Maharashtra State Electricity ... vs M/S. Datar Switchgear Ltd .

2) With the aforesaid preliminary comments on the nature of proceedings, we turn to the events that took place, in a chronological manner, that are relevant for deciding the lis:

The respondent by letter dated April 21, 1999 terminated the contract in its entirety and refused to maintain even the objects installed by them.

6) Dispute having arisen; for adjudicating these disputes, Arbitral Tribunal in terms of Arbitration Agreement was constituted. The Tribunal commenced its proceedings on February 19, 1999 and on June 18, 2004 passed a final award directing the appellant to pay Rs.185,97,86,399/- to the respondent as damages which included:

8) The Arbitral Tribunal, however, found no fault with the appellant as regards non-renewal of the LC observing that the respondent had terminated the contract in its entirety on April 21, 1999 whereas the LC was valid upto April 30, 1999.

9) After the remand, the learned Single Judge (Justice Roshan Civil Appeal No. 10466 of 2017 Page 8 of 65 Dalvi) by order dated March 18, 2009 rejected the case of the appellant on the ground that no case under Section 34(2)(iv) of the Act had been made out by the appellant. The aforesaid order dated March 18, 2009 of the learned Single Judge was challenged by the appellant before the Division Bench of the Bombay High Court. The Division Bench, while hearing the appeal, passed the following order on April 21, 2009:

10) The learned Single Judge by order dated April 30, 2009 clarified her order by saying that although the appellant has Civil Appeal No. 10466 of 2017 Page 9 of 65 argued the matter challenging the award being beyond the contract between the parties and being opposed to public policy, the learned Single Judge in her considered opinion rejected the same under Section 34(2)(iv) of the Act.

12) In the appeal before the High Court, the appellant raised certain additional grounds. Thereafter, the matter was heard finally and vide impugned judgment, the appeal of the appellant has been dismissed by the High Court.

1,79,15,87,009/- (Rs. 185,97,86,399 – 6,81,99,390) along with interest @ 10% per annum payable from the date of the Award till realisation. Cost of rupees one crore was also awarded. Counter claims of the appellant were dismissed. After taking note of the aforesaid facts in brief, the High Court dealt with the contention of the appellant herein that the matter needed to be remanded back to the learned Single Judge on the ground that the submission of the appellant that the Award was against the public policy had not Civil Appeal No. 10466 of 2017 Page 13 of 65 been considered by the learned Single Judge. After comprehensive discussion, this argument has been rejected authoritatively. In the process, the High Court also dealt with the submissions predicated on Order dated August 25, 2009 passed by this Court in special leave petition which was filed by the appellant whereby order of remand passed by Division Bench of the High Court, in the earlier round was challenged. Notice of Motion Nos. 3227 of 2010 and 461 of 2010 also came to be included in the discussion while dealing with the aforesaid issue. Thereafter, the High Court has discussed the scope of interference under Sections 34 and 37 of the Act, with particular reference to the ground of challenge on the basis that the award is against “Public Policy of India”. After referring to the law on this pivotal aspect, the High Court noted the points of arguments advanced by the appellant affirming part of challenge to the Award. Six points which were advanced by the appellant in this behalf are as under:

47. Clause 5.3 lays down that supply, erection at site and commissioning of the contract objects was to be done within a stipulated time. It also clarified that time is the essence of the contract and if there was delay in performance due to any reason MSEB would be entitled to claim liquidated damages. The chronology of events indicates that on 14/7/1997, MSEB by its letter informed DSL that Lists of DTC locations were ready with the Circle Offices and DSL should collect the same. The case of DSL in brief is that though it was represented by MSEB that Lists were ready and available on 14/7/1997, Lists were not supplied and, as a result, installations could not be done and as many as 120 letters had to be written by DSL to MSEB, requesting them to supply the Lists. Secondly, sequence of completion of work also was changed from time to time and suddenly on 21/12/1998 Circle Engineer informed DSL that sequence as per clause 5.2 of the work order had to be adhered to and, DSL was therefore constrained to send a letter of termination dated 19/02/1999 and even thereafter in a meeting which was held on 11/3/1999 between the Chairman of the MSEB, DSL and other two parties who were awarded the contract, as mentioned in clause 17 of the minutes of the meeting, the Chairman informed DSL that the Lists were readily available in Kolhapur Zone and asked Mr. Datar to take up the work under B-II and B-III schedule immediately and the Chairman directed that CEs present in the meeting that it was the Board's responsibility to give the list with maps to the agencies and expeditious steps should be taken in that regard. It was, therefore, contended that as late as 11/3/1999, the Chairman himself had conceded that the Lists were not made available to DSL. In this context, certain letters assume importance regarding change of sequence of work. The work order dated 27/3/1997 shows that the work initially had to be done in Kolhapur Zone, then in Nasik Zone and finally in Aurangabad Zone.

