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2010 DIGILAW 449 (JHR)

State of Jharkhand v. Webel Technology Ltd.

2010-04-12

GYAN SUDHA MISRA

body2010
Order This appeal has been preferred by the appellant State of. Jharkhand against the order passed by the Sub-Ordinate Judge in Misc. Case No. 54/2007 dated 16th June, 2009 rejecting the objections filed by the State of Jharkhand against the award passed by the Arbitrator in favour of the respondent Webel Technology Limited, which is a Public Corporation of the State of West Bengal and has been blacklisted by the State of Jharkhand. It is pointed out by the counsel for the respondent that the order blacklisting the respondent is• a subject-matter of challenge by way of a writ petition which is sub-judice before the learned Single Judge. However, this is not really a subject-matter of consideration in this appeal and the relevaht question to be determined in this appeal' is whether the objections of the State of Jharkhand rejected by the Sub Ordinate Judge and upholding the award passed by the' Arbitrator awarding an amount of Rs. 17,05,00,000/- (Rs. seventeen crores and five lacs only) in favour of the respondent is justified or not. 2. To explain the position giving rise to this appeal, it may be relevant to state that the contract was awarded by the State of Jharkhand in favour of the respondent Webel Technology Limited to impart computer education, to the children of 500 schools in the State of Jharkhand and a sum of Rs. 105/- each was to be incurred on this training and education of one student. However, even before the contract could be executed, a dispute arose between the parties, as a result of which the contract was never ever given effect to as per the' averment of the counsel for the appellant. .3. However, the respondent came• up with a case that they had already started the project and even as per their own version, it claimed to have incurred initially a sum of Rs. 1,40,00,000/- (Rs. one crore and forty lacs only) by way of advance to Syntech for supplying hardware, software appliances etc., and a further sum of Rs. 90,00,000/- was claimed to have been paid to Alho Infosystern Ltd. as advance for execution of the computer literacy project. It was further claimed that a sum of Rs.11,60,590/- was spent and incurred on the employees for execution of the project and interest also towards cost of the proceeding. 4. 90,00,000/- was claimed to have been paid to Alho Infosystern Ltd. as advance for execution of the computer literacy project. It was further claimed that a sum of Rs.11,60,590/- was spent and incurred on the employees for execution of the project and interest also towards cost of the proceeding. 4. The appellant, State of Jharkhand, however, contested the matter and as per their case, the respondent did not initiate the project at all and was not fit to be paid any amount whatsoever as the contract itself was never ever given effect to This gave rise to a dispute between the parties, as a result of which the matter was referred to for arbitration before an Arbitrator appointed by the High Court in view of the agreement executed between the parties, incorporating a clause for appointment of an Arbitrator. After appointment, the Arbitrator adjudicated the dispute and finally passed an award in favour of the respondent for a sum of Rs.17,05,00,000/- (Rs. seventeen stores and five lacs only) includes Rs.1,56,000/-by way of cost to the respondent herein. The Arbitrator, however, rejected the claim of the respondent in regard to its claim for a sum of Rs.11 ,60,590/- which had been claimed towards expenses incurred on the employees for execution of the project. However, the learned Arbitrator recorded a finding that a sum of Rs.1,40,00,000/- (Rs.one crore and forty lacs only), in fact, was incurred on actual expenses since the said amount had been advanced by the respondent to some companies like Syntech and Alho Infosystem Ltd by way of advance for execution of the computer training and the said amount had been spent as• advance for supply of computer hardware, software appliances etc., as al ready referred to hereinbefore. Thus, even as per the award of the Arbitrator, the actual amount that had been incurred by the respondent for initiation arid execution of the contract was only a sum of Rs.1,30,00,000/- (Rs.one crore and thirty lacs only) but the Arbitrator determined a sum of Rs.15,75,00,000/- by way of liquidated damages and a sum of Rs.1,30,00,000/- (Rs. one crore and thirty lacs only) which was the actual amount spent by the respondent for initiation of the project as also a sum of Rs. one crore and thirty lacs only) which was the actual amount spent by the respondent for initiation of the project as also a sum of Rs. 1,56,000/ - by way of cost imposed on the appellant State of Jharkhand for creating a condition which, according to the Arbitra for, was a liability on the State of Jharkhand as it had created a condition on account of which the contract could not be executed. Thus, in total, an award for a sum of Rs.17,05,00,000/- (Rs. seventeen crores and five lacs only) was determined by the Arbitrator, to be paid to the respondent. 5. The State of Jharkhand felt seriously aggrieved with the amount determined by the Arbitrator and hence, •it filed a Misc. Case No. 54/2007 before the court of Sub-Ordinate Judge, Ranchi and raised an objection that the award was alarmingly exorbitant and it is not the appellant State of Jharkhand which could be saddled with the liability of payment of more than Rs. 15 cores by way of liquidated damages. the Sub-Ordinate Judge, however, dismissed the objections and hence, this appeal has been preferred by the State of Jharkhand alongwith the application for stay of the execution of the award. 