chronic defaulter in payment of premiums and he has lost his reputation before the termination of contract itself. It was further stated that the Contractor has not only cheated the Corporation but also general public and having such nature of conduct he does not have any reputation, which is alleged to have been lost by the Contractor by the termination of contract. With regard to claim No.9 i.e., for grant of interest it was stated that there was no agreement to the effect that the Corporation has to pay interest as stipulated rate to the petitioner; that without any written agreement showing such rate of interest under any provisions of law, the Arbitrator has no authority to grant interest and thus awarding of interest @18% per annum on the amounts awarded by him, is liable to be set aside and that all the above claims were barred by limitation and the Arbitrator ought to have rejected the same. In O.S.No.17 of 1999 filed by the Corporation to set aside the award dated 08.04.1999 passed by the Arbitrator, the Corporation has reiterated the averments made by it in the counter filed by them in O.S.No.15 of 1999. Since the parties and the issues involved in both the O.Ps are one and the same, the Court below clubbed both the O.Ps. and tried jointly. Though no oral or documentary evidence was adduced on behalf of both the parties, the Arbitration Award dated 08.04.1999 was marked as Ex.C.1 with their consent. The Court below, on hearing both the parties and considering the entire material available on record, held that the Arbitrator awarded an amount of Rs.59,74,619.20 ps towards claim No.1 based on Ex.P.4, the list of material seized by the Corporation, in which, it has been claimed by the Contractor for seized hoardings i.e., 180 big worth Rs.18,63,000/-, 52 small hoardings worth Rs.8,06,925/-; missing of bus shelters tops, large 78 Nos worth Rs.7,80,000/-, medium 123 Nos worth Rs.9,84,000/- and small 24 Nos worth Rs.1,44,000/-; missing of display boards 140 Nos worth Rs.1,40,0000/-, the seized T.Vs 84 Nos worth Rs.9,24,000/-; 21 VCRs worth Rs.2,52,000/-; glow signs and 21 translights worth Rs.1,26,000/- and two show cases worth Rs.30,000/-. The Corporation had filed counter before the Arbitrator disputing the seizure of such items, the value assessed by the Contractor and also the claim of the Contractor. The Corporation had furnished all the details of the seized articles under Ex.P.3, which was filed as material paper in W.P.No.5309 of 1991 before this Court. Ex.P.3 shows that 226 hoardings, 58 TVs, 7 VCRs, 2 Amplifiers, two show cases and other ancillary materials, but its value was not assessed. In Ex.P.6, letter dated 10.08.1992, the Corporation has stated that around 100 numbers bus shelters value of Rs.4,00,000/- were missing and therefore, the claim of the Contractor for 232 hoardings cannot be valid for Rs.26,69,925/-. The recitals of the claim statement also shows that the Contractor has addressed a letter dated 01.04.1991 to the Corporation disclosing all the details of the properties seized by the Corporation, but he has not filed the office copy of the said letter, which is most crucial document to decide and ascertain what were the actual items that were seized and its value. The learned Arbitrator has not taken into consideration the letter dated 01.04.1991 of the Contractor and list of seized articles furnished by the Corporation under Ex.P.3 and also the value of the hoardings given by the Contractor in Ex.P.6, and taking into consideration only Ex.P.6, he assessed the values, which is not correct. Ex.R.24, dated 17.12.1993, the letter of the Contractor seeking permission to sell about 21 hoardings located in twin cities, and Ex.R.23, dated 07.05.1994, permission granted by the Corporation for sale of the said hoardings reveal that the Corporation has permitted to sell the said hoardings to M/s.Uni Ads Pvt. Limited. Ex.R.27, dated 23.02.1995, the letter of the Contractor, reveals that the Contractor had obtained permission for sale and for handing over the sold hoardings to M/s.Uni Ads Pvt. Limited. The correspondence also reveals that the Corporation has permitted to sell hoardings and handed over some of the hoardings to M/s.Uni Ads Pvt. Limited, but it has not mentioned about the same in its counter. From ExsR.23, R.24, R.27 and R.28, dated 27.09.1995, it was clear that M/s.M.Narayana Raju of M/s.Uni Ads Pvt. Limited claimed an amount of Rs.2,85,000/- towards cost of 47 hoardings of the Contractor. In spite of specific pleadings of the Corporation and also the correspondence between the parties, the Arbitrator did not touch these items and there was discussion and finding for return of about 37 or 47 hoardings to third party through the Contractor. Ex.R.27-the Contractor’s letter itself go to show that they have taken possession of 37 hoardings for which claiming of amounts from the Corporation does not arise and as such the same has to be deducted from out of the total hoardings i.e., to be deducted from out of the small hoardings. The Corporation has not furnished any value of the hoardings and also the details of big and small hoardings, and as such the version of the contractor has to be believed in this aspect that his missing hoardings are 180 in big and remaining are small hoardings. Thus, the finding of the Arbitrator for Rs.18,63,000/- for 180 big hoardings and Rs.10,085/- per each small hoarding is proper and just and the said finding requires no interference. So far as the seized small