1 mpt IN THE HIGH COURT OF JUDICATURE OF BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 419 OF 2007 M/s.Krishna Developers Pvt.Ltd. .. Petitioner versus M/s.Parth Enterprises .. Respondent ... Mr.P.K. Samdhani, Sr. Counsel with Mr.Deepak Chitnis for the petitioner. Mr.M.D.Siodia i/b M/s.Rustomji & Ginwala for the respondent. CORAM : D.G.KARNIK, J DATED : 17th April 2008 P.C.: 1. By this petition under section 34 of the Arbitration and Conciliation Act 1996 (for short ’Arbitration Act’) the petitioners challenges the unanimous award dated 22nd June 2007 passed by the Arbitral Tribunal. 2 2. On 28th December 2001, M/s.Krishna Developer (the petitioner herein) entered into a contract with M/s.Parth Enterprises (hereinafter referred to as "claimant") for construction of building of Corporate Centre "A" at Andheri Kurla Road, Andheri (East) Bombay. The petitioner agreed to pay to the claimant construction cost calculated at Rs.771/- per sq.ft. of the built up area which was approximately at 1.25 sq.ft. The built up area was to be calculated in the manner provided in the agreement. The petitioner had represented to the claimant that the building plans were sanctioned by the Mumbai Municipal Corporation (for short ’MMC") and were valid and in force. The claimants were required to submit running bills for the work executed and the bills were to be paid within one week of the certification by the Architect. The agreement provided that at the option the claimant could receive 50% of the bill amount in cash and purchase constructed premises at the rate of Rs.3,821/- per sq.ft. by utilising the balance billed amount. By reselling the area so bought at a rate higher than Rs.3,821/- the claimant could earn some additional profit. 3. The disputes arose between the parties after 3 a few months and after part of the construction was carried out. The petitioner alleged that the claimant had committed breach of the agreement and sought to terminate the agreement and prevented the claimant from carrying out any further construction. The claimant, therefore, invoked arbitration clause and made several claims against the petitioner. By an award dated 22nd June 2007, the Arbitral Tribunal allowed part of the claims and rejected the counter claim of the petitioner. That award is impugned by this petition. 4. Claim nos.1 and 2 made before the Arbitral Tribunal were settled between the parties during the course of arbitration and were therefore not considered by the Arbitral Tribunal. There is no dispute regarding claim nos.1 and 2. 5. One of the claims before the Arbitral Tribunal by the claimant was for loss of profit that could have earned by selling the premises which it would have purchased at Rs.3,821/- in pursuance of the contract. That claim was rejected by the Arbitral Tribunal as speculative. The claimant has not filed any petition challenging the award on that count. 4 6. The Arbitral Tribunal has recorded the finding of fact that the petitioner had committed a breach of the agreement dated 28th December 2001 by filing to provide reasonable facilities for purpose of the contract by the claimant within the stipulated time. This being purely the finding of fact based on evidence and was not seriously challenged before me by the petitioner. 7. The Arbitral Tribunal held that if the claimant would have allowed to complete the construction he would have been entitled to Rs.771/- per sq.ft. of the area constructed. This sum represented cost of construction and contractor’s profit. The Arbitral Tribunal held that petitioner would have earned profit of 10% on the cost of construction so received. The Arbitral Tribunal computed the cost of uncompleted work at Rs.6.69 crores and held that the claimant would have earned contractor’s profit at 10% of the said amount and accordingly awarded sum of Rs.66,90,000/- to the claimant. Mr.Samdani, learned Senior Advocate for the petitioner submitted that this claim of Rs.66,90,000/- has been wrongly awarded by the Arbitral Tribunal. He submitted that there was no evidence on record to show what profit the claimant would have earned on uncompleted work. He submitted 5 that the witnesses examined have not given any estimate of profit and therefore this claim has been wrongly awarded by the Arbitral Tribunal. 8. The Arbitral Tribunal is not strictly by the provisions of Evidence Act. The Arbitral Tribunal was entitled to take into consideration that the contractor would have earned reasonable profit on the cost of construction. Usually the contractors profit, as given in the building text books, is about 15%. The Arbitral Tribunal has only awarded 10% as the contractor’s profit. In my view, Arbitral Tribunal has not committed any error of law and the fact in assuming the contractors profit at 10%. 9. Mr.Samdani learned counsel for the petitioner also took exception to the huge amount of costs awarded by the Arbitral Tribunal. It may be noted that the claim of the claimant was Rs.7.14 crores and the counter claim of the petitioner was 16.51 crores. Thus, total amount involved in the dispute was more than Rs.23 crores. Considering the claims and also the time spend by the Arbitral Tribunal I do not find the award and quantification of the costs exorbitant or unreasonable so as to require inferference. 6 10. Learned counsel for the petitioner further submitted that Arbitral Tribunal erred in awarding interest. Two Division Benches of this court have taken a view that the interest can be awarded even on the claim of damages. They are:- 1) Municipal Corporation of Gr. Mumbai Vs. Atlanta Infrastructure Ltd. reported in 2006(2) Bom.C.R.596, 2) In Executive Engineers, Dhenkanal Minor Irrigation Division, Orissa & ors. Vs. N.C. Budharaj & ors. reported in 2001(2) S.C.C. 721 In view of this, there is no merit in the submission that interest could not have been awarded. 11. In the circumstances, there is no merit in the petition which is hereby dismissed summarily. (D.G. KARNIK, J)