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2018 DIGILAW 895 (CAL)

Laxmi Pat Surana v. Voltas Ltd.

2018-12-06

MOUSHUMI BHATTACHARYA

body2018
JUDGMENT : Moushumi Bhattacharya, J. This is an application for setting aside of an Award dated 28th March 2017 passed by a learned sole arbitrator. The petitioner who seeks to have the Award set aside was the respondent in the arbitration proceedings. By the said Award, the learned arbitrator held that the claimant before him (who is the respondent before me) is entitled to an Award of Rs. 22,31,530.60 and entitled to claim interest at the rate of 6% per annum from 19th November 2008 until realisation of its dues. By the said Award, the counter claim filed by the respondent was dismissed. 2. The facts leading to the arbitral Award impugned in the present proceedings are as follows. Under a contract dated 7th April, 2007, the petitioner placed a work order for design, engineering testing etc. at the manufacturer's works and commissioning as well as performance test of water cooled type central air conditioning system for Puja Complex at Kharagpur. The respondent, Voltas Ltd, accepted the work order by its letter dated 20 April, 2007 confirming the value of the project at Rs.1,24,23,086/- subject to tax duties/levies imposed by the State/Central government. According to the petitioner Mr. Surana, the entire work was to be completed within 30thJune, 2007 and the fact of completion was acknowledged by the petitioner including satisfactory completion thereof which would appear from a handing over certificate dated 21st August, 2008. The respondent Voltas complained before the arbitrator that after having supplied goods and services, the petitioner failed to make payment of bills amounting to Rs. 22,31,532.60/-. The respondent's case before the Arbitrator was that despite repeated demands, the petitioner did not pay. The respondent claimed interest at 24% per annum for delay in making payment and the total dues claimed by the respondent before the Learned Arbitrator was Rs.44,58,907/-. The respondent contended that the petitioner had failed and neglected to pay the respondent's legitimate dues for the work completed without any bona fide reason. The petitioner filed a counter statement (and counter claim) before the Arbitrator claiming an Award for a sum of Rs. 4,32,81,469.20/- under various heads including for liquidated damages. The impugned Award records that in the 22nd sitting, the petitioner withdrew five of the initial seven claims after which the counter claim became restricted to Rs.6,21,154.30/- on account of liquidated damages for belated execution of the work and Rs. 4,32,81,469.20/- under various heads including for liquidated damages. The impugned Award records that in the 22nd sitting, the petitioner withdrew five of the initial seven claims after which the counter claim became restricted to Rs.6,21,154.30/- on account of liquidated damages for belated execution of the work and Rs. 65,000/- for cost of electricity supplied to the respondent for 65 weeks. The petitioner further complained that the respondent had not done the performance test despite several reminders sent on 5th September 2008, 6th January 2009, 16th June 2009, 28th of June 2010 and 11th of August 2010. 3. According to the petitioner (respondent before the Learned Arbitrator), the bills were not processed and not paid due to breach on the part of the respondent (claimant in the arbitration proceedings) in not performing the performance tests which compelled the petitioner to withhold 10% of the contract price amounting to Rs.12,42,308/-. The petitioner stated that the commissioning of the plant was delayed by 13 months resulting in the petitioner suffering losses as commercial operations in the shopping mall could not be started without the Air Conditioning Plant being in place. 4. Upon consideration of the documents relied upon by the respective parties and the pleadings filed by them, the primary question considered by the Arbitrator was whether the entirety of the claim of Voltas can be decreed on the basis of the admission made by the petitioner. The Arbitrator was of the view that the letters dated 12th January 2009 and 18th May 2009 did not contain any admission on the quantum of the money payable. The Arbitrator however, relied upon the letter dated 16th June 2009 referring to the invoice dated 17th November 2008 for Rs.23,31,532.67 where the petitioner Mr. Surana stated inter-alia that ".................we wish to inform you that owing to acute financial crisis, we are unable to make payment for the time being." "The situation seems to be improving and we are hopeful and liquidating our liabilities within the second quarter of this financial year." In the Arbitrator's view, the contents of the above letter amounted to an acknowledgment of liability by the petitioner to the respondent as well reinforcing the existence of a jural relationship. 5. 5. Upon consideration of the other letter exchanged between the parties, the Arbitrator also came to the finding that the petitioner did not record any grievance in any of his letters in relation to the alleged non-performance on the part of Voltas. The Arbitrator highlighted the apparent inconsistency in the contents of the two sets of letters issued by the petitioner; one from 15th September 2008 to 11th August 2010 complaining that the performance test was outstanding because of which the respondent's bills could not be finalised; and the other from 6th January 2009 to 16th June 2009 recording an assurance of payment. However, in relation to the petitioner's admission of outstanding amounts to Voltas, the most significant finding of the Arbitrator was that the allegation of certain letters being procured by Voltas was unfounded since such allegation was not substantiated from the cross-examination of Voltas's witness. According to the learned Arbitrator, the petitioner was unable to clarify at whose instance or under what circumstances these letters were allegedly procured. 