hoardings are concerned, they were assessed as only 9 instead of 52. Thus the Court below held that the Contractor is entitled for hoarding costs as under: “Hoardings: big size 180 Rs.18,63,000/- small size 9 Rs. 90,765/- each at Rs.10,085/- ------------------- Total: Rs.19,53,765/- -------------------” So far as the seizure of the bus shelters tops are concerned, the Contractor claimed for large 78 Nos. worth Rs.7,80,000/-, medium 123 Nos. worth Rs.9,84,000/- and small 24 Mps/ worth Rs.1,44,000/-. In the counter, the Corporation has disputed the same stating that the Contractor has no right to construct such bus shelters as per the terms of agreement. For the claim made by Contractor for 140 display boards worth Rs.1,40,000/-, the Corporation stated that no such display boards were installed by the Contractor and it is only imaginary. The learned Arbitrator has given a finding fixing the liability of the said amounts on the Corporation, but he had not discussed anything about the existence of bus shelters, display boards and its seizure. In view of the admission made by the contractor in his letter dated 7.07.1992-Ex.P.9 that the installation of bus shelters is not part and parcel of their agreement, the Court below held that the Corporation is not liable to pay amounts covered under bus shelters and display boards. With regard to the claim for seized TVs, VCRs and other items, the Arbitrator awarded Rs.12,86,148/- basing on Exs.P.4 and P.24. The same was also disputed by the Corporation stating that only 58 TVs were seized but not 84; that out of the seized TVs half of them were not working; that 6 VCRs were not working; and that glow signs and trans-lights were not at all installed and they have not sized them. There was no piece of material to show that the Corporation has seized those items and Ex.P.3 was also silent about the seizure of the same. In Ex.R.25, the copy of the letter marked to the Corporation, the Contractor has furnished the value of TV sets and VCRs, which go to show that he was willing to sell the TVs at Rs.6,000/- each, VCR at Rs.7,000/- and VCP at Rs.6,000/-. The Arbitrator has not discussed on the said letters and the values mentioned therein. Basing on Ex.P.4 and the values mentioned therein and also the bills covered under Exs.P.24 to P.30, the Arbitrator has assessed the value of the TVs, VCRs and other items. When a letter of the Contractor is available giving sale rate of his articles covered under Ex.R.25, taking the bill value by the Arbitrator is not at all justifiable. In the absence of any seizure report or letter dated 01.04.1991 of the Contractor, the Court below took into consideration Ex.P.3, the list of seized articles from the Contractor, according to which the Corporation has seized 58 TVs and 7 VCRs for which the Contractor is entitled to claim an amount of Rs.6,000/- per TV and Rs.7,000/- per VCR i.e., Rs.3,97,000/-. With regard to the claim of two show cases, the Corporation has admitted the seizure of the same and the Court below confirmed the amount of Rs.30,000/- awarded by the Arbitrator. Accordingly, with regard to claim No.1, the Court below came to the conclusion that the Contractor is entitled to Rs.23,80,765/- instead of Rs.60,49,925/- as awarded by the Arbitrator. In so far as claim No.2, it has been observed by the Court below that in W.P.No.5309 of 1991 filed by the Contractor, this Court gave an opportunity to the Contractor to pay the deposits and installments by giving certain time, but the Contractor did not comply with the said conditions. Therefore, the Corporation permitted the new Contractor to take up new contracts. It was further observed that the Arbitrator ought not to have granted an amount of Rs.10,00,000/- towards amount on development infrastructure facility from the Corporation and accordingly rejected the said claim. In so far as claim No.3 is concerned, the Court below observed that as per the contract agreement, the contract period was to be extended on payment of rentals and deposits before commencement of second, third and fourth year contract period. Since the Contractor did not fulfill his obligations for continuation of the contract period, mere obtaining the orders for execution of works is not at all a ground to claim compensation from the Corporation on the ground that he would have realized the profits of the said work order. In the absence of contract period, the Contractor is not entitled to claim any amounts on this count. Therefore, awarding Rs.5,03,893-50 by the Arbitrator towards the loss incurred due to non-execution of orders is not justified and accordingly disallowed the same. With regard to claim No.4, the Court below held that the Arbitrator allowed the claim of Rs.16,37,019-75 ps for non recovery of dues from the customers due to cancellation of contract by the Corporation, based on the particulars of the statement and the amount due from the customers of various districts under Exs.P.20 and P.27. It was the contention of the Contractor that their customers have not paid the amounts because of the paper publication issued by the Corporation. Since the notice and letters sent to the Contractor were returned unserved, the Corporation had issued paper publication informing the same and also informing the cancellation of the agreement. Further, the Contractor in its letter dated 30.11.1991 Ex.R.26 admitted that they have shifted their office to new address. Since the new address was not furnished to the Corporation, the