w w w . L a w y e r S e r v i c e s . i n

Indian Oil Corporation Ltd. v/s M/s. Kadbrotee Engineering Industries

Company & Directors' Information:- B. R. OIL INDUSTRIES PRIVATE LIMITED [Active] CIN = U15141MP2009PTC022534

Company & Directors' Information:- D P ENGINEERING INDUSTRIES LIMITED [Active] CIN = U27310DL2008PLC176856

Company & Directors' Information:- A K ENGINEERING INDUSTRIES (INDIA) PRIVATE LIMITED [Active] CIN = U25206DL1997PTC085204

Company & Directors' Information:- G L ENGINEERING INDUSTRIES PRIVATE LIMITED [Active] CIN = U28920MH1981PTC023662

Company & Directors' Information:- S B OIL INDUSTRIES PVT LTD [Active] CIN = U51225WB1981PTC033684

Company & Directors' Information:- R K OIL INDUSTRIES PRIVATE LIMITED [Active] CIN = U51109UP1991PTC013762

Company & Directors' Information:- B V M ENGINEERING INDUSTRIES LIMITED [Active] CIN = U28111DL1972PLC005983

Company & Directors' Information:- M M A OIL INDUSTRIES PRIVATE LIMITED [Active] CIN = U36100KA2013PTC069069

Company & Directors' Information:- K R OIL INDUSTRIES PRIVATE LIMITED [Active] CIN = U15140UP1988PTC009717

Company & Directors' Information:- R R R ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1993PTC055069

Company & Directors' Information:- A. V. ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1974PTC007360

Company & Directors' Information:- G D R ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U27109UP1971PTC003388

Company & Directors' Information:- L S ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1977PTC008484

Company & Directors' Information:- I B I ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U45202PB1974PTC003422

Company & Directors' Information:- A H B ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U35999WB1988PTC044786

Company & Directors' Information:- O K ENGINEERING INDUSTRIES PRIVATE LTD [Active] CIN = U74899DL1987PTC027660

Company & Directors' Information:- R P ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1973PTC006781

Company & Directors' Information:- S V ENGINEERING INDUSTRIES PVT LTD [Under Liquidation] CIN = U74210TG1981PTC003174

Company & Directors' Information:- OIL INDUSTRIES LIMITED [Dissolved] CIN = U99999KA1947PLC000951

Company & Directors' Information:- INDIAN INDUSTRIES PVT LTD [Strike Off] CIN = U31908KL1945PTC000453

Company & Directors' Information:- INDIAN INDUSTRIES LIMITED [Dissolved] CIN = U99999MH1919PTC000513


    Decided On, 14 January 2011

    At, High Court of Judicature at Bombay


    For the Petitioner: N. Engineer a/w Sunil Gangan i/by M/s. RMG Law Associates, Advocates. For the Respondent: S.A. Oak i/by M/s. Mahesh Menon & Co., Advocates.

Judgment Text


This Petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act), whereby award dated 31st January, 2007 has been challenged. The Arbitrator has granted the award as under:-

'I hereby direct the Respondents to pay to the Claimants the sum of Rs.9,12,157/- within 30 days from the date of the Award. If the Respondents fails to pay the awarded sum within 30 days from the date of the Award then the Claimants shall be entitled to receive interest at the rate of 9% p.a. On the awarded sum of Rs.9,12,157/.'

2. The facts of the case are the Petitioners are interalia engaged in the business of refineries and marketing, selling and distributing of Petroleum Products. The Respondents is a partnership firm engaged in engineering works.

3. On 26th July, 2002, the Petitioners had floated limited tender No.MSO/ENG/LT-16/01-02/BHADLI for construction of sand pad foundation, fabrication of new cone roof tank for water and installation of fire fighting pumps at Petitioner’s Bhadli depot. Pursuant to the quotation received from the Respondents, the Petitioners by letter dated 26th July, 2002 placed the work order upon the Respondents. Thereafter, the contract was executed between the parties on 23rd August, 2002.

4. The Respondents did not take any steps for taking over of the site and therefore, the Petitioners by their letter dated 18th September, 2002 informed the Respondents that, 28th September, 2002 should be treated as the commencement date of the work order and that the Respondents should report at site and commence the work immediately. Since, the contract was for a period of 6 months, the completion date of the contract was 27th March, 2003. The time was the essence of the contract. The Respondents did commence work on 7th October, 2002.

5. The Respondents’ progress of work was very slow and tardy at site. The Respondents had grossly delayed the execution of the work, and was able to complete only the foundation work for the tank, which constituted only 10% of the total job by 3rd March, 2003.

6. The Respondents did not commence the construction of fire fighting pump housework, which was an independent activity and not related to tank fabrication. The Petitioners had by their aforesaid letter dated 24th February, 2003 advised the Respondents that if they did not commence the pump house construction work on or before 3rd March, 2003 they would delete this portion of the work from the Respondent’s scope and get it done through other agency.

