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Nicco Corporation Limited v/s Simplex Infrastructures Limited

    AP No. 705 of 2009

    Decided On, 23 June 2010

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE SANJIB BANERJEE

    For the Petitioner: Abhrajit Mitra, Jishnu Chowdhury, Sarvapriya Mukherjee, Rajesh Upadhyay, Advocates. For the Respondent: Goutam Chakravartti, Sr. Adv., Utpal Bose, S.K. Samanta, Advocate.



Judgment Text

SANJIB BANERJEE, J. : ?


1. The petitioner has taken recourse to this Court against an award made under the Arbitration and Conciliation Act, 1996. Four principal grounds have been canvassed: that the award is contrary to the contract; that there has been gross violation of the principles of natural justice in the arbitrator coming to conclusions not on the basis of the case made out by the respondent or on the material brought by the parties before him; that the respondent-claimant had rendered the reference nugatory by submitting that the parties were governed by a letter of intent issued on September 19, 2000 and not by the subsequent work order or agreement executed on February 8, 2001; and, that the arbitrator did not adequately consider the plea raised by the petitioner herein under Section 16 of the 1996 Act and erred in rejecting such application out of hand. The petitioner herein was awarded the work of installation of a crude oil storage tank at Raava, Andhra Pradesh by Cairn Energy India Pvt Ltd. The award records that the petitioner?s offer following a notice inviting tender was accepted by the principal employer on September 5, 2000 and the formal agreement was executed on October 16, 2000. The petitioner awarded a sub-contract to the respondent for the installation of a granular pile foundation, tank pad and associated civil work. The award says that the respondent?s part of the work involved setting up 2725 stone columns of 600 mm nominal diameter of a specified type. On September 19, 2000 a letter of intent was issued by the petitioner to the sub-contractor indicating that the ?total lumpsum value? of the work was to be Rs.2.85 crore. A break-up of the contract price was shown in a sheet appended to the letter of intent. The salient technical and commercial conditions were agreed to between the parties at a meeting held on the same day. The minutes of the meeting, running into eight points covering a page and a half, were referred to in the letter of intent. The sub-contractor was advised to gear up its ?mobilisation activities and start the work at right earnest? on the strength of the letter of intent and informed that a ?formal Work Order will be issued shortly.? The break-up of the contract price referred to an amount being allocated for conducting a vertical load test. The only point of note in the minutes of the meeting of September 19, 2001 is that it stipulated that the ?(t)ime of completion has been agreed as 4 months which may be extended by another 15 days.? The award finds that the sub-contractor completed the work of installing the stone columns and the initial testing thereof by April 24, 2001 and that the routine testing was done by July 4, 2001. Disputes arose between the parties at the time of final settlement of accounts. The primary disagreement was upon the petitioner herein deducting 10 per cent of the value of the contract by way of liquidated damages. In the reference the sub-contractor claimed reimbursement of the sum of Rs.28.50 lakh deducted on account of liquidated damages. The arbitrator awarded such amount in full. Three other heads of claim ? Rs.15 lakh for mobilising three additional rigs, Rs.5 lakh for bringing in additional tools and tackles and Rs.23 lakh towards overrun expenses ? taken to the reference by the sub-contractor were rejected in full. In respect of a further claim of Rs.5 lakh for delay in making payment of the running account bills, the arbitrator allowed damages of Rs.1,48,000/-. Against the sixth head of claim of Rs.7,40,662/- on account of final payment of the sub-contractor?s bill that had not been made despite being certified for payment, the arbitrator awarded Rs.6,93,721/-. The arbitrator awarded interest at the rate of 10 per cent from July, 2003 to August, 2009 and quantified it to be Rs.20,88,000/-. The total quantum of the award was rounded off to Rs.57,79,700/-. The petitioner was directed to pay such sum within 60 days of the date of the award which was published on September 4, 2009. In default, the petitioner was required to pay interest at 12 per cent per annum on a sum of Rs.34.80 lakh from the date of the award till the date of payment or realisation. The counter-claim of the petitioner was rejected in its entirety. The petitioner had claimed Rs.1,80,32,000/- on account of liquidated damages imposed on it by the principal employer and a further sum of Rs.3.50 crore towards compensation for loss of business. The arbitrator required the parties to bear their respective costs.