6. On the point whether Voltas was in breach of the contract and therefore not entitled to claim payment in full, the Arbitrator notes that the letter dated 16th June 2009 from Mr. Surana to Voltas stated that payment will not be released till such time the performance test was not done in terms of Clause 5 of the contract and upon production of relevant documents. However on the very same day i.e. on 16th June 2009, the petitioner writes a letter to Voltas stating that he is trying his best to liquidate the liabilities within the second quarter of the financial year. On comparing both the letters written on the same day i.e. on 16th June 2009, the Arbitrator came to the conclusion that since the letter acknowledging outstanding dues was written prior to the one refusing payment, the contents of the latter had to be an afterthought. The Arbitrator took into account that no evidence was adduced with regard to the working of the AC plant or any complaints received thereto. The Arbitrator also held that Clause 5 of the contract (on which the petitioner had relied on for retaining 10% of the payment) did not authorise such withholding of payment when the commissioning of the plaint had been acknowledged by the petitioner on several occasions even as late as on 16th June 2009. The Arbitrator also held that Clause 5 of the contract (on which the petitioner had relied on for retaining 10% of the payment) did not authorise such withholding of payment when the commissioning of the plaint had been acknowledged by the petitioner on several occasions even as late as on 16th June 2009. The Arbitrator further held that the petitioner's claim on account of liquidated damages for belated execution of the work for a sum of Rs.6,21,154.30/- under Clause 7 of the contract, was barred by limitation since the plant was handed over in August 2008 and the claim for liquidated damages was made for the first time on 4th April 2013. The Learned Arbitrator accordingly held that Voltas was entitled to an Award of Rs.22,31,535.60/- on account of the principal amount claimed. 7. The Award has been challenged by the petitioner Mr. Laxmi Pat Surana, who appeared in person, before this Court. 8. Mr. Surana complains that the Learned Arbitrator misconstrued the terms of the contract and the letters exchanged between the parties particularly those relating to withholding of payment to Voltas by reason of the performance test not having been carried out. Mr. Surana dwells at length on the alleged admission of liability relied upon by the Arbitrator and submits that the said admission has been explained in later correspondence between the parties. Mr. Surana urges with vehemence that these letters were "procured"; in that the letters were issued by him at the request of Voltas for securing future business. Mr. Surana submits that he had to suffer loss since the Shopping Mall could not be made ready on time which in turn disentitled Voltas to any payment. Mr. Surana points out in great detail, the importance of carrying out of the performance test for the air conditioning plant to be made operational and that the performance test under Clause 5(d) of the contract was required to be performed in the presence of the petitioner's engineers as specified in Appendix-C (Schedule of Desired Factory and Field Tests), which was not considered by the arbitrator. 9. Mr. Suddhasatva Banerjee and Mr. Chayan Gupta, learned counsel appearing for the respondent Voltas, submit that despite the respondent performing to the satisfaction of the petitioner, the latter failed to make payment against the invoices raised despite an unequivocal admission to the amount payable to Voltas. 9. Mr. Suddhasatva Banerjee and Mr. Chayan Gupta, learned counsel appearing for the respondent Voltas, submit that despite the respondent performing to the satisfaction of the petitioner, the latter failed to make payment against the invoices raised despite an unequivocal admission to the amount payable to Voltas. Counsel relies on the letters dated 6 January 2009, 12 January 2009, 18 May 2009 and 16 June 2009 in this regard. Counsel assails the grounds taken by Mr. Surana for challenging the impugned Award primarily on the point that in an application under section 34 of The Arbitration and Conciliation Act, 1996, a court cannot reappreciate the evidence which has already been done before the arbitrator. According to counsel, the impugned Award has dealt with each and every issue, including the explanation with regard to the admission made by the petitioner in several letters written to Voltas. Counsel submits that the allegation with regard to some of the letters being procured, had been raised during the course of the arbitration proceedings and has been comprehensively dealt with by the Arbitrator. On the issue of the petitioner being entitled to withhold 10% of the contract price by reason of Voltas not carrying out the performance test, it is submitted that this issue has also been considered by the Arbitrator. According to counsel, the Arbitrator has taken into account all relevant correspondence between the parties and this Court should refrain from reopening the issues already decided. In essence, the impugned Award addresses all the issues with reasons and hence there is no basis for this court to interfere with the decision of the Learned Arbitrator. 