pvr 1 ap79-05 IN THE HIGH COURT JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.79 OF 2005 M/s.Indus Engineering Company ...Petitioner vs. 1.Indian Oil Corporation Ltd. & Anr. ...Respondents --- Mr.Zal Andhyarujina i/b. Thakordas & Madgavkar, for Petitioner. Mr.Gaurav Joshi with Mr.Chirag Mody with Ms.Anushka Sherla i/b. DSK Legal, for Respondent no.1. --- CORAM: D.K.DESHMUKH, J. DATED: 10th March,2011 P.C.: 1. This petition is filed under Section 34 of the Arbitration and Conciliation Act challenging the Award made by learned Arbitrator on 17.9.2004. Perusal of that Award shows that the findings were recorded by the learned Arbitrator on four issues. The finding on issue pvr 2 ap79-05 nos.2 and 3 was in favour of the petitioner and an amount of Rs.14,59,674.99 was awarded in favour of the petitioner, with interest. So far as issue no.4 is concerned, it was decided against the petitioner and his claim was rejected. Issue no.4 related to the delay caused in completion of the work awarded. The Arbitrator has recorded a finding that for the delay caused in completion of the work it is the claimant who is responsible and therefore, the respondent no.1 has rightly deducted the amount of liquidated damages from the amount payable to the petitioner. It appears that after the Award was made the respondent no.1 paid to the petitioner the amount which was payable by respondent no.1 to the petitioner under the Award. That amount was accepted by the petitioner without any protest. When this petition came for hearing before me on 22.11.2005, it was found that though the Arbitrator has recorded a finding that the petitioner is responsible for delay in completion of the work, there were no reasons pvr 3 ap79-05 recorded by the learned Arbitrator for recording that conclusion. Therefore, an application was made under Section 34(4) of the Act by the petitioner and by order dated 22.11.2005 the arbitral proceedings were ordered to be re-opened for recording of reasons by the learned Arbitrator in support of his conclusion that it is the petitioner who is responsible for delay in completion of the work. Pursuant to order dated 22.11.2005 the learned Arbitrator took up the proceeding and by his Award dated 12.8.2006 recorded his reasons for the conclusion recorded by him that it is the petitioner who is responsible for delay in completion of the work. The petitioner thereafter amended the petition and challenged the Award dated 12.8.2006 which is hereinafter referred to as the Second Award . 2. The learned Counsel appearing for respondent no.1 raised a preliminary objection to the maintainability of the petition. He contended that the petitioner having accepted the amount pvr 4 ap79-05 which was payable by the respondent no.1 to the petitioner under the Award without any demur or protest, the petitioner is estopped from challenging the Award. The learned Counsel relied on my judgment in Arbitration Petition no. 430 of 2005 in the case M/s.Prashanth Projects Ltd. Vs. Hindustan Petroleum Corporation Ltd. & Anr. decided on 27.9.2006 and the judgment of the Supreme Court in the case Pooran Chand Nangia Vs. National Fertilizers Ltd., (2003)8 Supreme Court Cases 245 . 3. The learned Counsel appearing for respondent no.1 on the other hand submitted that the judgment of the Supreme Court in Pooran Chand Nangia case referred to above is not relevant in the present case. He also submitted that what is recorded by me in my judgment in M/s.Prashanth Projects Ltd. case is also not relevant in this case. He submitted that the findings on Issue nos.2 and 3 in the Award were in his favour and that amount was awarded to him pvr 5 ap79-05 and that amount was accepted by him and that part of the Award is not challenged in the present petition. But his acceptance of a part of the Award does not preclude him from challenging that part of the Award which is against him and by which he is aggrieved. 4. Now in so far as the preliminary objection raised by respondent no.1 is concerned, in my opinion, the acceptance of the amount by the petitioner will prevent the petitioner from challenging the findings of the learned Arbitrator on issue nos. 2 and 3 because it is pursuant to those findings that the amount has been awarded in favour of the petitioner but it will not prevent him from challenging the findings recorded by the learned Arbitrator on other issues against him. 5. So far as my judgment in M/s.Prashanth Projects Ltd. case is concerned, that judgment is based on two consideration viz. (i) in that pvr 6 ap79-05 case a letter was written while offering the money payable under the Award and the amount was offered is full and final satisfaction of the claim and (ii) it was the view at that time that what be challenged under Section 34 of the Act was the Award and there is only one Award which can be challenged under Section 34 of the Act. In the present case while offering the amount, the respondent no.1 did not offer the amount in full and final satisfaction of the claim, and the view that the entire award can only be challenged under section 34 of the Act and not only a part of Award is no longer in field in view of the findings recorded by the Full Bench in its judgment in the case 2010(1) Mh.L.J. 547, R.S.Jiwani(M/s.), Mumbai Vs. Ircon International Ltd., Mumbai . So far as the judgment of the Supreme Court in the case Pooran Chand Nangia referred to above is concerned, from that judgment it appears that the learned Arbitrator made an Award awarding certain sums, those sums were offered to the appellant, before the Supreme pvr 7 ap79-05 Court accepted those sums without any reservation and then filed petition challenging the jurisdiction of the Arbitrator to make the award. Therefore, the Supreme Court held that after having accepted the amount payable under the Award he cannot challenge the jurisdiction of the Arbitrator to make the Award. In my opinion, therefore, the preliminary objection raised on behalf of respondent no.1 to the maintainability of the petition has no substance. 