The award runs into 13 type-written pages, the first two of them on nonjudicial stamp paper covering the cause title. After setting out the outline of the transaction, the arbitrator noticed the letter of intent and the minutes of the meeting held on September 19, 2000 and, in particular, the stipulation as to the time for completion of the work as recorded in such minutes. The major portion of the award covers the liquidated damages aspect. Paragraph 9 of the award relates to such issue and runs into 21 sub-paragraphs with the arbitrator concluding that the withholding of the sum of Rs.28.50 lakh by the petitioner was wrongful and the sub-contractor was entitled to be reimbursed such amount.


The petitioner says that beginning paragraph 9.6 and ending paragraph 9.20 of the award, there are thirteen demonstrable instances where the arbitrator had proceeded de hors the agreement between the parties or on the basis of a case not made out by the sub-contractor or the arbitrator drew inferences without there being the slightest iota of evidence in support thereof. It is the petitioner?s submission that the arbitrator envisaged a situation that had neither been represented by the sub-contractor nor by the petitioner and proceeded to assess the claim on account of liquidated damages on the basis of how he imagined the things to have unfolded rather than how the parties had led evidence on such score.


The petitioner submits that the arbitrator conjectured that since the entirety of the site had not been handed over by the petitioner to the respondent till February 5, 2001, it was impossible for the respondent to complete the work within four months and the grace period of 15 days from September 19, 2000 which was the date on which the letter of intent was issued. The petitioner questions the arbitrator?s rationale in negating the petitioner?s contention that the time for completion of the work began to run from the date of the letter of intent. The petitioner says that the arbitrator needlessly surmised that the subcontractor could not have comprehended that its acceptance of the work order of February 8, 2001 implied that it would be liable to liquidated damages. The petitioner insists that such finding is contrary to the case made out by the claimant in the reference.


In all, the petitioner details thirteen counts of challenge on the liquidated damages aspect to either the recording of facts or the arbitrator?s findings that appear between paragraphs 9.6 and 9.20 of the award:


(i) At paragraph 9.6 of the award the arbitrator found that the work order of February 8, 2001 contained two important deviations from the agreement reflected in the letter of intent. Clause 14 of the work order recorded that the time schedule was to be four months from the date of the letter of intent with a grace period of 15 days at the discretion of the petitioner. Clause 15 of the work order provided for imposition of liquidated damages at the rate of 1 per cent per week of delay beyond the stipulated time for completion, subject to a maximum of 10 per cent of the contract price. At paragraph 9.7 of the award the arbitrator held that neither the initial agreement (the letter of intent) on which the more detailed agreement (the work order of February 8, 2001) was to be based nor the negotiations between the parties contemplated either of the deviations. The petitioner?s challenge to such finding is that there was no evidence at all on such aspect that could have prompted such conclusion.


(ii) Towards the end of paragraph 9.7 of the award the arbitrator found that ?the parties never contemplated, far less intended when they entered into the initial agreement on 19th September 2000, that there should be a clause for L.D./Penalty.? The arbitrator further recorded that it was ?unfortunate that the claimant executed such an agreement on 8th February 2001 not looking into or appreciating the consequence of such deviated terms ?? The petitioner submits that it was not the claimant?s case that it had been tricked into executing the work order nor did the claimant run a case that it had mistakenly executed the agreement without understanding the contents thereof. In any event, the petitioner says that since the agreement would admit of no other construction than the obvious that the scheduled date of completion was to be within four months from the date of the letter of intent, the claimant could not have been heard to complain of the unreasonableness of the time schedule or the consequence of the failure to adhere thereto.