10. I have considered the submissions made by Mr. Surana (petitioner) and counsel appearing for the respondent/Voltas. Since much emphasis has been placed on Clause 5(d) of the contract by both the parties by reason of the interpretation given by the Arbitrator to the said clause, it is necessary to set out clause 5 of the contract below; 5.0 Terms of Payment: (a). 15% of the contract value as advance against submission of Bank Guarantee/Corporate Guarantee Bond for an equal amount valid till successful trial and testing of the plant. (b). 65% against prorate supply/despatch of equipments/materials. (c). 10% against prorate progress of work at site. (d). 15% of the contract value as advance against submission of Bank Guarantee/Corporate Guarantee Bond for an equal amount valid till successful trial and testing of the plant. (b). 65% against prorate supply/despatch of equipments/materials. (c). 10% against prorate progress of work at site. (d). 10% after successful commissioning and performance tests of the entire installation and after submission of Performance Bank Guarantee (for 10% value of the Contract) with a validity period of 21 months from the date of performance test. You shall also submit as built drawings, operating instruction, maintenance manual and other documents as may required by us." Mr. Surana urges that under 5(d), he was entitled to withhold 10% of the contract price since Voltas did not carry out the performance test. 11. At this stage, it is necessary to look at the Arbitrator's assessment of the two issues; namely admission of liability on the part of Mr. Surana and conducting of performance test by Voltas. From the impugned Award, I find that the Arbitrator has considered each and every communication on the point of the alleged admission both from Mr. Surana as well as from Voltas. The Arbitrator has in fact found that the letters dated 6th January 2009, 12th January 2009 and 18th May 2009 (relied upon by Voltas) did not contain any evidence of admission of the quantum of money payable to Voltas. According to the Arbitrator, the only letter reflecting an acknowledgement of liability on the part of Mr. Surana is the letter dated 16th June 2009, the relevant part of which has been set out above. Hence, the conclusion of the Learned Arbitrator cannot be faulted in view of Mr. Surana's unequivocal statement to liquidate his liabilities in the near future. Mr. Surana's contention of Voltas "procuring" letters to avoid harsh action against the erring engineers has duly been taken into account and the Arbitrator concludes that the stand with regard to procurement of letters in a belated attempt to justify Mr. Surana's acknowledgement of liability and good work certificate to Voltas. This conclusion is not bereft of reasons and is based on the petitioner's witness, Mr. Ahin Kumar Das (RW2) not having been able to substantiate the fact of the "procuring" of the concerned letters. 12. Surana's acknowledgement of liability and good work certificate to Voltas. This conclusion is not bereft of reasons and is based on the petitioner's witness, Mr. Ahin Kumar Das (RW2) not having been able to substantiate the fact of the "procuring" of the concerned letters. 12. With regard to the point of Voltas not being entitled to claim payment for the commissioning of the AC plant, the Arbitrator considered the letters relied on by Mr. Surana, namely, 5th September 2008, 6th January 2009, 16th June 2009, 28th June 2010 and 11th August 2010 (on the issue of withholding of 10% of the contract value for Voltas not having done the performance test). The Arbitrator has held that Clause 5 of the contract was merely to ensure proper installation and performance of the plant and did not authorise Mr. Surana to withhold payment for the work done. He bolsters his finding with the appreciation recorded by Mr. Surana in the letter dated 16th June 2009; "for the good air conditioning plant installed and commissioned by you and request you to kindly continue to provide your good services for its proper operation and maintenance for which we shall be ever grateful to you". The fact that malfunctioning of the plant was not raised by Mr. Surana contemporaneously after the plant was handed over by Voltas is given weightage as well as the fact that Mr. Surana's witness did not depose that the AC plant did not function properly at any point of time. 13. From the submissions made by counsel, it appears that the dispute primarily centres around the inconsistent stand taken by Mr. Surana in the letters admitting liability and certifying that the work was properly done while disputing the claim of Voltas on the other hand. The only issue which is to be adjudicated is whether the reasons given by the learned Arbitrator on this issue can be interfered with on the ground of the arbitrator's failure to consider relevant material, mis-appreciation of the materials-on-record or a perverse conclusion drawn from such materials. Mr. Surana's contention that the Arbitrator has failed to apply his mind on relevant materials including the terms of the contract could have been accepted had the Arbitrator not considered any of the materials which Mr. Surana relies on. This is not the case. Mr. Surana's contention that the Arbitrator has failed to apply his mind on relevant materials including the terms of the contract could have been accepted had the Arbitrator not considered