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2014 DIGILAW 217 (BOM)

Metalmeccanica Fracasso India Pvt. Ltd. v. Prakash Industrial Infrastructure Pvt. Ltd.

2014-01-28

N.M.JAMDAR

body2014
Judgment 1 By this petition filed under section 34 of the Arbitration and Conciliation Act, 1996, the Petitioner seeks to challenge the Award passed by the Arbitral Tribunal dated 29 January 2013, amended on 20 February 2013. 2 The Petitioner is a private limited company. It has a plot of land situated at Murbad, MIDC, Dist. Thane. To set up a factory, the Petitioner and the Respondent had entered into an agreement, whereby the Respondent was to carry out work of construction, leveling of plot, retaining walls, storm water drains for the purpose of setting up a factory on the said plot owned by the Petitioner. As per the terms of the contract, the value of the work was Rs.7,10,00,000/-. The work order was issued in favour of the Respondent on 31.05.2007. Dispute arose between the parties in respect of the payments to be made to the Respondent. Both the parties appointed their Arbitrators, who appointed a third Arbitrator and the Arbitral Tribunal was constituted. 3 The Respondents claimed an amount of Rs. 12,21,809/- as balance amount, as the bills of less payment received for the work done. The Respondent also claimed an amount of Rs. 22,46, 950/- for shifting excavated material. It also claimed the amount towards taxes, royalty and interest and also damages and compensation to the tune of Rs. Five crores. 4 Before the Arbitral Tribunal the parties filed their pleadings and produced documents on record. The Arbitrial Tribunal framed issues. As far as the claim towards damages made by the Respondent has been rejected, which finding has not been challenged by the Respondent. Therefore, the main issue that arise for consideration, as framed by the learned Arbitrator is regarding the work of disposal of the excavation material and the interest on the amount claimed. The Arbitral Tribunal came to the conclusion that the Respondent is entitled to an amount of Rs. 34,69,769/- towards the dues in the respect of the disposal of the excavated material. The Arbitral Tribunal also granted royalty amount, water charges, electricity charges and taxes as part of the said amount and granted interest at the rate of 18%.. Under the different head, the Arbitrator also granted an amount of Rs. 1,58,706 towards the VAT and service tax. 34,69,769/- towards the dues in the respect of the disposal of the excavated material. The Arbitral Tribunal also granted royalty amount, water charges, electricity charges and taxes as part of the said amount and granted interest at the rate of 18%.. Under the different head, the Arbitrator also granted an amount of Rs. 1,58,706 towards the VAT and service tax. After the Award was passed, the Arbitral Tribunal carried out corrections to the Award whereby the amounts awarded under the caption of 'water charges' and 'electricity charges' were interchanged. The Arbitral Tribunal made correction in the operative portion of the Award by changing the figure from Rs.34,69,769/- to Rs.36,28,475/-. This Award including the corrected Award is challenged in the present petition. 5 The learned counsel for the Petitioner submitted that there is no findings given by the Arbitral Tribunal that the work of excavation was done by the Respondent though it was an issue before the Arbitral Tribunal. The learned counsel submitted that the under the specific clause of the agreement, the Respondent was under an obligation to shift excavated material outside the plot within six kilometers radius, which the Respondent failed and therefore, the charges for disposal of the excavated material were rightly reduced from Rs. 118 to Rs. 50. He submitted that the Arbitral Tribunal has overlooked the specific clause under the agreement where the duty was on the Respondent to shift the excavated material outside the plot and when it deviated from the terms of the contract, there was no question of granting full amount to the Respondent. The learned counsel for the submitted that admittedly the material was not shifted outside the plot by the Respondent. The learned counsel for the Petitioner further submitted that the Respondent has accepted the amount as a full and final settlement and there are two specific endorsements made by the Manager of the Respondents, who has deposed as a witness. The learned counsel submitted of the in spite of these admissions of having received the amount in full and final settlement, the learned Arbitrators have ignored these admissions and have proceeded to pass the Award. The learned counsel submitted that for non consideration of these admissions, the Award is perverse. The learned counsel submitted of the in spite of these admissions of having received the amount in full and final settlement, the learned Arbitrators have ignored these admissions and have proceeded to pass the Award. The learned counsel submitted that for non consideration of these admissions, the Award is perverse. The learned counsel further submitted that the Arbitral Tribunal could not have carried out corrections in the Award without notice to the parties and in any case could not have increased the amount of the Award. 6 The learned counsel for the Respondent on the other hand submitted that as far as the argument regarding the work of the excavation is concerned, no specific plea regarding the same has not been taken in the Petition. She submitted that the entire case of the Petitioner is that the excavated material was not shifted outside the plot which itself suggests that excavation work has been carried, otherwise there would be no excavated material. As far as the work regarding shifting material outside the plot is concerned, the learned counsel submitted that the interpretation put by the Petitioner is not correct and it will be an absurd interpretation since the material will have to be shifted outside the property belonging to the Petitioner. The learned counsel submitted that the relevant term of the agreement states that the material is to be shifted outside the plot only if it was so required and there is no communication from the Petitioner, calling upon the Respondent to shift the material outside the plot. She submitted that the reduction of the rate from Rs. 118 to Rs. 50 is completely arbitrary and that in series of the correspondence, the Petitioner has mentioned the rate of Rs. 118 and in fact the running bills put up by Respondent have been accepted at the rate of Rs.118. She submitted that it was not open to the Petitioner to unilaterally change the rate of Rs. 118 to Rs. 50/-. The learned counsel for the Respondent submitted that there is no positive assertion by the Manager of the Respondent that he has accepted the amount as full and final settlement. She submitted that it was not open to the Petitioner to unilaterally change the rate of Rs. 118 to Rs. 50/-. The learned counsel for the Respondent submitted that there is no positive assertion by the Manager of the Respondent that he has accepted the amount as full and final settlement. As far as the correction of the Award is concerned, the learned counsel pointed out that what was done was only a clerical change by including the amount of taxes which were already granted under the Award and for that purpose no notice was required. 