(iii) At paragraph 9.8 of the award the arbitrator held that the petitioner herein took advantage of the deviated terms. The petitioner argues that the respondent was no minor or under any other disability and if the terms of the agreement permitted the petitioner to impose liquidated damages, it was not for the arbitrator to attribute motives or discard the black and white of the agreement on a perceived wrong done to the claimant.


(iv) At paragraph 9.10 of the award the arbitrator recorded a submission on behalf of the claimant that the liquidated damages clause was introduced only in the agreement of February 8, 2001 and such clause could not operate with retrospective effect. It is the petitioner?s argument that the arbitrator could not have permitted such a point being made and should not have subsequently been taken in by it since the agreement mandated the imposition of liquidated damages on the sub-contractor by the petitioner.


(v) At paragraph 9.12 of the award, in the context of the question as to whether the final agreement was de hors the terms of the letter of intent, the arbitrator found that the parties had intended that the work order or final agreement would follow immediately after the execution of the letter of intent. The petitioner contends that the arbitrator could not get into the minds of the contracting parties or their representatives to gauge the intention. However, such argument of the petitioner appears to be clearly flawed since the letter of intent expressly recorded that the work order was to follow shortly.


(vi) At paragraph 9.12 of the award the arbitrator found that the petitioner could not issue the work order within reasonable time of the letter of intent ?because they were unable to handover the entire site before 5th February 2001 ?.? The petitioner states that the fact that the last bit of the site was handed over to the sub-contractor on February 5, 2001 it would not follow that the petitioner?s failure to complete the handing over of the entirety of the work site was an impediment to the sub-contractor completing the work at the rest of the site. The petitioner suggests that there could have been no nexus between the date of the final handing over of the site and the alleged delay in the execution of the work order.


(vii) At paragraph 9.12 of the award the arbitrator also held that the controversy as to whether the work order was de hors the letter of intent had arisen since the claimant contended that the liquidated damages clause was not in the contemplation of the parties when the letter of intent was issued. The arbitrator found that the claimant?s contention was misconstrued by the petitioner to imply that the claimant had suggested that the work order was separate and independent of the letter of intent. The petitioner says that the letter of intent was the abstract of the final agreement that was to be executed by the parties. According to the petitioner, if all the details were incorporated in the abstract letter of intent there would be no need for a subsequent detailed agreement to be executed. The petitioner asserts that it was enough that the letter of intent indicated a time schedule; the consequence of the failure to adhere to the time schedule was incorporated in the detailed work order of February 8, 2001. For effect, the petitioner reiterates that the work order and all its terms were ungrudgingly accepted by the sub-contractor.


(viii) At paragraph 9.13 of the award the arbitrator found that without going into the question as to whether the liquidated damages clause had been duly incorporated in the work order, since such clause imposed a retrospective liability it could not be upheld. The arbitrator referred to Section 56 of the Contract Act and found that, to such extent, such agreement was ?violative of Section 56? of the Contract Act ?and hence invalid.? The petitioner refers to Section 56 of the Contract Act that, in simple terms, provides that an agreement to do an act impossible in itself is void. The second paragraph of the section covers a situation where the act becomes impossible or unlawful subsequent to the contract being made. The third paragraph of the section prohibits compensation for loss through non-performance of any act known to be impossible or unlawful. The petitioner says that since the minutes of the meeting of September 19, 2000 referred to in the letter of intent specified that the work was to be completed within four months (or an extended period of 15 days thereafter) and since it was the admitted position before the arbitrator that the work had been commenced by the sub-contractor prior to the work order of February 8, 2001 being executed, the finding of the arbitrator that the starting point for the time schedule had not been specified flies in the face of logic and is, as such, opposed to public policy.