7. The Respondents was advised by letter dated 21st January, 2003 to submit action plan for completion of work by end of February, 2003. However, the Respondents did not submit any action plan also. The Petitioners by letter dated 7th March, 2003 suspended the work at site, as time was the essence of the contract.

8. The Respondents made a claim of Rs.22,83,921.28 Ps. upon the Petitioners for the work alleged to have been done and the expenses incurred by them at site and also on account of loss of profit, compensation and other incidental expenses. The Petitioners rejected the said claims. A net amount of Rs.5,90,441.19 Ps. which was found due and payable by the Petitioners to the Respondents was paid. The Respondents accepted the said amount in full and final settlement of their claims.

9. On 30th September, 2004, the Respondents have by their Advocate’s letter dated 30th September, 2004 sought to lodge its claim for the balance amount of Rs.17,17,688.28. The dispute was referred by the Director (Marketing) of the Petitioners Corporation to the Sole Arbitration of Mr. R.D. Kale. The Respondents filed their settlement of Claim and the Petitioners filed its Written Statement. The Respondents filed its rejoinder. The parties also examined witnesses. The Petitioners and the Respondents advanced oral arguments. The Petitioners also submitted their written arguments. On 31st January, 2007 the impugned award was passed by the Arbitrator. Hence, this Petition.

10. The learned counsel appearing for the Petitioners (Original Respondents) has pointed out Exhibit 'M', which is nothing but a statement of claim/ chart prepared by the Respondents (Original Plaintiffs) showing the names of the suppliers, items and the amount alleged to have been paid. The whole submission is that such document, Exhibit 'M' just cannot be relied upon to grant claim in such a fashion.

11. There is nothing on record to show that the Respondents lead further evidence and/or place on record any supporting documents referred in the statement (Exhibit 'M'). Without filing of the affidavit in support of this document by the plaintiff, the same is not sufficient till the award of damages in such fashion. This is a private document referred by the claimants. Further, there is nothing on record, to show that the parties have agreed to lead evidence in such fashion. Though there is no written objection, yet the tenure of the cross-examination shows that on any facets of Exhibit 'M' it has been tested and objected by the Petitioner.

12. In view of Section 19 of the Act and the provisions of the Code of Civil Procedure, and/or the Evidence Act, are not strictly applicable, still the basic requirement of proof of documents, as it goes to the root of the matter, just cannot be overlooked specially when the parties nowhere agreed to follow such procedure while leading the evidence. The Arbitrator, therefore, need to consider the basic principle of awarding the damages of compensation as provided under the Contract Act.

13. In the judgment of Anindya Mukherjee Vs. Clean Coats Private Limited, Arbitration Petition No. 947 of 2009 dated 28/10/2010, this Court (Anoop V. Mohta, J.) has observed as under:-

'18 The Arbitrator needs to consider the basic laws while assessing and granting any kind of damages/ compensation. The Apex Court in the STATE OF RAJASTHAN & ANR. VS. FERRO CONCRETE CONSTRUCTION PRIVATE LIMITED, (2009) 12 SCC 1), has observed in paragraph No.55 as under:-

'55. While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable.'

14. In view of above, the finding given by the Arbitrator in para (f), while awarding this amount is without any material evidence and supporting documents and therefore, unacceptable and just contrary to law and even the material placed on record. The reasoning that the claimants cannot be made to suffer losses due to the rescission, even if it is proper and lawful, in my view, also cannot be the reason to award such amount in such fashion, basically when the learned Arbitrator has already observed by referring to clauses 31 and 32 of the Contract that the action so taken by the Petitioner of termination of contract is well within the square of the contract by giving the reasons on merits also. Therefore, the termination itself than the forfeiture so invoked also supports the case of the Petitioner.

15. The Apex Court in (Oil and Natural Gas Corporation Vs. M/s. Wig Brothers Builders & Engineers Pvt. Ltd., JT 2010(11) SC 146), (Ramnath International Construction Pvt. Ltd. Vs. Union of India & Anr. 2007(2) S.C.C. 453= AIR 2007 S.C. 509), has dealt with the facets of contract clauses between the parties. The award of damages ignoring the terms of contract amounts to 'exceeding the jurisdiction' and 'a legal misconduct' and is unsustainable.

16. The principle of "accord and satisfaction on receipt of amount in full and final settlement of claim"

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is well established as declared in Lala Kapurchand Godha & Ors. Vs. Mir Nawab Himayatalikhan Azamjah, AIR 1963, S.C., 250, Union of India & Ors. Vs. Hari Singh, 2010(10) SCALE, 205 is an additional factor which needs to be considered in the present case. As admittedly, the Respondents had already received an amount of Rs.5,90,411.19 ps./- at the relevant time after considering the material as well as bill so raised and assessed by the Petitioner. The same was received without any objection at the relevant time. Therefore, the claim so raised is after thought and ought not to have been awarded, as done in the present case. 17. Resultantly, I am inclined to set aside the present award dated 31st January, 2007, as it is based upon the no material on record, therefore unsustainable in law. The award is quashed and set aside. 18. The Petition is accordingly allowed. No costs.