Madras High Court
M/S.Coastal Consolidated Structures … vs M/S.Karaikal Port Private Limited on 14 October, 2024
Author: C.Saravanan
Bench: C.Saravanan
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 27.03.2024
Pronounced On 14.10.2024
CORAM :
THE HONOURABLE MR.JUSTICE C.SARAVANAN
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
and
A.Nos.3167 and 4635 of 2021
and
A.Nos.4217 and 4219 of 2023
Arb.O.P.(Com.Div.) No.132 of 2021
M/s.Coastal Consolidated Structures Pvt. Ltd.,
Registered Office at
60-3-23/A , Coastal Building,
Near I.T.I.Bus Stop,
Ashok Nagar, Vijayawada,
Andhra Pradesh – 520 010. ... Petitioner
Vs.
1.M/s.Karaikal Port Private Limited,
Represented by its Chief Financial Officer,
Mr.B.Venkataraman,
Registered Office at
Kheezhavanjoor Village, T.R.Pattinam,
P.B.No.33, Karaikal – 609 606.
2.M/s.MARG Limited,
Registered Office at
“Marg Axis”, 4/318, Rajiv Gandhi Salai,
Kottivakkam, Chennai – 600 041.
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
Also at:
Sri Sai Subhodhaya Apartments,
Basement No.57/2B, East Coast Road,
Thiruvanmiyur,
Chennai – 600 041. ... Respondents
Arb.O.P.(Com.Div.) No.138 of 2021
M/s.Karaikal Port Private Limited,
Represented by its Chief Financial Officer,
Mr.B.Venkataraman,
Registered Office at
Kheezhavanjoor Village, T.R.Pattinam,
P.B.No.33, Karaikal – 609 606. ... Petitioner
Vs.
1.M/s.Coastal Consolidated Structures Pvt. Ltd.,
Registered Office at
60-3-23/A , Coastal Building,
Near I.T.I.Bus Stop,
Ashok Nagar, Vijayawada,
Andhra Pradesh – 520 010.
2.M/s.MARG Limited,
Registered Office at
“Marg Axis”, 4/318, Rajiv Gandhi Salai,
Kottivakkam, Chennai – 600 041.
Also at:
Sri Sai Subhodhaya Apartments,
Basement No.57/2B, East Coast Road,
Thiruvanmiyur,
Chennai – 600 041. ... Respondents
Arb.O.P.(Com.Div.) No.275 of 2021
M/s.MARG Limited,
Registered Office at
“Marg Axis”, 4/318, Rajiv Gandhi Salai,
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
Kottivakkam, Chennai – 600 041.
Also at:
Sri Sai Subhodhaya Apartments,
Basement No.57/2B, East Coast Road,
Thiruvanmiyur,
Chennai – 600 041. ... Petitioner
Vs.
1.M/s.Coastal Consolidated Structures Pvt. Ltd.,
Registered Office at
60-3-23/A , Coastal Building,
Near I.T.I.Bus Stop,
Ashok Nagar, Vijayawada,
Andhra Pradesh – 520 010.
2.M/s.Karaikal Port Private Limited,
Represented by its Chief Financial Officer,
Mr.B.Venkataraman,
Registered Office at
Kheezhavanjoor Village, T.R.Pattinam,
P.B.No.33, Karaikal – 609 606. ... Respondents
Prayer in Arb.O.P.(Com.Div.) No.132 of 2021: Original Petition is filed under
Section 34 of the Arbitration and Conciliation Act, 1996, read with Rule 3(ii) of
the Madras High Court Arbitration Rules, 2021, to set aside the Award dated
17.02.2021 passed by the Sole Arbitrator insofar as rejecting the claims made
by the petitioner against the respondents to the tune of Rs.23,23,38,231/- except
the amount awarded against the respondents.
Prayer in Arb.O.P.(Com.Div.) No.138 of 2021: Original Petition is filed under
Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the Award
dated 29.12.2020 which was corrected vide corrected Award dated 17.02.2021
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
passed by the Sole Arbitrator insofar as it holds that the petitioner is liable to
pay a sum of Rs.57,33,472/- to the first respondent towards the retention
payment, within 3 months from the date of Award failing which to pay the same
with 18% interest per annum from the date of the Award till the date of payment
and rejects the counter claim of the petitioner.
Prayer in Arb.O.P.(Com.Div.) No.275 of 2021: Original Petition is filed under
Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the Awards
dated 29.12.2020 and 17.02.2021 passed by the Sole Arbitrator in directing the
petitioner to pay a sum of Rs.8,48,97,709/- with a period of 3 months from the
date of award.
Arb.O.P.(Com.Div.) No.132 of 2021
For Petitioner : Mr.K.Elango
For Respondents :
For R1 : Mr.Vinod Kumar
For R2 : Mr.T.Mohan
Senior Counsel
for Mr.R.Sivaraman
Arb.O.P.(Com.Div.) No.138 of 2021
For Petitioner : Mr.Vinod Kumar
For Respondents :
For R1 : Mr.K.Elango
For R2 : Mr.T.Mohan
Senior Counsel
for Mr.R.Sivaraman
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
Arb.O.P.(Com.Div.) No.275 of 2021
For Petitioner : Mr.T.Mohan
Senior Counsel
for Mr.R.Sivaraman
For Respondents :
For R1 : Mr.K.Elango
For R2 : Mr.Vinod Kumar
COMMON ORDER
By this common order, all the three original petitions filed under Section
34 of the Arbitration and Conciliation Act, 1996 are being disposed of.
2. These Original Petitions are directed against Common Award dated
29.12.2020 as corrected vide common order dated 17.02.2021 by the Arbitral
Tribunal. Operative portion of the Impugned Award reads as under:-
In the result an Award is passed,
* Directing the 1st respondent to pay to the
claimant a sum of Rs.57,33,472/- being the
retention amount within 3 months from the date of
Award failing which to pay the same with 18%
interest p.a. from the date of Award till the date of
payment;
# Directing the 2nd respondent to pay to the
claimant a sum of Rs.8,48,97,709/- within 3
months from the date of Award failing which to
pay the same with 18% interest p.a. from the date
of Award till the date of payment.
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021# The 2nd respondent is directed to the
claimant a sum of Rs.7,00,000/- within 3 months
from the date of Award failing which to pay the
same 18% p.a. from the date of Award till date of
payment.
[Note :- *Award Debtor No.1
#Award Debtor No.2]
3. The learned Arbitrator was appointed pursuant to an order dated
18.12.2015 in O.P.No.592 of 2015. The Award Holder had earlier filed a
consolidated claim for a sum of Rs.32,29,69,412/- together with interest against
the respective Award Debtors (the petitioners in Arb.O.P.(Com.Div.) No.138 and
Arb.O.P.(Com.Div.) No.275 of 2021).
4. For the sake of clarity, the protagonist in the respective Original
Petitions are as under:-
TABLE-I
Parties Before Original Petition Name Remarks Status
The Tribunal Nos.