(ix) At paragraph 9.15 of the award the arbitrator distinguished the body of judicial precedents brought to the reference by the petitioner herein. The arbitrator made a distinction between an agreement of misadventure -which would be a commitment to do a thing without proper assessment of the time, situation or capacity - and an agreement to do something which was impossible on the face of the agreement. The arbitrator opined that the reference before him covered the second situation where the impossibility either pre-existed or was brought about by the promisee. The petitioner argues that it is not inconceivable that a party may subsequently execute an agreement that had already come into effect and admit by executing the same that it was already in default. The petitioner complains that the arbitrator was not alive to such a commonplace scenario.


(x) At paragraph 9.16 of the award the arbitrator expressed the view that time was neither intended nor made the essence of the agreement. The arbitrator furnished four reasons in support of such view: that the time could be extended without any reservation as recorded in the letter of intent but subsequently modified to be amenable to extension subject to the discretion of the petitioner herein; that at the time of the issuance of the letter of intent the parties were aware that there was no certainty that the site would be made ready for completing the work; that the working of the agreement was subject to drawings, designs and methodology being specified by the ultimate employer who was not a party to the agreement; and, in view of clause 5(a) of the general terms and conditions of the claimant?s offer on which the letter of intent was based. The petitioner submits that it was not necessary for the arbitrator to engage into any discussion as to whether time was of the essence of the agreement. The petitioner says that the very fact that the sub-contractor?s bill was subject to deduction by way of liquidated damages would imply that the agreement would not come to an end upon the stipulated date expiring but it would entitle the petitioner to accept the work at a reduced price. The petitioner suggests that as to whether time was of the essence of the agreement was irrelevant for the purpose of adjudicating upon the propriety of the petitioner having imposed liquidated damages on the sub-contractor.


(xi) At paragraph 9.17 of the award the arbitrator found that the petitioner?s failure to hand over the entirety of the site impeded in the subcontractor completing the work. The arbitrator apparently disbelieved the petitioner?s claim that 80 per cent of the site had been handed over to the sub-contractor by the date of issuance of the letter of intent. The arbitrator attributed an admission to the petitioner herein that at such stage 75 per cent of the site was so low that it was continually inundated by seawater at high tide. The petitioner says that an imaginary claim was attributed to the petitioner that 80 per cent of the site had been handed over to the subcontractor; and, equally, an imaginary admission was ascribed to the petitioner herein that in September, 2000, 75 per cent of the work area remained under water at high tide. The petitioner?s argument cannot be accepted and is liable to be disregarded on the strength of the material referred to by the arbitrator in the context. Assuming for the moment that the petitioner neither claimed that it had made over 80 per cent of the site to the sub-contractor nor did the petitioner admit that three quarters of the area was submerged at high tide, the finding reached by the arbitrator was not solely on the basis of the alleged imaginary claim and admission. The arbitrator noticed that the job for filling up the site was entrusted to another sub-contractor only on September 28, 2000 and completed on February 5, 2001. The arbitrator found that the possession of the site was made over by the petitioner to the sub-contractor in instalments (earlier, at paragraph 9.5 of the award, the arbitrator accepted the evidence of the claimant?s witness that possession of the site had been handed over to the claimant in ?tits and bits?). The arbitrator found, on the appreciation of the material before him, that even in October, 2000 the sub-contractor complained that the failure of the petitioner herein to hand over the site impaired the movement of rigs for stacking stones. The arbitrator noticed the petitioner?s promise to hand over the entirety of the site by December, 2000 and the claimant?s response thereto that the time for completion should be extended till March 31, 2001 if the complete site was handed over by December 10, 2000.


(xii) At paragraph 9.19 of the award the arbitrator held that since time was not of the essence of the contract the sub-contractor was only required to complete the work within reasonable time. The petitioner says that such finding has no bearing on the petitioner?s entitlement to impose liquidated damages.


