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Mahanagar Telephone Nigam Limited v/s M/s. Ultramatx Computer Support Systems Pvt. Ltd.

    Decided On, 08 February 2012
    At, High Court of Judicature at Bombay
    For the Petitioner: Ms. S. I. Shah with Ms. Jyotsna Pandhi i/by M/s. S.I. Shah & Co., Advocates. For the Respondent: Atul Daga with Aziz Khan with Ms. Devika Nigade i/by M/s. Divya Shah Associates, Advocates.

Judgment Text
The Petitioner (original Respondent) has challenged the Award under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act, 1996) passed by the sole Arbitrator. The conclusion of the Award is as under :

'1 The respondent shall refund the liquidated damages recovered for Malabar Hill, Gamdevi, Turbhe PCM & City PCM exchanges amounting to a total of Rs. 2,19,453/2 with interest @ 9% p.a with effect from 24-7-2000, till the date of this award.

2 The respondent shall refund an amount of Rs. 96000/- to the claimant, out of the risk and cost expenses recovered for Malabar Hill & Gamdevi with interest @ 9% p.a with effect from 24-7-2000, till the date of this award.

3 The performance bank guarantee furnished by the claimant shall be returned back, duly discharged by the respondent.'

2 The Petitioner is a public sector undertaking in Central Government Company under the Companies Act. The Respondent is a private limited company and was awarded the work of supply, installation, testing and commissioning for A.C. Units at various Telephone Exchanges of the Petitioner at Mumbai and New Delhi. As there arose dispute between the parties and in view of the arbitration clause, the claimant/Respondent raised various claims by alleging wrongful termination of the contract and consequent recoveries made by the Petitioner for work completed at the risk and cost of the Respondent and also levied liquidated damages for alleged delays.

3 The first issue is whether the Officers of the Petitioners had authority to terminate the contract as only the purchaser i.e. The Corporate office of MTNL was authorised to do so. As per clause 18, the right to terminate the contract vests with the Company. Any officer of the company cannot terminate the contract without due compliance of the relevant conditions as specified by the Authority empowered to do so. The finding given by the learned Arbitrator by interpreting the provisions which read by both the Counsel and also made rival submissions upon it. After reading the said clause, I am also of the view that the termination of the contract was legal. The Petitioner has also accepted the same position and acted accordingly.

4 The Arbitrator was appointed to adjudicate the dispute and difference between the parties. It covers all the disputes between the parties arising out of and related with the contract. Both the parties acted and proceeded and so also the Arbitrator.

5 The Respondent/original claimant pursuance to the purchase orders delivered the units at the respective places. As the Petitioner failed to make full payment and wrongly imposed liquidated damages, the Respondent approached the Chairman and Managing Director of MTNL, New Delhi and accordingly arbitration claim was filed for making a reference for adjudication of the claim aggregating to amount of Rs.66,22,832/. The claims were raised with respect to Exchanges in question.

6 The Arbitrator by the impugned Award dated 18 April 2007 by considering all the material and documents placed on record by the parties, adjudicated the claims Exchange-wise. There is no challenge made by the Respondent/original claimant to the original Award. The Award is only challenged by the Petitioner/original Respondent.

7 Considering the reasoning as well as the operative part of the Award, the second issue is about the grant/refund of liquidated damages. The party is entitled to recover the liquidated damages as per the agreed terms and conditions. In the present case the relevant clauses are Clause 16.1 and 16.2. The learned Arbitrator, after interpreting those provisions and considering the facts and circumstances held that the supply of equipment was made and the same was accepted by the Petitioner. Therefore, there was no question of deducting any amount towards the liquidated damages as done in the present case in view of the additional 21 days grace period as contemplated under Clause 16.1 and 16.2. The clause further provides that the Chairman and Managing Director, MTNL, New Delhi has authority to recover liquidated damages. Therefore being a pre-condition to take specific approval from the Chairman and Managing Director and admittedly it was not done in the present case, there was no question to recover and/or to proceed to impose/levy any liquidated damages. In view of this, I am of the view that the interpretation so given by the learned Arbitrator and specifically to the clauses pertaining to the liquidated damages cannot be stated to be perverse. The view so taken is possible view and it cannot be stated to be against the contractual provisions and/or any law and further as there was no ambiguity in the said terms. Therefore the levy/deduction of liquidated damages, in view of the specific clause was without authority and, therefore, rightly held to be illegal recovery. The Arbitrator, therefore, even on merits, considering the issue of 21 days grace period recorded clear finding in support of the Respondent and gave the reasoning which is well within the frame work of law and the record.

8 Both the parties are bound by the terms and conditions of purchase order No.57. Therefore, any other unilateral letter and/or amendment to any purchase order cannot be the basis to change the terms and conditions originally agreed and as in the present case, nothing is pointed out and was produced to support their contention with regard to the authority to levy damages, the reasoning and operative part given by the Arbitrator need no interference.