Claimant 592 of 2015 Costal Claimant/Sub- Award
& Consolidated Contractor Holder
132 of 2021 Structures Pvt. Ltd.
and Anr.
1st Respondent 138 of 2021 Karaikal Port Employer Award
Limited Debtor -1
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
Parties Before Original Petition Name Remarks Status
The Tribunal Nos.
2nd Respondent 275 of 2021 MARG Limited Main Contractor Award
Debtor -2
5. As against the total claim of Rs.32,29,69,412/-, the Award Holder has
secured a partial relief for a sum of Rs.9,06,31,181/- [Rs.57,33,472/- +
Rs.8,48,97,709/-] as against Award Debtor No.1 and Award Debtor No.2. Thus,
the challenge in Arb.O.P.(Com.Div.) No.132 of 2021 is for a balance amount of
Rs.23,23,38,231/- (Rs.32,29,69,412/- – Rs.9,06,31,183/-).
6. Respective Award Debtor Nos.1 and 2 are the Petitioners in
Arb.O.P.(Com.Div.) No.138 of 2021 and Arb.O.P.(Com.Div.) No.275 of 2021.
They have challenged the Impugned Award, insofar as it holds that the
respective Award Debtors are liable to pay to the Award Holders viz., the
Petitioner in Arb.O.P.(Com.Div.) No.132 of 2021, a sum of Rs.57,33,472/- and
Rs.8,48,97,709/- respectively.
7. Before the Arbitral Tribunal, Award Debtor No.1 made a counter claim
of Rs.98,98,830/-. It was later reduced to Rs.11,56,473/-. The Award Debtor
No.2 filed a counter claim for Rs.10 Crores in the arbitration proceedings. The
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
counter claims of both the Award Debtors have been rejected by the Arbitral
Tribunal. Before the Arbitral Tribunal, Award Debtor No.1 filed an application
under Section 16 of the Arbitration and Conciliation Act, 1996, inter alia, to
segregate the claims of the Award Holder.
8. The Arbitral Tribunal vide its Order dated 06.08.2018 allowed the
application in favour of the Award Debtor No.1 and allowed the claimant to
segregate the relief claimed against the Award Debtor No.1 and the Award
Debtor No.2. Relevant portion of the Order dated 06.08.2018 of the learned
Arbitrator as under:-
“19. On the face of this observation, it is
very clear that between the Claimant and the 1st
Respondent Port, the claims which are after the
Tripartite Agreement dt.24.08.2012 alone can be
decided through the process of Arbitration by his
Tribunal. However, it is to be noted, such
restriction is only between the Claimant and the
1st Respondent. Therefore, this issue is decided in
favour of the 1st Respondent.
20. As rightly pointed out by the Learned
Counsel for the 1st Respondent, Item No.1 in the
amended Statement of Claimant namely clearance
of pending bills to the tune of Rs.1,02,96,430/-
and claim of interest on the delayed payments
could be a valid claim against the 1st Respondent
post 24.08.2012. The other claims relate to
reduction of work, compensation towards
mobilization charges on the reduced work,
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
compensation for idling of machines and
manpower and escalation claim are objected as
prior to 24.08.2012. However, the Claimant
seemed to have made those claims arising out of
the Tripartite Agreement dt.24.08.2012 and the
onus is on the Claimant to prove the said claims
are post 24.08.2012 and the 1t Respondent is
liable for such claims. Therefore, this Tribunal is
of the view that Statement of Claim has to be
amended to segregate such claims which could be
made against the 1st Respondent and the
Claimant has rightly come up with such
amendment.
21. As far as the claims against the 2nd
Respondent for a sum of Rs.19,92,69,561 /- is
concerned, the 1t claim relates to non-payment of
the agreed sum of Rs.8.49 Crores and interest
thereon. The Claim No.4 and 5 relates to claim of
compensation over idling of machines and
manpower and also some escalation charges.
Again, the onus is on the Claimant to prove the
Claim No.4 and 5 against the 2nd Respondent.
22. Whether the Claimant could club the
claims against the 1st Respondent and the claims
against the Respondent in this Arbitration
proceeding is a question raised by the Learned
Counsel for the 1st Respondent. When the
Claimant has issued notice to the 1st Respondent
at the first instance on 09.06.2014, he made all
the claims against the 1st Respondent. The
Claimant approached the Hon’ble High Court, for
the appointment of an Arbitrator to adjudicate he
disputes between all the three parties to the
Tripartite Agreement. The 1t Respondent was
specific about the claims post 24.08.2012 and
they cannot object the claims prior to 24.08.2012
against the 2nd Respondent. There is no objection
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
raised by the 1st Respondent that the claims
against the other Respondent cannot be When the
Claimant has issued notice to the clubbed in one
Arbitral proceeding. In fact, the 2ndRespondent
who Remained absent in the proceedings before
the High Court has not raised any objection
before this Tribunal At this juncture, it is not
appropriate for this Tribunal to de-link the
disputes between the claimant and the 2nd
Respondent and initiate separate Arbitral
proceedings and that amounts to multiplicity of
proceedings. This Tribunal has power to
adjudicate the disputes between the Claimant and
the 1st Respondent separately and adjudicate the
dispute between the Claimant and the 2nd
Respondent separately and can pass the Award
suitably. Therefore, the amended Statement of
Claim segregating the claims against the 1st
Respondent and the claims against the 2nd
Respondent is a proper course to adhere to the
Orders passed by the Hon’ble High Court wherein
as far as the 1t Respondent is. concerned, the
Claimant can make only those claims arising post
24.08.2012 and nothing prevents the Claimant
from claiming those claims. against the 2nd
Respondent prior to 24.08.2012. In any event, in
the prayer paragraph, the Claimant has to
segregate the claim against the 1st Respondent
and the claim against the 2nd Respondent and
make suitable amendments by fling amended
Statement of Claim. This issue is decided
accordingly.
23) The Tripartite Agreement dt.24.08.2012
envisaged that the 2nd Respondent to pay a sum
of Rs.8.49 Crores by way of postdated cheques.
Since the 2nd Respondent failed to honour the
cheques issued, they are liable to pay the amount
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
and as discussed earlier, the 2nd respondent was
a party not only to the Tripartite Agreement and
Arbitration clause therein but also a Party before
the Hon’ble High Court which constituted this
Tribunal to enter into reference. Though the
Hon’ble High Court observed, that the learned
Counsel for the Claimant and the 1st respondent
agreed that the claim which is post 24.08.2012 be
decided through the process of Arbitration while
appointing this Tribunal, it has directed the Sole
Arbitrator to enter upon the reference and
adjudicate the disputes inter-se the parties which
include the 2nd respondent also. Therefore, this
Tribunal has jurisdiction to decide the dispute
between the claimant and the 2nd respondent
which is also under the Tripartite Agreement i.e.
the payment of Rs.8.49 Crores.”
