At, High Court of Judicature at Madras
By, THE HONOURABLE CHIEF JUSTICE MR. SANJIB BANERJEE & THE HONOURABLE MR. JUSTICE P.D. AUDIKESAVALU
For the Appellant: Srinath Sridevan, Advocate. For the Respondent: S. Karthikei Balan, Advocate.
(Prayer: Appeal filed under Section 13 of the Commercial Courts Act, 2015 read with Section 37 of the Arbitration and Conciliation Act, 1996 against the order dated 27.08.2019 passed in O.P.No.1051 of 2017.)
Sanjib Banerjee, CJ.
1. A spirited challenge is made to the order impugned by which a petition questioning the propriety of an arbitral award has been, by and large, repelled.
2. The principal plank of attack is the perceived failure on the part of the arbitrator to look into the documents filed by the appellant herein in support of the appellant’s claim for damages on account of breach committed by the respondent contractor in completing the construction work and the inordinate delay on the part of the contractor. The appellant complains that the key documents are not referred to in the arbitral award dated September 27, 2017 and the arbitration court did not consider such aspect to be a serious ground of challenge.
3. According to the appellant, the building was to be constructed for the purpose of its use as a hotel and commercial complex. The appellant says that the contractor was aware of the nature of the project and of the contracts entered into by the appellant with third parties promising to make over possession of the constructed areas to such third parties within agreed timelines. The appellant complains that despite the contractor being aware of the damages that the appellant was exposed to qua third parties, the contractor did not take diligent steps to complete the project in accordance with the specifications or hand over the completed project within time. The appellant says that it is for such purpose that the contract provided for liquidated damages, but the arbitrator willy-nilly disregarded the same.
4. As to the various documents that were exhibited in course of the arbitral reference and not dealt with or referred to by the arbitrator in the impugned award, the appellant complains that the arbitration court has recorded that the arbitration court has looked into some of the documents and found that the award would not have been altered even if such documents had been looked into. According to the appellant, the test applied by the arbitration court in such regard is flawed and the arbitration court ought to have set aside the award on the ground that it failed to take relevant considerations into account and was, accordingly, manifestly arbitrary and patently erroneous.
5. It is elementary that the arbitrator is the final judge of the quality and quantity of the evidence. There is no rule that every document that is carried to an arbitral reference must be expressly referred to in the award. It is evident from the award that the arbitrator duly applied his mind to the matters in issue and referred to both the documents and the oral evidence before him in reaching the conclusions. Ordinarily, in exercise of the limited authority available under Section 34 of the Arbitration and Conciliation Act, 1996, the court cannot look into the basis of reasoning or even the law that may have been applied by the arbitrator in considering the matters in issue. It is only when the award appears to be completely flawed in the sense that it shocks the conscience of the court or when the methodology adopted for assessment is found to be opposed to public policy and egregiously unjust or unfair that an arbitration court would be excited to delve any deeper into the award or annul the same.
6. The arbitrator in this case framed appropriate issues. The first of the issues pertained to whether there was any delay occasioned as a result of any breach or failure on the part of the contractor. Upon referring in detail to how the project was worked out, setting out some of the answers to the questions posed to the witnesses and alluding to several of the documents that had been carried to the reference, the arbitrator concluded that there was breach on the part of the appellant herein, inter alia, in not producing the drawings in time, failing to make timely payments to permit the contractor to proceed with the balance of the work and the like. Upon the arbitrator concluding by indicating cogent reasons that the delay was attributable to the appellant in this case, much of the sheen of the appellant’s claim of damages for delay was lost.
7. The arbitrator then specifically considered the counter-claim pertaining to liquidated damages taken by the appellant to the reference in the third issue. The arbitrator referred to the celebrated case of Fatch Chand (AIR 1963 SC 1405) and the other famous case of Maulabux (AIR 1970 SC 1955), which are often referred to in matters of the present kind when there is a liquidated damages clause in the agreement and such clause is invoked. The arbitrator appreciated the law in such regard in proper perspective and held that notwithstanding there being an indication of the quantum by way of a liquidated damages clause, a party had to assert and establish that it had suffered loss and damages for it to be entitled to the liquidated damages indicated. The quantum indicated by way of liquidated damages may be accepted as a genuine pre-estimate by the parties of the compensation that a party would be entitled to upon breach by the other party or upon failure by the other party to adhere to certain specified conditions of the contract. However, notwithstanding the extent of damages being quantified, merely because there is a liquidated damages clause does not entitle a party claiming to have suffered loss and damage to be entitled to such quantum without proving that it had suffered any loss.
8. After considering the legal principles in such regard, the arbitrator concluded that no loss or damage had been occasioned to the appellant herein on account of the acts or conduct of the respondent contractor. In course of the discussion, the arbitrator referred to the contract between the parties, the manner in which the parties went about discharging their duties thereunder and the reciprocal obligations of the parties. Sufficient reasons have been indicated as to how the mind of the arbitrator was impelled to arrive at an adverse finding qua the claim on account of liquidated damages that had been made by the appellant herein.
9. As far as the order impugned dated August 27, 2019 is concerned, it is evident that the arbitration court adhered to the command of Section 34 of the Act and did not engage in any inquiry any more than was necessary. The criticism of the order by the appellant that the arbitration court looked into some of the documents that had not been referred to in the award and found that the specific reference to such documents in the award would not have made any difference, must be seen in the appropriate perspective. The arbitration court would be minded to accept a challenge to an award when the very basis of a claim is found to be undone by a document which is not referred to in the award. Similarly, if a particular head of claim appears to be virtually admitted by the other side and the relevant document is not noticed by the arbitrator while dismissing such head of claim, the arbitration court may set aside the finding on such score by referring to the document that was already before the arbitral tribunal. However, when a possible view is taken on a totality of the consideration of all the documents, it is difficult for t
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he arbitration court to upset the view taken by the award unless the view is found to be outlandish and completely not in consonance with the documents relied upon by the challenging party. 10. There does not appear to be any basis to the appellant’s grievance that the arbitration court did not take relevant considerations into account in assessing the impugned award dated September 27, 2017. 11. For the reasons aforesaid, the appeal is found to be devoid of merit and the judgment and order impugned do not call for any interference. It is also noticed that the quantum of interest awarded has been reduced and the respondent herein does not have any grievance in such regard. 12. Accordingly, O.S.A.No.143 of 2021 is dismissed. C.M.P.No.6498 of 2021 is closed. There will be no order as to costs.