(xiii) At paragraph 9.20 of the award the arbitrator recorded a submission made on behalf of the petitioner herein that the work should be deemed to have been completed only on July 4, 2001 since the final test was completed on such date. The petitioner contends that even if the petitioner were to accept that for reasons which were not attributable to the subcontractor it was entitled to an extension of time, the final completion of the work on July 4, 2001 was totally unacceptable. There is no merit in this closing challenge on the aspect of liquidated damages that has been made by the petitioner. The arbitrator held that the final date of completion had to be reckoned as April 24, 2001 since it was the petitioner herein who had acknowledged such date in its letter of August 27, 2002. It is not open to the petitioner to now argue against its own contemporaneous understanding of the date of completion.


In addition, two other specific points have been made by the petitioner. In connection with the arbitrator awarding compensation to the sub-contractor for the failure of the petitioner to pay the running account bills within ten days from the date of submission thereof, the petitioner suggested in course of the hearing before the arbitrator that the running account bills did not incorporate the royalty payment certificates as required by the agreement. The arbitrator opined that such contention was bereft of merit and that the work involved no material for which royalty payment was needed. The petitioner says that such finding is contrary to the agreement which provided for royalty payment. Even if the petitioner is technically correct, it cannot be missed that it was not the only reason for the arbitrator allowing a part of the compensation for delayed payment. The arbitrator found that for the previous bills the petitioner had not made the production of a royalty payment certificate as condition precedent to releasing the amounts covered thereby. The arbitrator also noticed that at no stage had the petitioner herein demanded any royalty payment certificate or informed the sub-contractor that its running account bills could not be released for want of such certificate.


The final ground of challenge is in the arbitrator?s rejection of the petitioner?s plea under Section 16 of the 1996 Act. The petitioner says that at the 34th sitting in the reference it was submitted on behalf of the sub-contractor that the work order of February 8, 2001 could not ?constitute the agreement between the parties for the simple reason that the said order was being issued long after the expiry of the time for completion of the job as intended by the parties and as stipulated in the letter of intent ?? (at page 259 of the petition). The petitioner says that the arbitration agreement is contained in the work order of February 8, 2001. According to the petitioner, if the claimant in the reference disowned the very work order which contained the arbitration clause that gave authority to the arbitrator to take up the reference, it was open to the petitioner to seize upon such submission to raise an objection under Section 16 of the 1996 Act. The petitioner says that the objection was immediately taken and is reflected in the minutes pertaining to the relevant sitting or the immediate following sittings. The petitioner contends that the arbitrator?s recording in the award that such objection was taken at the very end of the reference is demonstrably erroneous. The petitioner has handed over a copy of its written objection under Section 16 of the 1996 Act. The application began with the caveat that it was being made by way of abundant caution since the plea had been raised orally much earlier and had not been dealt with on behalf of the claimant. The petitioner says that it was not open to the claimant to dissociate itself from the work order and rely on it for the purpose of the arbitration clause contained therein. The petitioner claims that it could not have raised the objection earlier than it had and it was, in any event, not its case that there was no arbitration agreement between the parties; but that it was entitled to take the objection the moment the claimant contended that it was the letter of intent and not the work order that was the real agreement between the parties.


The petitioner has referred to several authorities in support of its challenge to the award. The petitioner relies on a judgment reported at 1995 (1) Cal LJ 489 (Hooghly River Bridge Commissioners v. Bhagirathi Bridge Construction Co. Ltd.) and the enunciation of law at paragraph 115 therein that if an arbitrator came to a finding without evidence it must be held that the arbitrator had misconducted the proceedings. The petitioner says that the fundamental basis for challenging an award remains unchanged notwithstanding the 1996 Act having replaced the 1940 Act. The petitioner also refers to paragraph 141 of the report for the proposition that if the bad portion of an award is severable from the good part the court may set aside the bad part and uphold the rest of the award; but when no severance is possible the entirety of the award must be set aside. There is no doubt that an arbitrator?s finding on a material aspect has to be based on evidence. It has to be assessed in this case as to whether the basis on which the arbitrator rendered his award on the issue of liquidated damages is rooted to the evidence that was before him. As to the other proposition of law of the severance of the bad part of the award from the good, there would be no difficulty in the present case since the award is distinct in its treatment of the several heads of claim and if the award in respect of a particular head is found liable to be set aside, it is not necessary that the rest of the award has to follow suit.