9. By the aforesaid order, the Arbitral Tribunal also permitted the Award
Holder to file a revised claim. Thus, the Award Holder filed a revised claim
before the Arbitral Tribunal as detailed below:-
TABLE-II
Claim Nature of Claim Against 1st Against 2nd Total Claim
No. Respondent Respondent
1(A) Clearance of Rs.1,02,96,430/- – Rs.9,51,94,139/-
pending Bills
Clearance of - Rs.8,48,97,709/-
Dishonoured
Cheques
1(B) Interest on delayed Rs.31,55,028/- Rs.7,98,39,883/- Rs.8,29,94,911/-
payments
2 Compensation Rs.4,70,48,668/- - Rs.4,70,48,668/-
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
Claim Nature of Claim Against 1st Against 2nd Total Claim
No. Respondent Respondent
over Reduced Part
of work (deprived)
3 Compensation Rs.70,16,161/- – Rs.70,16,161/-
towards
Mobilization
charges on
deprived part of
(saved) work
4 Compensation Rs.3,14,96,944/- Rs.2,89,81,738/- Rs.6,04,78,682/-
over idling
Machines and
Personnel
5 Escalation on part Rs.2,29,70,259/- Rs.8,27,731/- Rs.2,37,97,990/-
of work carried
out after
completion of
original Agreement
Period
6 Construction Rs.17,16,361/- – Rs.17,16,361/-
materials lying at
port Batching
Plant
7 Bill for – Rs.47,22,500/- Rs.47,22,500/-
Transportation of
Stones
TOTAL Rs.12,36,99,851/- Rs.19,92,69,561/- Rs.32,29,69,412/-
10. In view of the above development, the Award Debtor No.2 in turn
filed an application under Section 16 of the Arbitration and Conciliation Act,
1996 before the Arbitral Tribunal on 04.04.2019 and prayed for the following
relief as a preliminary objection:-
a) Adjudicate only those disputes and
claims arising out of the tripartite agreement
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021dated 24.08.2012;
b) Pass an order that the Claimant can
make claims against the Applicant herein arising
post 24.08.2012;
c) Order that this tribunal does not have
the jurisdiction to adjudicate disputes inter se
parties prior to 24.08.2012 as the same falls
outside the jurisdiction of tripartite agreement
dated 24.08.2012 and goes contrary to the order
dated 18.12.2015 in 0.P No. 592 of 2015 passed
by the Hon’ble Madras High Court.
d) pass such further or other orders as this
Hon’ble Tribunal may deems fit and proper in the
circumstances of the case.
11. In the Minutes of Meeting an Order dated 29.04.2019, the Arbitral
Tribunal recorded as follows insofar as the above application filed by the Award
Debtor No.2:-
“Both side present. The application filed by
2nd Respondent to recall CW-1 is allowed and
CW-1- Mr. M. V. Ranga Prasad, is recalled for
further cross examination by the Learned counsel
for the 2d Respondent. CW-1, cross examination
completed. The Claimant side oral evidence
closed. The 1st Respondent has no oral evidence.
The 2nd Respondent has no oral evidence. Oral
evidence completed. The matter stands adjourned
to 13.06.2019 at 3.00 PM at the same venue for
the arguments of the Learned counsel for the
Claimant. As far as the application filed by the
2nd Respondent under section 16 of the Act
praying to the Tribunal to adjudicate only those
disputes and claims arising out of the Tripartite
Agreement dt. 24.08.2012 and not the dispute or
claims prior to the said dates is concerned,
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021orders will be passed in the main claims itself.”
12. After the pleadings were completed the Arbitral Tribunal had framed
10 issues. These 10 issues have been answered by the Arbitral Tribunal as
follows: –
TABLE-III
Issue Issues Relevant Extracts of the Award
Nos.
1 and 2. What is the extent of liability Term No.19 relates to the
and obligations of the 1 arbitration. Therefore, under this
st
respondent / Ms.Karaikal tripartite agreement as on
Port Private Limited in 24.08.2012 it was agreed that the 2 nd
OP.No.138 of 2021 under the respondent was due and liable to
tripartite agreement dated pay a sum of Rs.8.49 Crores which is
24.08.2012? evidenced by issuing of 6 post, dated
cheques. It was specifically admitted
that the 1st respondent namely the
Whether the 1 st respondent/ employer is not in any way liable or
Ms.Karaikal Port Private under any obligation for any dues
Limited had any liability between the parties prior to
prior to the tripartite 24.08.2012. The only obligation
agreement? against the 1st respondent is that the
1st respondent agreed to release and
settle the due payments directly to
the claimant which will be construed
and deemed to constitute a valid
discharge of the contractor namely
the 2nd respondent.
3. Whether the 1 st respondent/ According to the claimant, the total
Ms.Karaikal Port Private amount received for all the bills
Limited had fulfilled their raised by the claimant towards the
obligations and made all the work executed is Rs.13,24,90,404/-
payments due for the works as evidenced by Ex.C6 at Pg.66 of
executed by the claimant Vol-3 and Pg.3 of Vol-10. According
after the tripartite to the respondent, the total amount
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Issue Issues Relevant Extracts of the Award
Nos.
agreement? paid was Rs.13,24,91,196/- as per
Ex.R.1. Therefore, the amount
received by the claimant from the
respondent is admitted with slight
difference. The value of the work
executed is also agreed as
Rs.13,96,41,714/-. This figure
appears in both the statement.
Similarly, on the heads of recoveries,
TDS deducted is agreed as
Rs.27,92,834/-; retention amount is
agreed as Rs.57,33,472/-; work
contract tax deducted is admitted as
Rs.4,32,087/-; other heads at
Rs.80,90,955/-. Therefore, out of
total bill of Rs.13,96,41,714/- if the
recovery of Rs.1,70,49,343/- is
deducted the balance payable will be
Rs.12,25,92,451/- which tallies with
the statement filed by the 1 st
respondent under Ex.R1. However,
according to the claimant there is a
claim for the proportionate of
recovered mobilisation charges to
the tune of Rs.1,44,60,991/-. This
amount is shown as ‘Proportionate
Release of Recovered Mobilisation
Charges’ at Pg.3 of Vol-10. This
amount does not figure in the
statement of account filed by the
respondent under R1.
There is no explanation from the
claimant how they are entitled for
this proportionate release of
recovered mobilisation charges to
the tune of Rs.1,44,60,991/-. The
claimant has also filed a tabulation
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
Issue Issues Relevant Extracts of the Award
Nos.
with regard to claim of pending bills
against the 1st respondent. This
statement which is labelled as
‘Statement after tripartite
agreement’, reflects the bill dated
13.10.2012 to the bill dated
22.01.2014. After the invoice amount
there is an additional column under
the heading ‘Amount to be added to
offset the balance amount (B)’ and
the total is shown as
Rs.1,44,60,991/- which is the
corresponding amount shown as
‘Proportionate release of recovered
mobilisation charge’ at Pg.3 of Vol-
10. Adding this amount the ‘New
Gross Bill’ of Rs.15,41,02,705/-, the
total recoveries is shown as
Rs.1,70,49,350/-, the amount
receivable is shown as
Rs.13,70,53,355/- and the amount
received from 1st respondent is
shown as Rs.9,42,91,093/- and the
amount received from MARG is
shown as Rs.3,81,99,311/- and the
total outstanding is shown as
Rs.45,62,951/-.