6. Learned counsel for the appellant State of Jharkhand has drawn the attention of the Court to the reasons assigned by the Arbitrator and on perusal of the same, it4Could be noticed that even as per the averment of the respondent, the actual expense that has been incurred on initiation of the contract, was only a sum of Rs. 1,90,00,000/- (Rs. one crore and ninety lacs only) which also was not accepted by the Arbitrator and it in the Arbitrator himself who recorded a finding that the actual expenses incurred by the respondent for starting the project by taking steps in this regard and paying some advance amount to the companies for purchasing computer hardware and software was at the most a sum of Rs.1,30,00,000/- (Rs. one crore and thirty lacs only) and that was the amount which the respondent could, no doubt, claim as the said amount had been spent by the respondent on initiation of the project. However, the Arbitrator determined a sum of Rs.15,75,00,000/- (Rs. fifteen crores and seventy five lacs only) by way of liquidated damages and a sum of Rs.1,56,000/- by way of cost. 7. Thus, in sum and substance, a sum of Rs. However, the Arbitrator determined a sum of Rs.15,75,00,000/- (Rs. fifteen crores and seventy five lacs only) by way of liquidated damages and a sum of Rs.1,56,000/- by way of cost. 7. Thus, in sum and substance, a sum of Rs. 15,75,00,000/- and odd was determined by the Arbitrator by way of liquidated damages, which has been assailed by' the appellant State of Jharkhand on the plea that the Arbitrator has misconducted himself by determining this amount by way of liquidated damages without recording a finding to the effect how the said amount has been computed by way of liquidated damages without really recording a finding on the circumstance which created a cause for not giving effect to the contract which had been awarded to the respondent. It was submitted that in absence of any finding to this effect the award which has been passed in favour of the respondent is clearly vitiated and perverse and the Court of Sub-Ordinate Judge has not addressed this aspect of the matter while rejecting the objections of the appellant State of Jnarkhand which requires consideration by this Court. 8. learned counsel for the respondent, on the contrary, submitted that the amount awarded by He Arbitrator is perfectly justified and the Arbitrator has examined each and every 'aspect of the matter before determining the amount in favour of the respondent granting the liquidated damages. It was also submitted that it is the State of Jharkhand which created a situation under which the project could not be given effect to and hence, determination of the amount of more than RS.15 crores by way of liquidated damages is perfectly fit to be sustained by this Court. 9. On careful deliberation of submissions and counter-submissions of learned counsel for the parties, this Court is of the view that the determination of more than Rs. 15 crores by way of liquidated damages without recording a finding as to the causes for non-execution of the contract and whether the said amount is correctly calculated and arrived at towards liquidated damages, needs scrutiny and examination by this Court. Hence, this appeal is admitted, to be heard on merit, which may be listed for hearing in due course. 10. In tl1e meantime and until further order, request has been made by the appellant State of Jharkhand to stay the execution of the award passed in favour of the respondent. Hence, this appeal is admitted, to be heard on merit, which may be listed for hearing in due course. 10. In tl1e meantime and until further order, request has been made by the appellant State of Jharkhand to stay the execution of the award passed in favour of the respondent. Initially a blanket order was passed in favour of the appellant State of Jharkhand on the last date by way of an interim protection since the matter had not even been listed for admission and yet an order of stay was sought by the appellant from this Court. Therefore, this Court although had granted interim protection to the appellant, it thought it appropriate to consider whether the said order of stay is fit to remain in operation during the pendency of this appeal. I have noticed that even as per the award passed by the Arbitrator as also after hearing the counsel for the parties, a sum of Rs. 1,30,00,000/- (Rs. one crore and thirty lacs only), in fact, had been spent by the respondent for initiating the contract and for this purpose, documentary evidence had been produced by the respondent regarding the expenditure. The expense incurred by the respondent, in so far as this amount is concerned, prima facie, is supported by evidence. Hence, prima facie, there is no reason as to why an order of stay should be allowed to operate in so far as this amount is concerned. 11. Learned counsel for the appellant State of Jharkhand fairly agreed on this count and stated that a Bank Guarantee will be furnished by the State of Jharkhand for a sum of Rs. 1,30,00,000/- (Rs. one crore and thirty lacs only) in favour OT the respondent Webel Technology Limited through State of West Bengal which would be liable for encashment only after securing an order from this Court. The Bank Guarantee be furnished by the appellant State of Jharkhand within a period of four weeks from the date, of receipt of a copy of this order. 12. In so far as the balance amount of Rs. 15,75,00,000/- (Rs. fifteen crores and seventy five lacs only) plus interest as also cost is concerned, the same requires to be examined by this Court. Hence, it is ordered that in so far as execution of the award for a sum of Rs. 15,75,00,000/- (Rs. 12. In so far as the balance amount of Rs. 15,75,00,000/- (Rs. fifteen crores and seventy five lacs only) plus interest as also cost is concerned, the same requires to be examined by this Court. Hence, it is ordered that in so far as execution of the award for a sum of Rs. 15,75,00,000/- (Rs. fifteen crores and seventy five lacs only) and the amount towards interest and cost is concerned, the same shall remain stayed and shall not be given effect to and executed during the pendency of this appeal.