Arbitration Petition No. 431 of 2007,Arbitration Petition No. 398 of 2007

9th February, 2011

Petitioner Counsel: Mr. SURESH KUMAR, Ms. NILAM JADHAV
Respondent Counsel: Mr. U.S. SAMUDRALA

Cases Cited:
Dwarka Das Vs. State of Madhya Pradesh , 1999(3) SCC 500 [Para 5,9]
Union of India Vs. M/s. Arctic India, 2011(5) ALL MR 186 =Arbitration Petition No.388 of 2007 Dt.21/01/2011 [Para 7]
Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy & Anr., 2007(2) ALL MR 423 (S.C.) =2007 AIR SCW 527 [Para 8]

JUDGMENT

JUDGMENT :- Both these petitions are under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) whereby common award dated 30th May, 2007 has been challenged.

2. Union of India (UOI) (Western Railway) has challenged the award basically for the grant of loss of profit and interest thereon. M/s. R.P. Shah, the original claimant has challenged the award on the ground of awarding the compensation only 5% on loss of profit on the withdrawn work, instead of 10%. This Court by order dated 6th September, 2005 in earlier Arbitration Petitions, between the same parties, arising out of the same contract, quashed and set aside the earlier award, for want of no justification for not granting compensation for loss of profit caused due to not permitting the contractor to complete the balance work after the termination of the contract; and the denial of interest on the awarded amount.

3. The learned Arbitral Tribunal, therefore, reheard original claim Nos. 9 and 16. The basic facts are not in dispute.

4. There is also no dispute that the Arbitral Tribunal on earlier occasion not considered the aspect of loss of profit as the work was terminated. The claimant did not accept further extension of work, for want of change of conditions, that resulted into closure of the work. The claimant's representation dated 27th February, 2001, for the loss of profit was contested. In view termination of the original contract, the parties may or may not agree for continuation/additional work. The Arbitral Tribunal, has considered the issue of loss of profit in the present award. It is difficult to assess exact amount of compensation, in such type of cases, basically when there were no documentary evidence to support the loss. The contract worth of Rs. 89 lacks was withdrawn by the UOI. The withdrawn work was of Rs.1,04,41,953/-; the financial loss as claimed @ 10% on total amount of Rs.12,00,000/-; the Arbitral Tribunal has granted 5%, Rs.5,22,098/as workable compensation only under the first Supplementary Agreement. There is no fix rule or formula to grant loss of profit at 10%, in all circumstances. It depends upon facts and circumstances of the case. It may be more or it may be less. The experienced Arbitral Tribunal, therefore, has exercised discretion based on the material and the nature of contract in question. This amount cannot be stated to be exorbitant or unreasonable or unfair.

5. The Apex Court, in Dwarka Das Vs. State of Madhya Pradesh 1999(3) SCC 500 after considering various provisions of the contract Act, specially Section 73, has observed that the party who, rescinded the agreement, is found guilty of committing the breach of contract, the other party may entitle for compensation/ damages on account of expected profit/ loss of profit. The award therefore, so passed, is well within the frame work of law and the record and definitely not perverse. In my view, considering the reasoning so given, the grant of 5% loss of profit as awarded needs no interference.

6. So far as the interest is concerned, the Arbitral Tribunal after considering the relevant clauses of the contract conditions and the provisions of law, awarded interest of an amount of Rs.9,14,249/-. The Arbitration clauses was invoked on 13th February, 2002. The Arbitral Tribunal has awarded the claim of interest up to 30th May, 2007 based upon the earlier award and the interest was already paid accordingly.

7. The amount of loss of profit has been assessed by the Arbitral Tribunal only by this award. Therefore, entitlement of interest on the compensation so awarded, for the first time, arises now. The observations given by the Arbitral Tribunal after considering the old and the new agreement between the parties and by giving specific findings that clause 64(5) of old GCC for denying interest did not exist and therefore, the contention of the Union of India that the Arbitration proceedings governed by the new/revised clauses, is rejected. The Arbtiral Tribunal, therefore, though the interest was claimed @ 24%, restricted to 8% on the amount of Rs.19,87,497/- for 69 months, is correct. The possible interpretation of clauses so referred and given by the arbitral Tribunal, in the present case also need no interference. I have already observed in Arbitration Petition No. 388 of 2007, Union of India Vs. M/s. Arctic India dated 21/01/2011 : [2011(5) ALL MR 186], based upon the Supreme Court Judgment as under:

"47 "Even if two views are possible on an interpretation of central clause, that would not be justification in interfering with the Award specially when the view so taken is possible/plausible one and there is no perversity." (State of U.P. Vs. Allied Constructions (2003) 7 SCC 396), G. Ramchandra Reddy & Company v. Union of India & anr., (2009) 6 SCC 414., (M/s. Sumitomo Heavy Industries Ltd. Vs. Oil and Natural Gas Commission of India, 2010 Arb.W.L.J. 449 (S.C.)"

8. The future interest @ 12%, in view of the Apex Court Judgment in Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy & Anr., 2007 AIR SCW 527 : [2007(2) ALL MR 423 (S.C.)] is restricted to 9% p.a. till the realization.

9. In view of above reasoning itself, the submissions of the Claimant that 10% loss of profit ought to have been granted, is rejected, as there is no reason and/or specific justification made to grant such amount. The Judgment of the Apex Court Dwarka Das (Supra) is no way supports the case to grant 10% of loss of profit as the Arbitral Tribunal's award so passed is fair and reasonable.

10. In the circumstances, I see there is no reason to interfere with the finding recorded by the Arbitral Tribunal, with this regard. The original claimant is entitled to the amount of Rs. 14,36,347/towards full and final settlement of the contract, as awarded by the Arbitral Tribunal, with future interest @ 9 % p.a. from the date of award till the realization.

11. In view of this, both the petitions are disposed of. The award is modified to the above extent.

Ordered accordingly.