In any event, as per the bills
submitted under Vol-2 which reflects
in the statement provided under
Ex.R1 the claim of proportionate
release of mobilisation charges does
not reflect and there is no obligation
by the 1st respondent to pay this
amount. There is no other
correspondence or proof to show
that the 1st respondent had agreed to
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Issue Issues Relevant Extracts of the Award
Nos.
pay the proportionate release of
recovered mobilisation charges at
Rs.1,44,60,991/-. If that amount is
ignored the statement of account
filed by both parties shall reflect the
total value of work executed after
tripartite agreement was
Rs.13,96,41,714/- and the amount
recovered on various heads was
Rs.1,70,49,343/- and the amount
paid was Rs.13,24,90,404/- and
there is no balance payment payable
by the 1st respondent except the
retention amount of Rs.57,33,472/-.
The claimant is entitled for the
return of Rs.57,33,472/-. However,
whether the 1st respondent has paid
excess amount has to be seen while
discussing the counter claim.
4. Whether the 2nd respondent / Admittedly, there were dues payable
M/s.MARG Limited is not by the 2nd respondent to the claimant
liable to make any payment and on the appointed dated the
for the works executed after amount has been quantified.
the tripartite agreement? Therefore, the payment obligation of
the 2nd respondent to the claimant
prior to the tripartite agreement was
admitted, agreed and the amount is
also quantified and for the works to
be executed the obligation is on the
1st respondent to make direct
payment to the claimant and the 2nd
respondent is not obliged to make
any payment. Whether the 2nd
respondent has honoured those
cheques and whether they are liable
to make payment will be dealt with
separately. The issue is decided
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Issue Issues Relevant Extracts of the Award
Nos.
accordingly.
5. Whether the 2nd respondent / By a letter dated 30.10.2012 under
M/s.MARG Limited had Ex.C37 the 2nd respondent
made all the payments due confirmed balance payable after
for the works executed by the considering the post-dated cheques
claimant prior to the as Rs.3,72,99,755/- and also stated
tripartite agreement? that this amount will be released
proportionately with the future
running bills. Therefore, as far as the
2nd respondent is concerned there is
an admitted payable of Rs.8.49
Crores and another amount of
Rs.3,72,99,755/-.
As stated earlier, the claim of
Rs.8,48,97,709/- is an agreed
amount between the parties and the
amount reflects in the tripartite
agreement. Therefore, if any dispute
arises on this agreed amount it shall
be an arbitrable issue under the
tripartite agreement. Though the
liability was prior to the tripartite
agreement covered under the work
orders, the liabilities acknowledged,
agreed and quantified only under the
tripartite agreement. If this amount
is not paid as agreed by the 2 nd
respondent then the claimant has the
right to recover and raise an issue
before this Tribunal. Therefore, as
far as the claim of Rs.8,48,97,709/-
being an agreed amount which is
reflected under the tripartite
agreement is payable by the 2 nd
respondent to the claimant.
6. Whether the claimant is Under issue No.5 this Tribunal has
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Issue Issues Relevant Extracts of the Award
Nos.
entitled for various claims already discussed the various claims
made against the respondents raised by the claimant against the
1 and 2? 2nd respondent. This Tribunal has
held that the claimant is entitled to
claim a sum of Rs.8,48,97,709/-
alone and other claims are not
maintainable against the 2nd
respondent. The issue is decided
accordingly.
7. Whether the claims are As far as the admitted amount of
barred by limitation? Rs.8.49 Crores is concerned, the
cheques were returned as on
15.03.2013, the notice to initiate the
arbitration proceeding was issued
on 07.01.2015 within 3 years under
Ex.C63. Therefore, the claim against
the 2nd respondent is not barred by
limitation. This issue is decided
accordingly.
8. Whether the counter claims Ex.R1 contains the details of each
made by the respondents 1 bill and the amount payable. The
and 2 are maintainable and date of payment and the received
whether the claimant is liable amount is also shown. The received
to pay any counter claim? amount are consolidated and do not
have any relevance to the
corresponding bills. There is no
explanation from the 1st respondent
why an excess amount has been paid
as early as 15th March 2014.
Though the statement of account as
filed by the 1st respondent shows an
excess payment, having admitted a
gross bill made lawful deductions
and arrived at a net balance and
having paid consolidated amounts
on various dates and having failed
to raise a claim at the first instance
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Issue Issues Relevant Extracts of the Award
Nos.
while replying to the notice issued by
the claimant, the 1st respondent is
not entitled for the alleged excess
amount. But on the contrary, the
claimant is entitled for the return of
recovered retention amount of
Rs.57,33,472/-.
The 2nd respondent on his part has
claimed a sum of Rs.10 Crores as
monetary loss for rectifying various
defects committed by the claimant in
execution of the work. What is
applicable to the claimant is equally
applicable to the 2nd respondent as
the receivable by the parties were
decided and finally agreed at
Rs.8.49 Crores payable by the 2nd
respondent. Therefore the 2nd
respondent is not liable for any
counter claim.
9. Whether the claimant is As far as the claims against the 1st
entitled to any interest? respondent this Tribunal has already
found that the claims are not
maintainable but one of the claim
namely payment of outstanding bills
at Rs.8,48,97,709/- against the 2nd
respondent as agreed in the
tripartite agreement is liable to be
paid by the 2nd respondent to the
claimant. There is no agreement
between the parties for payment of
interest prior to or pendente lite.
However, the 2nd respondent is
liable to pay default interest at 18%
p.a if the 2nd respondent fails to pay
within the time stipulated by this
Tribunal.
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Issue Issues Relevant Extracts of the Award
Nos.
10. To what relief the parties are In view of the issues decided upon,
entitled to? the claimant is entitled only for the
retention amount of Rs.57,33,472/-
from the 1st respondent and all other
claims of the claimant against the 1st
respondent are rejected. The
claimant’s claim against the 2nd
respondent in respect of payment of
pending bills to the tune of
Rs.8,48,97,709/- is allowed and
other claims are rejected. The
counter claim of the 1st and the 2nd
respondent are rejected. Since the
2nd respondent failed to pay the
Arbitrator’s fee of Rs.7,00,000/- and
since the claimant has remitted the
amount, the 2nd respondent is liable
to pay to the claimant the said cost
of the Arbitrator.
Submissions of the Award Holder
13. The learned counsel for the Award Holder, the petitioner in
Arb.O.P.(Com.Div.) No.132 of 2021, would submit that the agreed work could
not be completed due to certain lapses on the part of Award Debtors, 1st & 2nd
Respondents [the Petitioner in Arb.O.P.(Com.Div.) No.138 of 2021 and
Arb.O.P.(Com.Div.) No.275 of 2021] during execution under Contractor
Principal Agreements and therefore, a Tripartite Agreement dated 24.08.2012
was executed in modification of the terms and conditions of the both Employer
Principal Agreement between the Award Debtor No.1 and Award Debtor No.2
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and Contractor Principal Agreement between Award Holder and Award Debtor
No.2.