In the judgment reported at AIR 1951 Cal 78 (Bajranglal Laduram v. Ganesh Commercial Co. Ltd.), the petitioner has relied on the legal principle recognised therein that the conclusion on facts reached by an arbitrator need to be based on evidence. There can be no argument as to such proposition or with the dictum in the judgment reported at AIR 2003 Bom 477 (Union of India v. Arora Associates) that misreading evidence and rendering any finding contrary to the material before the arbitrator would warrant the setting aside of the award. The petitioner has referred to two other judgments reported at (2008) 2 Arb LR 598 (Ennore Port Ltd v. Skanska Cementation India Ltd) and at AIR 1952 Cal 440 (Bijoy Singh v. Bilasroy and Co.) on the same aspect. In the former, the Madras High Court criticised an award since there is no evidence in support thereof. In the Calcutta case, it was held that findings of facts in an award have to be based on evidence.


On the general authority of the court under Section 34 of the 1996 Act, the petitioner has brought a decision reported at (2008) 13 SCC 80 (Delhi Development Authority v. R.S. Sharma and Company, New Delhi). Paragraph 21 of the report summarises the legal position. The petitioner emphasises that among the grounds recognised in paragraph 21 of the report are the ones where the award is contrary to substantive provisions of law or against the terms of the contract or patently illegal or contrary to justice and morality. The petitioner stresses on clause (c) of paragraph 21 of the report that recognises that an award may also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.


Two other judgments have been cited by the petitioner in connection with the summary rejection of the petitioner?s plea under Section 16 of the 1996 Act by the arbitrator. In the judgment reported at 2002 (3) CHN 171 (Arati Dhar v. S.K. Dutta) it was held at paragraph 25 that the arbitrator could not disregard a challenge launched under Section 16 of the Act and proceed to make the award; it was incumbent on the arbitrator to deal with such challenge ? even reject it if he thought it fit ? before addressing the merits of the disputes referred. The Court recorded, at paragraphs 14 and 16 of the report, that the arbitrator did not deal with the challenge to his jurisdiction. It is also of significance that paragraph 12 of the report found that the challenge as to the arbitrator?s authority in the relevant reference was taken at the outset and even before the submission of any statement by the challenger before the arbitrator. The petitioner has also brought a judgment reported at (2005) 2 Arb LR 338 (Savita Sapru v. Amarjeet Singh Juneja) where an application under Section 8 of the 1996 Act filed by the defendant was dismissed as the defendant had earlier disputed the arbitration agreement.


The respondent has referred to the judgments reported at (2002) 4 SCC 105 (Bhatia International v. Bulk Trading S.A.) and (2003) 5 SCC 705 (Oil & National Gas Corpn Ltd v. Saw Pipes Ltd) to suggest that the perception that the scope of interfering with an award has been enlarged under Section 34 of the 1996 Act is flawed. The respondent suggests that an arbitral award under the 1996 Act is liable to be set aside if it is opposed to the fundamental policy of Indian law; or it is contrary to justice or morality; or it is patently illegal; or it shocks the conscience of the court; or if it is demonstrably contrary to the terms of the contract which contains the arbitration clause that gives authority to the arbitral tribunal to adjudicate upon the disputes covered thereby. The respondent refers to paragraph 31 of the report in Saw Pipes Ltd to contend that the illegality that would prompt the court to set aside an award must go to the root of the matter and if the illegality is of trivial nature it cannot be held that the award is against public policy.