6. So far as the challenge to the First award and the Second Award made by the learned Arbitrator is concerned, the learned Counsel appearing for petitioner submitted that so far as the reasons recorded by the learned Arbitrator in support of his finding that it is the petitioner who is responsible for delay is concerned, those reasons have been recorded without considering various letters which were filed by the petitioner before the learned Arbitrator. He further submitted that the finding recorded by pvr 8 ap79-05 the learned Arbitrator that the Respondent no.1 was justified in deducting the amount calculated at the rate of 1% for every week of the delay beyond the stipulated date, is erroneous. He relied on the judgment of the Supreme Court in the case Oil and Natural Gas Corporation Ltd. Vs. SAW Pines Ltd., AIR 2003 Supreme Court 2629 to contend that the learned Arbitrator was not justified in holding that the amount deducted as liquidated damages from the amount payable to the petitioner by the respondent no.1 is a reasonable compensation. The learned Counsel submits that the observation of the learned Arbitrator in his Award, that the burden was on the petitioner to prove that no loss is suffered by respondent no. 1, is contrary to the law laid down by the Supreme Court in SAW Pipes Ltd. case referred to above. The learned Counsel appearing for respondent no.1 submits that the finding recorded by the learned Arbitrator that the petitioner is responsible for delay, is a finding recorded by the learned Arbitrator now giving elaborate pvr 9 ap79-05 reasons. It is essentially a finding of facts, and therefore, this Court under Section 34 of the Act would not be justified in disturbing that finding. He further submits that the learned Arbitrator has proceeded exactly as per the law laid down by the Supreme Court in SAW Pipes Case referred to above. He pointed out that the damage clause that the Supreme Court was considering in SAW Pipes Ltd. case and the damage clause which fell for consideration before the learned Arbitrator are almost identical. He pointed out that the Supreme Court has held that under the similar clause the percentage mentioned was genuine pre-estimate of damages and therefore, it has to be held as reasonable compensation. 7. The learned Arbitrator in the second Award has given elaborate reasons why he held the petitioner responsible for delaying in completion of the work. The learned Arbitrator was a person who is working in that field and therefore, has pvr 10 ap79-05 knowledge of the method of the work. In my opinion, it will not be appropriate for this Court to interfere with the finding of fact recorded by the learned Arbitrator. The learned Counsel appearing for petitioner pointed out that the learned Arbitrator has observed that sufficient notice was not given to third party inspection Agency (PDIL) appointed by respondent no.1 for inspection of the work and that they are required to be given 7 to 10 days time to visit the site for inspection, according to him this finding is recorded without there being any evidence on record. It is true that there is no evidence on record in support of this finding, but considering that the person who was acting as Arbitrator is a person working in the field and has knowledge about the work of respondent no.1 and its contractors, it can be said that he has used his personal knowledge for recording this finding. Hence, the Court will not be justified in interfering with that finding. We find that in SAW Pipes Ltd. case, the damage clause that has pvr 11 ap79-05 been considered by the Supreme Court is to be found in paragraph 38 of that judgment which reads as under:- 38. At this stage, we would refer to the relevant terms of the contract upon which learned counsel for the appellant has based his submissions, which are as under:- 11. Failure and Termination Clause/ Liquidated Damages:- Time and date of delivery shall be essence of the contract. If the contractor fails to deliver the stores, or any installment thereof within the period fixed for such delivery in the schedule or at any time repudiates the contract before the expiry of such period, the purchaser may, without prejudice to any other right or remedy, available to him to recover damages for breach of the contract:- (a) Recovery from the contractor as agreed liquidated damages are not by way of penalty, a sum equivalent to 1% (one per cent) of the contract price of the whole unit per week for such delay or part thereof (this is pvr 12 ap79-05 an agreed, genuine pre-estimate of damages duly agreed by the parties) which the contractor has failed to deliver within the period fixed for delivery in the schedule, where delivery thereof