14. The Tripartite Agreement dated 24.08.2012 covers Work Order
No.1203876 dated 31.01.2011 and Work Order No. 1203877 dated
19.02.2011. Under the Tripartite Agreement dated 24.08.2012 the value of work
that was completed up to 23.08.2012 by the Award Holder was arrived at
Rs.39.06 crores. Thus the value of balance work that was to be completed was
Rs.49.68 crores (Rs.50.16 crores in the Written Submissions filed by the Award
Holder).
15. The learned counsel for the Award Holder submitted that after
deducting a sum of Rs.26.84 crores towards payment made and after effecting
other recoveries, the outstanding balance payment for work done prior to
Tripartite Agreement dated 24.08.2012 was only Rs.12.22 crores [Rs.39.06
Crores – Rs.26.84 Crores].
16. The learned counsel for the Award Holder, further submits that the
Award Debtor No.1, witheld a sum of Rs.3.73 Crores out of Rs.12.22 Crores
payments by Award Debtor No.2 to Award Holder. Thus, secured execution of
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balance work valued at Rs.49.68 Crores. Rs.3.73 Croress was meant to be
released proportionately to the Award Holder later.
17. It is submitted that, post-dated cheques for Rs.8.49 Crores [Rs.12.22
Crores – Rs.3.73 Crores] were to be issued by the 2 nd Award Debtor. However,
the Award Debtor No.2 issued only 5 cheques for a total sum of Rs.6.57 Crores
and even these cheques were dishonored by Award Debtor No.2.
18. The Award Debtor No.2 letter enclosed 5 post-dated cheques. The
details of the dishonor of these 5 cheques were marked as Exhibit C- 67. A
Legal notice dated 12.04.2013 was also sent by Award Holder to the Award
Debtor No.2 demanding money towards the dishonored cheques.
19. The Award Holder has filed two cases under Section 138 read with
Section 142 of the Negotiable Instruments Act, 1882 against the Award
Debtor No.2 which are said to be pending before the Chief Metropolitan
Magistrate’s Court in Vijayawada, Andhra Pradesh.
20. The Award Holder thus made a total claim for Rs.19,92,67,561/-
against the Award Debtor No.2. Interest was calculated @ 18% per annum up to
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31.03.2016. The Award Debtor No.2 did not file any proof to show that the
money claimed against it were not due or that they had made the payment to
Award Holder.
21. The Learned Counsel for the Award Holder submitted that the
Arbitral Tribunal failed to apply its mind to the issue and considered the amount
paid by the 2nd Respondent after Tripartite agreement in four spells amounting
to Rs.3,81,99,311/- which was appropriated against the liability of the 2nd
Respondent already incurred prior to the Tripartite Agreement dated
24.08.2012. It I submitted that the said amount was erroneously set off towards
the liability of the Award Debtor No.1. This amount which was paid by the
Award Debtor No.2 was for discharge of its liability towards work completed
prior to the Tripartite Agreement dated 24.08.2012 which was admitted by the
Award Debtor No.2 vide letter dated 30.10.2012.
22. It is submitted that this payment of Rs.3,81,99,311/- by Award
Debtor No.2 was no way connected with the liability of Award Debtor No.1
Tripartite Agreement dated 24.08.2012 and was outside the scope of the
instant Arbitration proceedings, Minutes of Meeting dated 29.04.2019 had
observed that the Arbitral Tribunal will adjudicate those disputes and claims
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arising out of the Tripartite Agreement dated 24.08.2012 and decide finally in
the main claims.
23. It is therefore submitted that the aforesaid amount of
Rs.3,81,99,311/- ought not to have been set-off against Award Debtor No.1’s
liability of Rs.12,25,92,364/- for the work done after Tripartite Agreement
dated 24.08.2012.
24. The Award Holder would further submit that the Arbitral Tribunal
while answering issue Nos.1 and 2 has come to an erroneous conclusion that the
Award Debtor No.2 was liable to pay only a sum of Rs.8.49 crores to the
Petitioner and that the Award Debtor No.1 was not liable to pay for any
amounts to Award Holder for the period prior to Tripartite Agreement dated
24.08.2012 which is the date of the Tripartite Agreement.
25. The Award Holder further submits that the Arbitral Tribunal while
deciding issue No. 4 has given a categorical finding that the amount of Rs.3.73
crores was payable by the 2nd Respondent. However, without any basis, the
Arbitral Tribunal has come to a conclusion that the aforesaid amount of Rs.3.73
crores actually Rs.3,81,99,311/- admitted by the Award Debtor No.2 in
Ex.C.86 has been paid by the Award Debtor No.2 for the Award Debtor No.1.
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The sum of Rs.3,81,99,311/- paid by the Award Debtor No.2 was wrongly
claimed and credit was given for the work executed after the Tripartite
Agreement dated 24.08.2012. The Arbitral Tribunal has given credit to this sum
twice.
26. It is submitted that the money in (Ex.C86) was for the work
completed prior to the work executed before Tripartite Agreement dated
24.08.2012, and said payment is sought to be adjusted as against past dues and
also subsequent dues (Dues before and after 24.08.2012). It is submitted that
this finding of the Arbitral Tribunal is wholly without jurisdiction and is a patent
illegality.
27. It is submitted that the Arbitral Tribunal has failed to see that the
Award Debtors did not make the payments on time. The work orders have
specified time limits for making intermediary payments. Even in the legal notice
issued on behalf of the Award Holder to the Award Debtors on 07.01.2015, the
Award Holder had claimed interest for the delayed payment of money.
28. It is submitted that it is not the case of the Award Debtors that they
had made the intermediary payments on time. Moreover, the contract which
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ought to have been completed in 15 months took more than 2 years for the
defaults committed by the Award Debtors. The Tribunal however failed to apply
its mind while rejecting the interest claimed by the Award Holder for the delayed
intermediary payments.
29. It is further submitted that the Arbitral Tribunal failed to see the
provision for interest in Section 31 (7) (a) of the Arbitration and Conciliation
Act, 1996 which gives right to claim interest from the date of cause of action till
the date of the Award. The Tribunal ought to have awarded interest.
Submission of Award Debtor No.1
30. It is submitted that the case against Award Debtor No.1 is liable to be
dismissed as Award Debtor No.1 was proceeded under the Insolvency and
Bankruptcy Code, 2016 and Scheme for CIRP was sanctioned by the National
Company Law Tribunal (NCLT), Chennai.
31. It is submitted that after the above Original Petitions were filed before
this Court, an insolvency and resolution proceedings were initiated against the
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Award Debtor No.1 (the Petitioner in Arb.O.P.(Com.Div.) No.138 of 2021) by
M/s.Omkara Assets Reconstruction Private Limited under the Insolvency and
Bankruptcy Code, 2016 before the National Company Law Tribunal (NCLT),
Chennai, Division Bench-I in CP.(IB)/85/(CHE) 2022.
