IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.139 OF 2008 Elpro International Ltd. .. Petitioner Versus Shree Shyam Coal Company Ltd. .. Respondent Mr.Zubair Dada with Mr.H.K.Sudhakara with Ahtesham Khotri i/by M/s.Khaitan & Co for the petitioner. Mr.Simil Purohit with Mr.M.K.Banatwala i/by M.K.Banatwala for the respondent. CORAM CORAM CORAM : A.S.OKA, J. : A.S.OKA, J. : A.S.OKA, J. DATE DATE DATE : 28th November 2008. : 28th November 2008. : 28th November 2008. P.C.: . This petition under section 34 of the Arbitration and Conciliation Act, 1996 is listed for final disposal at admission stage. I have heard the submissions of the learned counsel appearing for the parties. With a view to appreciate submissions, it will be necessary to refer to the facts of the case in brief. On 16th May 2005 the petitioner entered into a Leave and Licence Agreement with one TVS Logistic Services Limited in respect of an industrial shed admeasuring 890 sq feet on the ground floor situated at survey nos.179 to 183 at village Chinchwad, Taluka Haveli, District Pune. 2 Another Agreement was entered into between the petitioner and the TVS Logistic Ltd on the same day which was an agreement for amenities by which the petitioner granted exclusive right to use of an open area of 47,747 sq feet. The licence granted to TVS Logistic Ltd (hereinafter referred to as the said TVS Logistic) was to expire after 31st March 2006. Reference has been made in the petition to the correspondence made between the petitioner and the said TVS Logistic. 2. On 27th March 2006, the petitioner entered into a Leave and Licence Agreement with the respondent for the period commencing from 01st April 2006 up to 31st March 2007 with a licence fee of Rs.20 lacs per month. Reference is also made to the amenity agreement executed by the petitioner on the same day with the respondent. 3. The dispute between the parties revolves around sub-clause (d) of clause 4 of the Leave and Licence Agreement dated 27th March 2006. Clause 4 of the said Agreement reads thus: "4. The Licensor hereby represents to and covenants with the Licensee as follows:- 3 a. that the title of the Licensor to the Licensed Premises is marketable and free from encumbrances of any nature whatsoever. b. the Licensor has full right and absolute authority to grant the license o the Licensed Premises to the Licensee on and from April 1, 2006. c. the Licensor shall not commit any act, deed, matter or thing during the period of license, whereby the Licensor’s right to grant the license or the Licensee’s right to use the Licensed Premises, is jeopardized, affected or rendered void. d. The Licensor shall allow the Licensee to use and occupy the Licensed Premises on and from April 1, 2006 failing which the Licensor shall be liable to pay to the Licensee damages at the rate of Rs.1,00,000/- per day 4 (hereinafter referred to as compensation). In the event the Licensor fails to pay to the Licensee the damages as stated herein then the licensor shall be liable to pay interest at the rate of 18% per annum for the delay in payment of compensation." 4. The case of the petitioner is that a notice was served through their advocate to TVS Logistic to vacate the premises and stop using the amenities on or before 31st March 2006. The case of the petitioner is that the said company by its advocate’s letter dated 25th May 2006 stated that the said company would vacate the premises and stop using the open area by the end of June 2006. 5. By a letter dated 05th June 2006, the respondent terminated the Leave and Licence Agreement as well as amenity agreement dated 27th March 2006 on account of the petitioner’s inability to deliver the possession of the property subject matter of the licence. By the said notice, the respondent called upon the petitioner to pay a compensation of Rs.61 lacs calculated at 5 Rs.01,00,000/- per day from 01st April 2006 till 31st May 2006 in accordance with sub-clause (d) of clause 4 of the Leave and Licence Agreement. Ultimately, the dispute regarding demand for the said amount was referred to the sole arbitrator. The award was made on 22nd November 2007 by the learned sole arbitrator accepting the claim of the respondent and directing the petitioner to pay to the respondent a sum of Rs.68,32,000/- comprising of an amount being Rs.61,00,000/- on account of compensation at the rate of Rs.01,00,000/- per day for period of 01st April 2006 to 31st May 2006 and a sum of Rs.07,32,000/- towards interest thereon at the rate of 12% per annum from 10th June 2006 up to 31st March 2007. The learned arbitrator directed the petitioner to pay to the respondent further interest at the rate of 12% per annum on Rs.61 lacs from 01st June 2006 till payment and/or realisation. 6. The learned counsel appearing for the petitioner has invited my attention to the relevant portions of the award. He pointed out that the agreed licence fee payable under the Leave and Licence Agreement was Rs.20 lacs per month. His submission is that the quantification of the damages at the rate of Rs.01,00,000/- per day provided in clause 4(d) of the 6 agreement is not at all a genuine estimation of the damages. He submitted that the quantification of damages of Rs.01,00,000/- per day can never be a genuine estimation considering the fact that licence fee payable under the Agreement was Rs.20 lacs per month. He invited my attention to the relevant part of the oral evidence considered by the learned arbitrator. His submission is that the evidence itself discloses that the amount of Rs.01,00,000/- per day cannot be a genuine estimation. He submitted that the award holding that respondent is entitled to Rs.61 lacs is arbitrary and contrary to public policy. He placed reliance on relevant observations, of the Apex Court in the decision of Oil and Natural Gas Corporation Ltd Vs. SAW Pipes Ltd (AIR 2003 Supreme Court 2629) and relying upon the said observations he submitted that a case is made out for interference by exercising power under section 34 of the said Act. 7. The learned counsel appearing for the respondent invited my attention to the discussion made by the learned arbitrator on this aspect in the award. He submitted that the award is a well reasoned award requiring no interference under section 34 of the said Act. Relying upon the decision of the Apex Court in the 7 case of Oil and Natural Gas Corporation (supra), he submitted that the burden was on the respondent to show that the amount was not a genuine pre-estimate of the loss caused to the respondent and the respondent has failed to discharge the said burden. 