16) Interestingly, before the Division Bench, the appellant had raised certain additional points on this aspect, which were not argued before the Tribunal or even before the learned Single Judge, viz., the non-supply of DTC locations did not amount to breach of fundamental term of the contract which led to termination of contract by the respondent. We would like to reproduce, at this stage, this part of discussion as well:

Respondent No.2 acted upon the said representation and Civil Appeal No. 10466 of 2017 Page 42 of 65 commenced installation in November 1997. On 20.04.1998, the appellant threatened respondent No.2 with liquidated damages and warned that time will not be extended for installation. This letter glossed over the fact that DTC locations were withheld by the district offices of the appellant. Both parties were ad idem that time had started to run and installation was to be completed before 18.03.1999 (twenty months from 18.07.1997, i.e. the date of receipt of the letter dated 14.07.1997 from the appellant). Despite rigorous follow up and distress appeals by respondent No.2 through more than 120 letters, the appellant did not furnish complete lists of DTC locations. On 21.12.1998, the appellant directed the work to proceed strictly in the sequence – Kolhapur, Nasik and Aurangabad Zones, with further sequences B-1, B-2 and B-3. The appellant stopped work under B03 indefinitely without assigning any reason. However, even till 19.02.1999, respondent No.2 was not provided with complete list of B-I locations in Kolhapur. Despite representation of 11.02.1999 from Technical Member of the appellant to give lists within four days, i.e. by 15.02.1999, no lists were received. Realizing the futility of expecting cooperation from the appellant, respondent No.2 terminated the contract on 19.02.1999.

64) Three chamber summons were taken out by the appellant during the pendency of this appeal before the Division Bench. By Civil Appeal No. 10466 of 2017 Page 64 of 65 these chamber summons, the appellant intended to amend the petition which was filed by it under Section 34 of the Act as well as the appeal. The High Court after detailed discussion in the impugned judgment rejected these summons. We find that the amendment sought was highly belated. Arbitration petition filed under Section 34 of the Act was sought to be amended after a delay of eight years. Further, the amendment in the appeal, taking those very grounds on which amendment in the arbitration petition was sought, was sought after a delay of 3½ years. The High Court, thus, rightly rejected these summons and it is not necessary to have any elaborate discussion on these aspects.

41) We find adequate force in the aforesaid submission of Mr. Dada. Let us first take note of these findings:

TERMINATION OF CONTRACT WAS VALID AND JUSTIFIED :

The aforesaid being a reasonable and plausible measure adopted by the Arbitral Tribunal for awarding the damages, there is no question of interdicting with the same.

And there the fact that the breach was deliberate might be of great importance.

59) We, thus, do not find any infirmity in the manner in which damages are awarded in favour of respondent No.2. RE : MITIGATION OF DAMAGES

We find that the Arbitral Tribunal has dealt with this aspect and held that the contract objects were custom built in the Civil Appeal No. 10466 of 2017 Page 61 of 65 following manner:

RE: ORDER ON CHAMBER SUMMONS

65) In the ultimate analysis, having found no merit in any of the arguments raised by the appellant, the appeal is dismissed with costs.

JANUARY 18, 2018.

Civil Appeal No. 10466 of 2017 Page 65 of 65