There are several principles which have to be kept in mind. To start with, proceedings for setting aside an award are not akin to appellate or revisional proceedings, however much the body of recent judicial authorities may have inflated the scope of Section 34 of the 1996 Act. Secondly, it should always be the endeavour of the court receiving a setting aside petition to try and uphold the award of the forum agreed to by the parties in preference to the regular civil court. In other words, the benefit of any doubt should go to the arbitrator and a possible view taken by the arbitrator should not be upset only because another view is preferred by the court. The exercise of construction and the interpretation of an agreement is within the domain of an arbitral tribunal and if the ambit of the arbitration agreement is wide, the conduct of the parties and correspondence exchanged between them may be taken into consideration by the arbitrator in course of construing a contract. Minor errors within the jurisdiction of the arbitral tribunal are glossed over by court and it is only awards that shock the conscience of the court or are manifestly illegal or result in serious miscarriage of justice that are liable for correction in this jurisdiction.


It is the aspect under Section 16 of the 1996 Act that has to be considered first. It is evident that the arbitrator was a trifle annoyed at the challenge to the jurisdiction of the arbitrator being taken at a belated stage. It is true that an oral challenge to the arbitrator?s authority had been made at or shortly after the 34th sitting in the reference. It is also true that Section 16 of the Act does not specify a challenge thereunder to be made by way of a written application; though it is desirable that such a challenge be made in writing. The arbitrator commented on the formal application under Section 16 of the 1996 Act having been filed on the closing day of the reference. But he did not dismiss or disregard the application merely on such ground. The arbitrator construed the claimant?s submission to not imply that the claimant intended to disown the work order of February 8, 2001. The arbitrator understood the claimant?s contention to be that the liquidated damages clause in the work order could not have been validly incorporated with retrospective effect. It is not only a plausible view but, in the circumstances, probably the only possible view. After all, it was the claimant which had sought the reference and lodged a claim. It was highly unlikely that the claimant could have submitted that the work order was of no relevance, however inarticulately the submission may have been recorded in the minutes of the 34th sitting in the reference. The Arati Dhar decision is of no relevance in the present context, particularly since the arbitrator decided on the application under Section 16 of the 1996 Act formally made on the last day. The principle of estoppel that the petitioner seeks to invoke on the strength of the Savita Sapru case cannot have a telling impact on the matter merely because the claimant had submitted that since the letter of intent did not contain the liquidated damages clause and the work order which incorporated such clause was not enforceable. Such submission, however widely it may have been made or recorded, has to be seen in perspective and the arbitrator understood it to be restricted to the applicability and the operation of the liquidated damages clause, and no more. With respect not only can no fault be found with the arbitrator?s approach, it appears to be the only manner in which the relevant submission of the claimant could have been perceived.


On the issue relating to liquidated damages, the first two points made by the petitioner are that the arbitrator found that there were material deviations in the work order which the parties did not contemplate. In a sense, there is substance in what the petitioner urges that if the letter of intent was to incorporate the entirety of the agreement there would be no purpose for a more detailed work order to be executed at a subsequent stage. But the arbitrator had occasion to delve into the circumstances in which the offer was made by the respondent, the correspondence between the parties leading up to the execution of the work order and, in particular, the sub-contractor?s complaints that the execution of the work was hindered by the entirety of the site not being made available. Clause 9.7 of the award, where the arbitrator referred to the deviations from the original agreement and his understanding that the parties never contemplated liquidated damages to be levied, does not spell out the reasons for the two points that have been made there and are now challenged by this petitioner. But a challenge to an award cannot be fashioned on the ground that every finding is not immediately preceded by the reasons in support of the finding. It is evident elsewhere in the award, and particularly from the correspondence referred to at paragraph 9.17 thereof, that when the matter went to and fro between the parties as to the dates of total handing over of the site and final completion of the work, the petitioner herein did not allude to any clause relating to liquidated damages. On the other hand, it is indisputable that the work order contained clauses 14 and 15 that pertained to the time schedule and liquidated damages and the sub-contractor accepted the same without any reservation. It is not a frivolous argument that the petitioner has made in suggesting that upon the sub-contractor having accepted the work order it was precluded from challenging the terms thereof. Equally, it was squarely within the authority of the arbitrator to assess such challenge on the basis of the material before him.