any of the materials which Mr. Surana relies on. This is not the case. The Arbitrator has in fact shown diligence in assessing each and every document emanating from Mr. Surana despite Voltas's objection that a few of these documents were not served on it. The inconsistency between the two letters dated 16th June 2009 has been dealt with in the Award in detail. In the view of this court, paragraph 18 of the counter statement/counter claim of the petitioner would be sufficient to resolve any doubt in relation to the inconsistent stand taken by the petitioner. In this paragraph, Mr. Surana has tabulated his counter claims and deductions together with the amount under respective heads. In the said table, he has claimed liquidated damages for the belated execution of the work at Rs.6,21,154.30/- and cost of cement and electricity supplied to Voltas at Rs.65,000/-. As stated above, the counter claim of Mr. Surana was reduced to these two heads during the course of arbitration. After computing the total amounts claimed by Mr. Surana at Rs.4,55,13,001.80/- (before the counter claim was reduced to liquidated damages and cement and electricity), the statement mentions "Less: principal outstanding claimed by the claimant : 22,31,532.60". Rs. 22,31,532.60/- is the amount which has been awarded to Voltas by the learned Arbitrator. Since the petitioner has clearly admitted to the same in his own computation of counter claims, the finding of the Arbitrator cannot be interfered with. 14. With regard to the rejection of Mr. Surana's claim for liquidated damages, the Arbitrator has correctly held that even though Mr. Surana was entitled to claim compensation for delayed execution of the project, such claim was made for the first time on 4th April 2013 at the time of making the counter claim and not when the plant was handed over in August 2008. Hence the claim was time-barred. The Arbitrator also mentions that there is no evidence that the petitioner accepted handing over of the plant subject to any claim on account of liquidated damages. The claim made on account of cost of electricity and cement supply to Voltas has also been rejected with reasons. 15. Hence the claim was time-barred. The Arbitrator also mentions that there is no evidence that the petitioner accepted handing over of the plant subject to any claim on account of liquidated damages. The claim made on account of cost of electricity and cement supply to Voltas has also been rejected with reasons. 15. For an Award to be set aside, a ground of patent illegality has to be apparent on the face of the Award and should be one that does not involve a fact-finding exercise beyond what the Award reflects. The recent trend to make out a case of perversity may succeed if the Award shocks the conscience of a court in that no reasonable person would have come to the findings resulting in the Award. A case of an Award being opposed to public policy under section 34 (2) (b) (ii) of the 1996 Act will have to be amenable the Explanation thereto and the objection must be such as to upend the Award altogether. A court may also find an Award to be patently illegal as incorporated in the amendment of 2015. A court should normally be disinclined to upset an Award unless at first blush or several readings after, there appears to be no justification for sustaining the Award under the grounds mentioned in section 34 or in the framework evolved by recent case law. In the instant case, the Award is certainly not one which can be labelled as unsustainable or worthy to be set aside. 16. In light of the aforesaid, this court sees no reason to interfere with the findings of the learned Arbitrator and the Award made in favour of the respondent. There is no ground to hold that the conclusions drawn by the learned Arbitrator are perverse for failing to consider material which ought to have been considered. In proceedings of this nature a court would be reluctant to re-assess the evidence which an Arbitrator has thoroughly gone into, until and unless a court has good reason to do so. In this case, the diligence of the learned Arbitrator in giving due weightage to the entire evidence-on-record is commendable. 17. In proceedings of this nature a court would be reluctant to re-assess the evidence which an Arbitrator has thoroughly gone into, until and unless a court has good reason to do so. In this case, the diligence of the learned Arbitrator in giving due weightage to the entire evidence-on-record is commendable. 17. The respondent Voltas is, however, directed to file an affidavit stating whether the performance test was done in compliance with Clause 1 of the relevant head under Appendix-C (TS-48); "Schedule of the and Field Tests", at Page-269 of the 2nd Volume of the petition. Such affidavit is to be filed within 4 weeks from the date of the judgment and parties are at liberty to mention the matter before the appropriate court if required thereafter. 18. In view of the above, AP No. 478 of 2017 is dismissed. There shall be no order as to costs. 19. Before parting, Mr. Surana's earnestness in urging his case must be appreciated. Although, I have expressed my views in the matter, it is not difficult to appreciate the difficulties which Mr. Surana must have faced in arguing complex facts coupled with a law which keeps extending its boundaries. Mr. Surana however did a commendable job in trying to give clarity to an uneven fact situation. 20. Urgent photostat certified copy of this judgment, if applied for, be delivered to Mr. Surana and learned counsel for the respondent, upon compliance of all usual formalities.