32. It is submitted that by the aforesaid order, the petition filed by the
financial creditors namely M/s.Omkara Assets Reconstruction Private Limited
was admitted in terms of the Section 7 of the Insolvency and Bankruptcy
Code, 2016. By an order dated 29.04.2022, the NCLT had appointed Mr.Rajesh
Sureshchandra Sheth, as an Interim Resolution Professional (IRP) as proposed
by financing creditors/petitioner before the NCLT. A Moratorium for the
purpose of Section 14 of the Insolvency and Bankruptcy Code, 2016 thus
came into force from 29.04.2022 and all proceedings were to be suspended.
33. It is submitted that pending the Order dated 29.04.2022 of NCLT in
CP.(IB)/85/(CHE) 2022, these Original Petitions were kept in abeyance.
34. It is submitted that the Insolvency Resolution Professional thereafter
issued a public A announcement under Section 15 of the Insolvency and
Bankruptcy Code, 2016 read with Regulation 6 of the Insolvency and
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Bankruptcy Board of India (Insolvency Resolution Process for Corporate
Persons) Regulations, 2016 on 02.05.2022 and called upon the creditors to file
their claim statement on or before 13.05.2022.
35. It is submitted that though the learned counsel who appears for
Award Debtor No.1 (the petitioner in Arb.O.P.(Com.Div.) No.138 of 2021
namely Karaikal Port Private Limited) claims to have mentioned before the
Court about the above developments only at stage of final hearing and
temporarily withdrawn from the case stating that the case was to be represented
by the said IRP. It appears that the said IRP has later authorized the counsel for
Award Debtor No.1 to represent the interest of the Award Debtor No.1 in these
Original Petitions.
36. It is submitted that since the Award Holder, failed to file a claim
statement, pursuant to the aforesaid advertisement dated 02.05.2022, the claim
if any has to abate.
37. It is submitted that meanwhile, the two resolution plans were
submitted by the M/s.Adani Port, Special Economic Zone, Ahmedabad,
Gujarat and M/s. Vedanta Ltd. The resolution placed by the M/s.Adani Port,
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Special Economic Zone, Ahmedabad was approved by the Committee of
Creditors [COC] which was later approved by the NCLT vide its Order dated
31.03.2023. Thereafter, NCLT terminated the proceedings against the Award
Debtor No.1 (the petitioner in Arb.O.P.(Com.Div.) No.138 of 2021).
38. It is submitted that in the light of the above development, it is the
preliminary objection of the Award Debtor No.1 viz., (Petitioner in
Arb.O.P.(Com.Div.) No.138 of 2021/ 1st Respondent in Arb.O.P.(Com.Div.)
No.132 of 2021) that the Arb.O.P.(Com.Div.) No.132 of 2021 should stand
abated as the Award Holder, (Petitioner in Arb.O.P.(Com.Div.) No.132 of 2021)
failed to file a claim statement before the Interim Resolution Professional
appointed by the NCLT on 29.04.2021.
39. The learned counsel for the Award Debtor No.1, has drawn the
attention to the decision of the Hon’ble Supreme Court reported in Ghanshyam
Mishra and Sons Private Ltd., through the authorised signatory Vs.
Edelweiss Asset Reconstruction Company Ltd., through the Director and
others [(2021) 9 SCC 657].
40. It is submitted that Calcutta High Court while dealing with an
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identical situation where an Award was challenged in A.P.No.550 of 2008
reported in (2021) SCC Online Cal 1601 in the case of Sirpur Paper Mills
Limited Vs. I.K.Merchants Pvt Ltd (formerly Known as I.K.Merchants)
held the claim abated/extinguished as the Award Holder failed to file the claim
petition before the Resolution Professional as was required under the scheme of
the Act.
41. The learned counsel for the Award Debtor No.1 has also relied on an
unreported judgement of the Bombay High Court dated 14.06.2023 in Enviro
Scientific Dredging and Water Projects Pvt. Ltd. Vs. Dighi port Limited
and another, in which while dealing with an appeal against an order of the
Arbitral Tribunal terminating the Arbitral Proceedings under Section 32(2)(c) of
the Insolvency and Bankruptcy Code, 2016 on account of the approval of the
Resolution Plan in respect of the Respondent in arbitration, which had not taken
into account the claim filed by the claimant in arbitration, the High Court
affirmed the order passed by the arbitral tribunal terminating the arbitration
proceedings.
42. The learned counsel for the Award Debtor No.1 submits that it is the
settled position of law that Courts must take cognizance of events/ developments
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subsequent to the institution of proceedings. Reliance was also placed on the
case of Pasupuleti Venkateswarlu Vs. The Motor & General Traders (1975)
1 SCC 770, followed in Om Prakash Gupta Vs. Ranbir B.Goyal (2002) 2
SCC 256, wherein it was held that if a fact arising after the lis has come to court
and has a fundamental impact on the right to relief or the manner of moulding
it, is brought diligently to the notice of the tribunal, it cannot blink at it or be
blind to events which stultify or render inept the decretal remedy.
43. It is further submitted that it is the settled position of law that the
Award Debtor No.1 is entitled to raise additional grounds in peculiar
circumstances of the case under Section 34 of the Insolvency and Bankruptcy
Code, 2016. Reliance was placed in the case of State of Maharashtra Vs.
Hindustan Construction Company Limited, (2010) (4) SCC (518), wherein it
was held that the Courts are entitled to allow a party to amend the application
filed under Section 34 of the Insolvency and Bankruptcy Code, 2016 or to
raise additional grounds in a Section 34 petition, if the peculiar circumstances of
the case so warrant and it is so required in the interest of justice.
44. It is therefore submitted, the relief sought for in Arb.O.P.(Com.Div.)
No.132 of 2021 to set aside the Award dated 29.12.2020 as modified/corrected
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on 17.02.2021 has to be dismissed as the proceedings against Award Debtor
No.1 are deemed to have been extinguished/abated as against the Award Debtor
No.1 in view of the proceeding initiated under the Insolvency and Bankruptcy
Code, 2016.
45. The learned counsel would therefore submit that the aforesaid Award
to the extent that it directs the Award Debtor No.1 to pay a sum of
Rs.57,37,471/- to the Award Holder is to be closed.
46. The learned counsel for the Award Debtor No.1 submits that while
dealing with Issue No.4, the Arbitrator’s Tribunal conclusion that Award Debtor
No.2 has no obligation to pay the Award Holder for the work executed after the
Tripartite Agreement (in short TPA) is contrary to the terms of the TPA. It is
submitted that Clause 1 of the TPA clearly records that payment made by Award
Debtor No.1 to Award Holder, will constitute a valid discharge and satisfaction
of the payment obligation of Award Debtor No.2 towards Award Holder under
the Contractor Principal Agreement.
47. It is therefore submitted that clause 1 of the TPA, which records that
Award Debtor No.2 will be discharged of its obligation to pay Award Holder, on
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Award Debtor No.1 making payment to Award Holder, clearly means that
Award Debtor No.2 was under obligation to pay Award Holder, for the work
executed after the TPA.