7 As regards correction of the Award is concerned, the Arbitral Tribunal has exercised powers under section 33 of the Act, which permits the Arbitral Tribunal to carry out corrections of its own Award. Amounts under the different heads have been interchanged and the amount of taxes which was granted in the body of the ground remained to be incorporated in the operative portion of the Award, which was included by the correction. None of the changes carried out are altering the Award in any manner. No fault can be found with the Arbitrator in carrying out these changes on their own accord. 8 As regards the contention that the Respondent had accepted the amounts in full and final settlement, reliance was placed on the final bill dated 15 April 2008 and letter dated 21 April 2008. In final bill dated 15 April, 2008, certified by the Manager of the Respondent, who along with the Architect has signed it at the bottom page and the bill reflects the net amount payable in full and final settlement. There is, however, no endorsement below the signatures of the Respondent's Manager of having accepted this amount as full and final settlement. It is possible to interpret this endorsement in the manner suggested by the learned counsel for the Petitioner that, by not stating that endorsement was with prejudice, the Respondent had accepted the amount. But that another interpretation is possible is not enough to exercise the powers under section 34 of the Act. The Arbitrators have insisted upon higher degree of proof for admission before debarring the Respondent from claiming higher amount. The Arbitrators have found that in absence of an specific endorsement that the Respondent was not accepting the said amount in full and final settlement, the Respondents cannot be precluded from raising the claim. The Arbitrators have insisted upon higher degree of proof for admission before debarring the Respondent from claiming higher amount. The Arbitrators have found that in absence of an specific endorsement that the Respondent was not accepting the said amount in full and final settlement, the Respondents cannot be precluded from raising the claim. To constitute a conduct of a party as an admission or acquiescence, in different facts situation, different degree of proof is required. In the present set of facts the Arbitrators have not construed this as an admission on the part of the Respondents, albeit by demanding higher degree of proof. It is a possible view to be taken. Further more it is up to the Arbitrators to assess the evidence. The same can be stated about the endorsement on the letter dated 21 April, 2008. This endorsement is in fact a guarded endorsement on the part of the Respondents. It states that what is received are the three cheques as per the certificate issued by the Architect. Therefore, clearly there is no admission that the cheques are being received in full and final settlement. Again it is the view of the Arbitrator on what will constitute an admission. It is a possible view. This argument of the learned counsel for the Petitioner that the Respondent had accepted the amount, therefore, cannot be accepted. 9 As regards the contention that the Arbitrators have not decided the issue whether the work of excavation was done in the first place. This is not a ground taken in the petition. Reading of the grounds taken in the Petition as well as the case put up before the Arbitrators, shows that the fact that the excavation work was carried out was an established fact. It is on the basis of this fact i.e. the excavated material was lying on the site, arguments have been advanced regarding its disposal. The learned counsel for the Respondents has rightly pointed out that under the relevant clause, the material had to be disposed of outside the plot only if it was required. The Arbitrator found that there is no requisition on the part of the Petitioner. Unless the Petitioner had called upon the Respondents to dispose of the material outside the plot, there was no need for the Respondents to do so. The Arbitrator found that there is no requisition on the part of the Petitioner. Unless the Petitioner had called upon the Respondents to dispose of the material outside the plot, there was no need for the Respondents to do so. Even otherwise, the interpretation mandating the Respondents to dispose of the excavated material outside the plot within six kilometers radius was found to be an absurd interpretation by the Arbitrator, leading to several practical difficulties. The findings of the Arbitral Tribunal on requisition as well as interpretation of the agreement are within the domain of the Arbitral Tribunal and these findings cannot be disturbed in the present proceedings 10 The running bills which were submitted by the Respondents at the rate of Rs. 118 were accepted by the Petitioner. It is after accepting the running bills at this rate, subsequently the Petitioner has changed the rate to Rs. 50/- on the ground that the material was not disposed of as per the terms of the contract. Once the Arbitral Tribunal came to the conclusion that there was no obligation on the part of the Respondents to dispose of the material outside the plot then the question of reducing the amount of Rs. 118 to Rs. 50 does not arise. This is apart from the conduct of the Petitioner in accepting the running bills of this amount. No fault can be found with the Award on this ground as well. The Award as regards interest, water, electricity supply and other charges has not been seriously disputed and these amounts flow from the part of the Award which has to be upheld. No other contentions were raised. In view of this position, the challenge to the Award must fail. 11 The petition is accordingly rejected.