9 The third issue is revolving around the 'no due certificate'. In every matter, merely because no due certificate and/or similar document is executed, it is not necessary that the Court or the Arbitral Tribunal should not look into the facts and circumstances of the case including the reason behind issuance of such certificates. The illegal determination and deduction of liquidated damages as done in the present case and which was matter of dispute and, therefore, no due certificate even if issued, but as it was subject to the said illegal deduction, just cannot be said to be the final and binding between the parties. It is observed by the Arbitrator that this certificate was subject to the satisfactory settlement of claims through arbitration which was invoked on 19.08.1987. This certificate was further revised by an unconditional 'no demand certificate' as required by the Respondent. The finding is given by the Arbitrator that the no demand certificate and the TOC/NOC which indicates that it was not voluntary. Therefore, the finding given that the no demand certificate cannot have the effect of extinguishing the claims made in this arbitration proceeding just cannot be stated to be wrong and/or contrary to record. There is substance in the contention raised by the learned counsel appearing for the Respondent/claimant and the finding arrived at by the Arbitrator that no due certificate was not final and conclusive in the present facts and circumstances of the case. There is no total bar to a contractor raising claims which are genuine even after the submission of such no claim certificate. In the present case, the issue of unauthorised liquidated damages and as recorded above, apart from the circumstances in which such no claim certificate was issued goes to show that the decision given by the Arbitrator by holding that no due certificate was not final and conclusive need no interference. The issue with regard to the unauthorised levy of liquidated damages was raised subsequently after the no due certificate and which ultimately, as recorded above, accepted by the Arbitrator by interpreting the provisions of the contract. This itself is relevant factor to show that no due certificate dated 9.1.1998 was not binding and final. This also supports in view of letter dated 3.9.1998 of the Petitioner. The facts and circumstances including the conduct of the Petitioner itself shows that no demand certificate was issued in duress and at least was not voluntary and it was subject to a final decision in arbitration proceeding. As finding given by the Arbitrator, and as the Respondent/claimant has discharged his burden and, therefore, there is no substance in the contention raised by the learned counsel appearing for the Petitioner that the Arbitrator committed wrong by overlooking the no due certificate dated 9.1.1998.

10 The Apex Court has considered the concept and purpose of 'no dues certificate' in R. L. Kalathia v. State of Gujarat (JT 2011 (2) SC 69) in the following words:

'(i) Merely because the contractor has issued 'no-dues certificate', if there is an acceptable claim, the Court cannot reject the same on the ground of issuance of 'no-dues certificate'.

(ii) Inasmuch as it is common that unless a discharge certificate is given in advance by the contractor, payment of bills are generally delayed, hence such a clause in the contract would not be an absolute bar to a contractor raising claims which are genuine at a later date even after submission of such 'no-claim certificate'.

(iii) Even after execution of full and final discharge voucher/receipt by one of the parties, if the said party is able to establish that he is entitled to further amount for which he is having adequate materials, he is not barred from claiming such amount merely because of acceptance of the final bill by mentioning 'without prejudice' or by issuing 'no-dues certificate'.

11 In view of the above, considering the reasoning given by the Arbitrator and so also the interpretation given to the terms and conditions, I am not inclined to accept the submission made by the learned counsel appearing for the Petitioner that the learned Arbitrator has acted beyond the scope of reference. It is unacceptable that dispute regarding levy of liquidated damages is beyond the scope of reference and therefore arbitrary. In my view, it is interconnected and interlinked and the Arbitrator has jurisdiction to adjudicate the dispute of liquidated damages as it definitely arose out of the same contract and the work in question. The Respondent throughout objected to such unauthorised levy of liquidated damages. If clause provide that the damages should be recovered subject to approval of the higher authorities, merely because the contract was terminated by other authority that itself is not sufficient to overlook the specific clause of needed approval as recorded above. Therefore, authorisation to terminate the contract cannot be read with authorisation to levy liquidated damages on the basis of deemed permission and/or authority as contended by the learned counsel appearing for the Petitioner.

12 The terms and conditions

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of the Contract are clear and specific and, therefore, there was no question of taking action on the basis of deeming provision. The Arbitrator is right in interpreting the said clear provision. Here, there is no question of levy of liquidated damages, but the question is it should be levied subject to approval of the higher authority which was admittedly not done in the present case. Therefore, the refund order, in the present case, need no interference. This is not a question of technicality or technical defects but it is a question of reading of clear clauses between the contractual parties. 13 The Petitioner, in view of the above, failed to make out a case to interfere with the reasoned order so passed by the learned Arbitrator. It is well within the frame work of law and the record. There is no illegality and/or perversity. The view so taken by the learned Arbitrator by giving due and proper interpretation to the terms and conditions and so is also reasonable and possible view, I see there is no case made out to interfere with the reasoning so given by the learned Arbitrator. 14 Resultantly, the Arbitration Petition is dismissed. There shall be no order as to costs.