48. It is submitted that the Arbitrator has at internal pages 10-12 of the
Impugned Award, while dealing with Issue Nos.1 and 2 clearly recorded at
paras 1 and 5, that payment made by the Award Debtor No.1 to the Award
Holder was to discharge Award Debtor No.2’s obligation to Award Holder.
Having held so, the Arbitrator could not have while dealing with Issue no. 4,
come to a contrary conclusion that after the execution of the TPA, Award Debtor
No.2 has no obligation to pay Award Holder for the work executed after the
TPA. It is submitted that such conclusion being contrary to the TPA is liable to
be set aside under section 34 of the Arbitration and Conciliation Act, 1996.
49. The learned counsel for the Award Debtor No.1 submits that the
Arbitral Tribunal’s conclusion that Award Debtor No.1 was liable to pay
Rs.57,33,472/- to Award Holder is contrary to the terms of the TPA and also
contrary to the Arbitrator’s own finding. It is submitted that under clause 1 of
the TPA, Award Debtor No.1 undertook to pay Award Holder only such
amounts which are certified by Award Debtor No.2 to Award Holder. Under
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clause 7 of the TPA the obligations of Award Debtor No.2 and Award Holder
towards each other under the Contractor Principal Agreement were to continue
to subsist.
50. It is submitted that Clause 5 of the Work Order No.1203876 and
Work Order No.1203877, in respect of which the Tripartite Agreement (TPA)
was made, clearly records that Award Debtor No.2 was entitled to deduct 5% of
the amount as Retention Money. Since, under the TPA, Award Debtor No.1 has
undertaken to pay only amounts which are certified by Award Debtor No.2, any
amount which was deducted by Award Debtor No.2 at the time of certification,
based on the terms of its work order (which in terms of clause 7 of the TPA,
continued to subsist), was not required to be paid by Award Debtor No.1.
Further, in terms of clause 7 of the TPA, the work orders between Award Debtor
No.2 and Award Holder, continued to subsist, it was only Award Debtor No.2
who liable to make any payment for any amounts which it has not certified or
which it has deducted.
51. The learned counsel for the Award Debtor No.1 submits that while
dealing with Issue No.3, the Arbitrator has recorded that the in the statement
filed by Award Holder as well as Award Debtor No.1, Rs.1,70,49,343/- is the
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total deduction, including Rs.57,33,472/- deducted as retention amount. Having
held so, the Arbitrator erred in treating the retention amount of Rs.57,33,472/-
as a separate item, while also holding that no balance amount is payable by
Award Debtor No.1.
52. It is submitted that the Arbitral Tribunal has correctly held that Award
Debtor No.1 was only required to pay the amount which was certified by Award
Debtor No.2 and nothing more and that there was no contractual obligation on
Award Debtor No.1 to pay for the value of the work. Having held so, the
Arbitral Tribunal could not have held Award Debtor No.1 liable for
Rs.57,33,472/-, which even as per the statement filed by Award Holder was part
of the amounts deducted by Award Debtor No.2 and hence not certified.
53. It is submitted that this amount not being part of the amount certified
by Award Debtor No.2, is not required to be paid by Award Debtor No.1 and
can only be a liability of Award Debtor No.2. The Arbitrator correctly concluded
under Issue No.3 that the Award Debtor No.1 had fulfilled its obligation and
made all the payments and that the claims by Award Holder against Award
Debtor No.1 is not maintainable.
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54. The learned counsel for the Award Debtor No.1 further submits that
the Arbitral Tribunal’s conclusion that Award Debtor No.1 is liable to pay
Rs.57,33,472/- is without any reason whatsoever as the Arbitral Tribunal has
held that, in the respective statements filed by Award Holder and Award Debtor
No.1, the value of the work executed after the TPA and the amount paid to
Award Holder, tally, except for a marginal difference.
55. It was further recorded in the said Award that the heads of recoveries
are the same in both the statements, including a sum of Rs.57,33,472/- as
retention amount. However, at paragraph 23 at internal page 21 of the Award,
the Arbitral Tribunal has treated the retention amount of Rs.57,33,472/- as a
separate item and without giving any reason held that Award Holder is entitled
to the said sum.
56. The learned counsel for the Petitioner in Arb.OP.No.138 of 2021
submits that, while dealing with Issue no. 8, which pertained to the counter
claim made by Award Debtor No.1, the Arbitrator reiterated that Award Holder
has admitted total recoveries at Rs.1,70,49,343/- (which includes
Rs.57,33,472/- towards retention amount, as stated above). After recording the
same, without giving any reason, the Arbitrator concluded that Award Holder is
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entitled to Rs.57,33,472/-. Reliance is placed on the judgement of the Supreme
Court in Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail
Corporation Ltd., (2022) 1 SCC 131, para 29, where it has been held that an
award stating no reasons for its findings would make it susceptible to challenge
on the ground patent illegality.
57. The learned counsel for the Award Debtor No.1submits that the
rejection of Award Debtor No.1’s Counter Claim by the Arbitrator is erroneous
and is also contrary to the Arbitral Tribunal’s finding. The Arbitrator completely
failed to take note of the written submission of Award Debtor No.1, where in
Award Debtor No.1 had reduced its counter claim to Rs.11,56,473/-. This was
based on the workings and documents submitted by Award Holder.
58. It is submitted that, while dealing with Issue No.8 relating to counter
claim, the Arbitral Tribunal rejected the counter claim for the sole reason that in
Award Debtor No.1’s letter dated 08.07.2014 issued by Award Debtor No.1 in
response to Award Holder notice dated 09.06.2014 invoking the arbitration
clause, Award Debtor No.1 had not made any claim for excess payment and had
stated that there is no subsisting dispute. It is submitted that, the response of
Award Debtor No.1 to the notice of arbitration issued by Award Holder, that
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there is no dispute, could not have been the basis for rejecting the counter claim.
59. It is submitted that in Award Holder ‘s notice dated 09.06.2014, under
Section 21 of the Act, it was alleged that Award Debtor No.1 was jointly and
severally liable in respect of amounts payable by Award Debtor No.2. It is in
this context and in response to the said notice, that Award Debtor No.1 had
stated that there is no subsisting dispute between Award Debtor No.1 and
Award Holder .
60. It is further submitted that, the Award Debtor No.1 had in its said
letter dated 08.07.2014 stated that the same was without prejudice. The Arbitral
Tribunal failed to note that Award Debtor No.1 had never waived its right to
raise a counter claim. It is well settled that a counter claim is an independent
action, which a party is entitled to make, if the counter party raises a claim.
Hence, the conclusion of the Arbitrator is manifestly illegal and liable to be set
aside.
61. The learned counsel for the Award Debtor No.1 submits that the
Arbitral Tribunal failed to note that Award Holder ‘s claims against Award
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Debtor No.1 were untenable as they included matters which were outside the
scope of the Tripartite Agreement. Under the TPA, Award Debtor No.1 had to
pay Award Holder the amounts certified by Award Debtor No.2 in respect of the
works relating to work order Nos. 1203876 and 1203877, but the Award Holder
while making its claim had included claims relating to other work orders also.