Corporation had no option except to issue the paper publication. If there were any payments due, the Contractor was at liberty to initiate legal proceedings by filing the suits and mere publication in the news papers issuing letters and notices by the Corporation is not at all fault. The Court below further held that the claimant is not entitled to claim compensation from the Corporation and the Arbitrator erred in allowing the said claim, and accordingly rejected this claim also. With regard to claim No.6 i.e., for idling of workmen from 18.01.1991 to 31.12.1991, the Court below held that the Arbitrator after having discussion and basing on Exs.P.21 and P.28, allowed an amount of Rs.1,21,700/- under this claim, and the same is just and proper and does not require any interference. With regard to claim No.7 i.e., loss of reputation and non-receipt of future works, the Contractor claimed an amount of Rs.20,00,000/- and the Arbitrator awarded Rs.5,00,000/- with an observation that the damage or loss is to be equally apportioned between the parties. The Court below held that the Contractor fell due of Rs.6,00,000/- to the Corporation and had not deposited the security amounts for continuation of third year contract and also due the monthly instalments. Therefore, the Corporation issued number of notices and terminated the contract. Thereafter, the Corporation seized the articles of the contractor on 18.01.1991. Since the notices sent to the Contractor returned unserved and the new address of the Contractor has not furnished, the Corporation has issued publication in news papers on 07.03.1991, and therefore, it cannot be said that the Corporation made such publication to cause damage to the reputation and loss to the business of the Corporation. Therefore, the Court below concluded that the Contractor is not entitled for any amount under this claim. With regard to claim Nos.8 and 9 the Arbitrator allowed the interest on claim Nos.1 and 2 @ 18% per annum and he did not allow the interest on the remaining claims. The Court below held that the Contractor is entitled to claim interest @18% per annum from 03.11.1995 till the date of that order on the allowed claim No.1 and fixed the future interest @ 9% per annum on the allowed claim from the date of that order till the date of realization. Accordingly, the Court below, by the common order, dated 22.02.2002, allowed O.P.No.15 of 1999 and partly allowed O.P.No.17 of 1999. Aggrieved by the same, the present appeals have been preferred by the Contractor and the Corporation. The learned counsel for the Contractor/appellant in C.M.A.No.2800 of 2002 tried to convince this Court contending that the Court below erred in reducing the amount with regard to claim No.1 from Rs.59,79,619.20 ps to Rs.23,80,765/-. But, in view of the exhaustive discussion and the findings recorded by the Court below as to the seizure of the material under Exs.P.3 and P.4, we are not inclined to accept the said contention. In so far as claim Nos.2 to 4 and 7 are concerned, there was no material available before the Court below, and therefore, the Court below having not satisfied with the material available to allow the said claims rejected the same. In view of the same, we do not find any error apparent on the face of record with regard to the said claims. Coming to claim No.6, based on the material available on record, the Arbitrator has fixed the amount of Rs.1,21,700/- towards idling of workmen and therefore, we are not inclined to interfere with the same. The learned counsel for the Corporation, who is the appellant in C.M.A.No.2359 of 2002, contended that the interest granted by the Arbitrator and the Court below @18% per annum with regard to claim No.1 is on higher side and the same should be reduced to 9% per annum in view of the substantial reduction of interest after economic reforms in the country. In support of his contention, he relied upon a judgment of the Supreme Court in Krishna Bhagya Jala Nigam Ltd v. G.Harischandra Reddy[1], which has been followed by a Division Bench of this Court in Continental Construction Company v. Board of Trustees, Visakhapatnam Port Trust, Visakhapatnam[2]. A perusal of the proceedings sheet shows that in C.M.A.No.2359 of 2002, this Court granted interim stay on 11.09.2002 subject to the condition of the appellant/Corporation depositing half of the awarded amount together with costs and interest, within a period of four weeks from that date. According to the Corporation, the said conditional order has been complied with and the Contractor has withdrawn the amount. Having regard to the facts and circumstances of the case, and in view of the observations made hereinabove, and the law laid down by the Supreme Court in Krishna Bhagya Jala Nigam Ltd’s case, we are of the opinion that the interest has to be reduced to the extent of 9% per annum on the amount awarded under claim No.1. But however, in view of the interim order, dated 11.09.2002, passed by this Court in C.M.A.No.2359 of 2002, the Corporation has already paid half of the amount including interest and costs, we direct the Corporation to pay the balance amount. Accordingly, C.M.A.No.2359 of 2002 is allowed in part reducing the interest on claim No.1 from 18% per annum to 9% per annum from 03.11.1995 till the date of realization. Consequently, C.M.A.No.2800 of 2002 stands dismissed. There shall be no order as to costs. T. MEENA KUMARI, J G.V.SEETHAPATHY, J Date: 03.08.2009 va/ktl [1] (2007) 2 SCC 720 [2] 2008 4 ALT 209