Notwithstanding the petitioner?s assertion that the findings on fact are not based on any evidence, there is enough indication in the several paragraphs expended in the award exclusively to the liquidated damages issue as to what impelled the arbitrator to hold against the petitioner on such count. The court does not approach an award with a toothcomb to link every finding to a strand of reasoning. The papers reveal that the evidence and submission at each sitting were meticulously recorded. In addition to what is expressly referred to in support of a finding there is an overall impression that an adjudicator conducting a trial carries on the strength of what unfolds before him in course of the matter. The onus on a challenger in proceedings under Section 34 of the 1996 Act i

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s much more than to pick out a finding here or a finding there to assail them on the perceived inadequacy of material expressly recorded in support thereof. There is often an element of subjectivity about a decision and the decisionmaking process. It was the arbitrator?s perception here that the petitioner herein took advantage of the deviated terms and that it was unfair to introduce a liquidated damages clause with retrospective effect. But the third and fourth counts of challenge of the petitioner on the liquidated damages issue have to be seen in the general drift of the arbitrator?s reasoning and the overall appreciation of facts. The sixth and seventh grounds involve facts and the arbitrator?s conclusion based on such facts that cannot be re-appreciated at this stage. As to the eighth and ninth grounds, the substance of the petitioner?s challenge is that retrospective liability imposed by law may be bad but that would not prevent a party accepting retrospective liability by contract. The arbitrator referred to Section 56 of the Contract Act in such context and inferred the default on the part of the sub-contractor to have been occasioned by the failure of the petitioner to make it congenial for the sub-contractor to perform its side of the bargain. It was a matter that the arbitrator was empowered to assess and he referred to the relevant provision and invoked the principle recognised therein. The arbitrator?s approach on such score neither shocks the conscience of the court nor is it manifestly illegal or in derogation of the law of the land. Even if the petitioner?s tenth ground of challenge is accepted, the fact that the arbitrator endeavoured to assess as to whether time was of the essence of the contract does not detract from the ultimate decision on the liquidated damages issue. The substance of the arbitrator?s finding on such count was that the subcontractor completed the work within reasonable time, considering the circumstances in which the work was carried out. The twelfth ground of challenge on the arbitrator?s finding that the sub-contractor had reasonably discharged its obligation is not worthy of further discussion since such finding came upon all the pervious material that the arbitrator had cited in the paragraphs preceding paragraph 9.19. The fifth, eleventh and thirteenth counts of challenge on the liquidated damages issue have been covered while noticing the substance of the attack on such grounds. The petitioner?s criticism of the arbitrator awarding compensation for the petitioner?s to failure to pay the running accounts? bill within time, has also been dealt with in course of appreciating the scope of such ground. The petitioner feels hard done by and has carried a most honourable challenge to the award. But there are limitations as to the exercise of the authority to interfere with an award in this jurisdiction. Another day, another adjudicator and the result in the reference may have been altogether different. But notwithstanding the arbitrator having detained himself over incidental issues as to whether time was of the essence of the contract and despite the arbitrator glossing over the fact that the sub-contractor had accepted the work order without any contemporaneous demur, the overall impression that the award conveys is that the petitioner herein was responsible for the delay in the completion of the work and could not, thus, penalise the sub-contractor therefor. That, in the ultimate analysis, is the substance of the award and, apart from such assessment being clearly within the jurisdiction of the arbitrator, it does not appear to be manifestly unjust or shocking to the conscience. The challenge to the award fails. AP No. 705 of 2009 is dismissed. The parties will bear their own costs. Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
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