is accepted after expiry of the aforesaid period. It may be noted that such recovery of liquidated damages may be up to 10% of the contract price of whole unit of stores which the contractor has failed to deliver within the period fixed for delivery, or (c) It may further be noted that Cl. (a) provides for recovery of liquidated damages on the cost of contract price of delayed supplies (whole unit) at the rate of 1% of the contract price of the whole unit per week for such delay or part thereof up to a ceiling of 10% of the contract price of delayed supplies (whole unit). Liquidated damages for delay in supplies thus accrued will be recovered by the paying authorities of the purchase specified in the supply order, from the bill for payment of the cost of material pvr 13 ap79-05 submitted by the contractor or his foreign principals in accordance with the terms of supply order or otherwise. (f) Notwithstanding anything stated above, equipment and materials will be deemed to have been delivered only when all its components, parts are also delivered. If certain components are not delivered in time the equipment and material will be considered as delayed until such time all the missing parts are also delivered. The damages clause which is relevant in the present case is clause 6(a), it reads as under:- 6(a) Without prejudice to the rights and remedies of the Corporation against the Contractors under any of the provisions of this Agreement and the General conditions of the Contract of the said Works Order or otherwise in law, if the Contractors commit any default or breach of the terms and conditions of pvr 14 ap79-05 this Agreement and/or the General conditions of the Contract and/or the said Works Order or fail in the due performance thereof within the time fixed by the contract (which is of the essence of the contract) and do not complete the entire work on the stipulated due date, the Corporation shall be entitled to recover from the Contractors and the Contractors hereby agree to be found to pay to the Corporation as and by way of compensation or liquidated damages an amount calculated at the rate of 1% for every week or part thereof of the delay beyond the stipulated date on account of any item which is not completed or finished and delivered completely to the Corporation on the stipulated date as mentioned in the Contract/Works order, subject to a maximum of 10% of the total contract value and both the parties hereby confirm, record and declare that the amount of compensation or liquidated damages fixed as above represent the genuine, fair and reasonable pre- estimate thereof considering all the facts and circumstances as the loss pvr 15 ap79-05 and damages that would be likely suffered by the Corporation on account thereof. It is further hereby agreed and confirmed that the sum payable by the Contractors under this provision shall be considered as reasonable compensation irrespective of whether actual loss or damage has or has not been sustained and the Corporation would not be required to render any proof in support thereof. It is further specifically declared that any extension of time granted by the Corporation under Clause 5 of the General Conditions of the Contract or otherwise shall not amount to abandonment, waiver or estopper against the Corporation of its claim for compensation or liquidated damages under this provision and the acceptance of delivery of any item of work by the Corporation will not be deemed to constitute any waiver of the Corporation s right nor shall it constitute any final completion of the contract and the Contract shall be deemed to be executed completely only when full and final measurements duly certified by the Corporation pvr 16 ap79-05 have been made and till then the Contractors shall not be deemed to the discharged or absolved from all their obligations in terms of the contract including specifically the provision relating to the payment of reasonable compensation and damages as aforesaid. It is specifically agreed & declared that in the event of the Contractors not completing the work even after the stipulated date, the aforesaid provision shall not be deemed to prevent or stop the Corporation from exercising any other rights or remedies available to the Corporation against the Contractors including the completion of the work departmentally or through any other contractor or agency or otherwise howsoever at the risk and account of Contractors and the Corporation shall be entitled to recover and the Contractor shall be bound to pay all such losses and damages which the Corporation may suffer on account thereof. This is also without prejudice to all the rights and remedies available to the Corporation under Clause 30 of the General pvr 17 ap79-05 Conditions of the Contract. Perusal of clause 6(a) and Clause 11 quoted above shows that they are similar on material aspect. The Supreme Court after considering the similar clause in SAW Pipes Ltd. case has held that the amount of damages which was mentioned in that case is genuine pre-estimate of damages, and therefore, it can be taken as reasonable compensation. The same conclusion is recorded by the learned Arbitrator in his Award. In our opinion, in this situation, we will not be justified in interfering with the Award. In the result, therefore, petition fails and is dismissed. No order as to costs. (D.K.DESHMUKH,J.)