8. I have carefully considered the submissions. I have perused the relevant findings recorded by the learned sole arbitrator. Perusal of the award shows that the respondent led evidence by examining two witnesses namely Mr.Iqbal Mohammed and Mr.Bharat Tibrewala. The learned arbitrator has referred to the evidence of the said two witnesses. He has referred to the evidence of the first witness Mr.Iqbal examined by the respondent in which he stated that he was personally present when the negotiations took place between the parties and that the clause relating to liquidated damages was arrived at after detailed negotiations between the parties. He deposed that based on the agreements entered into between parties, the respondent incurred several expenses and deputed additional staff and also made investments on infrastructure in order to establish their works at premises subject matter of licence. The said witness stated that it is difficult to crystalize with precision the damages suffered by the 8 respondent and in this view of the matter, the liquidated damages were specified in the agreement which was a genuine pre-estimate of the loss which would be caused to the respondent. 9. In response to question no.2 the witness stated that the respondent had made it clear that there was an urgent need of the premises and any delay in handing over the premises will cause loss and damage to the respondent. He stated that the respondent insisted that a clause be inserted in the agreement providing for payment of damages. In response to question no.7 he stated that the respondent was selling coal, coke and other products in the Western India Region which includes Bombay, Pune and Nagpur and therefore the respondent was desirous of setting up operations at Pune. The witness reiterated that after a detailed discussion, the parties arrived at payment of Rs.01,00,000/- per day. 10. The learned arbitrator has also considered the evidence of Mr.Tibrewala, the other witness examined by the respondent. He has also extensively referred to the evidence of the said witness and in particular paragraph 9 of his evidence which reads thus: 9 " 9. All the aforesaid facts were discussed between the claimants representative i.e himself and Mr.L.K.Tibrewala with the representatives of the respondents Mr.R.S.Dabriwala and Mr.Manoj Mehandru. After considering all the aforesaid factors and as basis for a genuine estimation of the extent of the damages suffered was not possible, the claimants and respondents mutually agreed to quantify the damages at Rs.1 lac per day for every default committed by the respondents." 11. In paragraph 15 of the award, there are two findings recorded by the learned arbitrator. The first is that in the cross-examination of the witnesses examined by respondent, the counsel for the petitioner could not impeach the evidence of the said witnesses and secondly, the petitioner did not lead any evidence to counter the deposition of the respondent’s witnesses. After considering all these aspects, in paragraph 16 of the award, the learned arbitrator held that prior to entering into the Agreement, the parties entered into detailed negotiations to quantify the loss or damages that would be caused to the respondent if the said 10 premises were not handed over to the respondent on 01st April 2006. In paragraph 16 of the award, the learned arbitrator has observed thus: "In the light of the pleadings and evidence, it is apparent that prior to entering into the agreement, the parties entered into detailed negotiations to quantify the loss or damages that would be caused to the claimants if the said premises were not handed over to the claimants on 01st April 2006. The said premises were required by the claimants for their business purposes, particularly for warehousing of their goods. So far as the business premises are concerned, in the normal course of things, it is expected and not unusual that the failure to hand over possession of the business premises on time would cause loss and damage to the party which is seeking to carry on business from the said premises. In the present case, from the evidence on record, it is evident that the claimants took various steps including taking steps for recruiting staff, identification of customers and obtaining orders, dislocation of work to be relocated from the said premises on 11 the belief that they would be able to carry on business from the said premises from 01st April 2006. From the material on record and on an analysis of the evidence of the witnesses, it cannot be said that the claimants suffered no loss at all due to the default on the part of the respondents in handing over the possession of the said premises. The claimants have suffered loss and damage." 12. Apart from this, the learned arbitrator found that in the written statement filed by the petitioner, there is no denial by the petitioner of the fact that a sum of Rs.01,00,000/- was a pre-estimate of the damages. 13. Considering all the aforesaid aspects, there is no scope to interfere with the award. In the circumstances, the Petition is dismissed with no orders as to costs. (A.S.Oka,J)