62. It is submitted that Exhibit R1, which has been relied upon by the
Arbitrator, identifies the value of work done by Award Holder after the Tripartite
Agreement, in respect of various work orders, including Work Order
No.1203876 and Work Order No.1203877, which were subject matter of the
Tripartite Agreement. The value of certified amounts for these two relevant work
orders added up to Rs.11,32,12,531/-. Against this Award Debtor No.1 had
admittedly paid a total sum of Rs.11,43,69,004/- as seen from Exhibit C 62 and
the various entries in Exhibit C 65. It is based on these that Award Debtor No.1
had reduced its counter claim to Rs.11,56,473/-. This aspect has been
completely ignored by the Arbitrator. The award having failed to take into
account this crucial aspect suffers from patent illegality.
Submission of Award Debtor No.2
63. The learned counsel for the Award Debtor No.2 submits that the Arbitral
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Tribunal has failed to note that, out of Rs.8,48,97,709/- he has already paid a sum
of Rs.5,82,77,222/- and therefore, the claim, if any, should be confined only to the
balance amount which is Rs.2,66,20,487/- (Rs.8,48,97,709/- – Rs.5,82,77,222/-). It
is therefore submitted that the learned arbitrator committed a grave error in
awarding a sum of Rs.8,48,97,709/- to the Award Holder.
64. It is submitted that despite Order dated 18.12.2015 passed by the
Hon’ble High Court in O.P.No.592 of 2015, Award Holder sought a claim which
was contrary to the order. Award Holder in its claim Statement has stated that as
per the accounts/ledger of the Award Holder, an amount of Rs.8.49 Crores was due
and payable by Award Debtor No.2 to Award Holder as on 24.08.2012.
65. It is submitted that Award Debtor No.2’s liability under the Tripartite
Agreement was crystal clear and has been captured in Clause 3 which states that
Award Debtor No.2 was obligated to make the payments to the Award Holder only
to the tune of Rs. 8,48,97,709/- alone. Even in O.P.No.592 of 2015, Award Holder
had agreed that it would confine the claim before the Arbitral Tribunal only in
respect of claims subsequent to 24.08.2012. Contrary to the above undertaking, the
Award Holder has sought the relief for period prior to 24.08.2012 which is way
beyond the scope of reference made by this Hon’ble Court under Section 11 of the
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Arbitration & Conciliation Act, 1996.
66. Learned counsel for the Award Debtor No.2 has referred to the following
dates on which payment for Rs.5,82,77,222/- was made to Award Holder.
a) In volume 9, page 8, under the tabulation – Statement of Payment
received.
TABLE-IV
Date Amount
10.09.2012 Rs.2,00,77,911/-
b) In volume 3, Page 68 – Under the tabulation the amount received from
Award Debtor No.2.
TABLE-V
Date Amount
18.05.2013 Rs.8,63,981/-
18.05.2013 Rs.1,06,80,266/-
20.06.2013 Rs.1,39,06,517/-
16.07.2013 Rs.1,27,48,547/-
Total Rs.3,81,99,311/-
67. It is submitted that though receipt of this amount has been acknowledged
by Award Holder in its documents, Award Holder has continued to seek a sum of
Rs. 8.49 Crores instead of the balance sum of Rs.2,66,20,487/- only, after
deducting the aforementioned payments made by the Award Debtor No.2.
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68. It is submitted that Sections 59 to 61 of the Indian Contract Act, 1872
would categorically reveal that if a claim has been made by a Debtor, with respect
to a particular payment, then the amount should be appropriated towards the dues
for which it has been paid. In the present case, Award Debtor No.2 has clearly
claimed that the entire amount has been paid towards the payments pursuant to the
liability on entering the Tripartite Agreement. Award Holder has not even claimed
much less proved that it appropriated the payments made to another debt. Such
being the case, the Learned Arbitrator ought not to have passed an award stating
that the amount payable by Award Debtor No.2 is Rs.8.49 Crores without any
appreciation of facts brought before him.
69. It is submitted that further to substantiate the same, the examination of
CW1 and CW2 would make it clear that instead of seeking the balance sum, Award
Holder has sought for Rs. 8.49 crores which was impermissible, both under law
and in equity.
70. It is submitted that the Arbitral Tribunal at any event ought to have taken
note of above payments made. This admission is of significance because, Award
Debtor No.2 has made payments directly to Award Holder. However, Award
Holder has not taken the same into account and such payments, it is submitted,
assuming without admitting, if at all, the Award Holder, can restrict the claim, only
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to the actual amount payable. It is submitted that there is no discussion on the same
in the impugned Award.
71. It is further submitted that it would not be out of place to mention that it
has been held by courts that the Arbitral Tribunal is duty bound to pass an award
with due application of mind and after affording adequate reasons. Reliance was
placed on the decision of the Hon’ble Calcutta High Court in the case of
Soorajmull Nagarmull Vs. Jute Corporation of India Ltd., (2001) SCC
OnLine Cal 382.
72. On behalf of the Award Debtor No.2, it was further submitted that the
award has been passed beyond the period after the mandate of the learned
Arbitrator expired. It is submitted that on the date of reference, Section 29 A of the
Arbitration and Conciliation Act, 1996 had been amended and an award had to
be passed within 12 months.
73. It is therefore submitted that the impugned Award ought to have been
passed within a period of 12 months of the date of reference as per the provision as
it stood then. It is further submitted that, subsequent extension of the mandate by
orders of the court after the mandate had expired or further extension due to
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outbreak of Covid-19 Pandemic and the decision of the Hon’ble Supreme Court
would not cure the irregularity as no order was obtained for extending the mandate
of the learned Arbitrator after the expiry of 12 months as per the provisions of
Section 29A of the Arbitration and Conciliation Act, 1996.
Discussion on merits
74. I have considered the arguments advanced by the learned counsel for
the Award Holder, Award Debtor No.1 and learned Senior Counsel for the
Award Debtor No.2. I have also perused the Impugned Order passed by the
Arbitral Tribunal on 29.12.2020 as corrected vide Order dated 17.02.2021 and
the pleadings and the documents.
75. Although this Court is not sitting as an Appellate Court under Section
34 of the Arbitration and Conciliation Act, 1996 against an Award impugned
before it and is not expected to re-appreciate the evidence, however to arrive at a
conclusion as to whether the Award Holder had made out a case or whether the
respective Award Debtors had made out a case, Court also has to examine all
the exhibits including the pleadings and the orders that came to be passed both
by the Arbitral Tribunal and by this Court during the long course of litigation
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between the parties hereto starting with filing of O.P.No.592 of 2015 by the
Award Holder for appointment of an Arbitrator.
76. Impugned Award records that an Order was passed on 31.12.2015 in
O.P.No.592 of 2015, whereby the learned Arbitrator was appointed as the Sole
Arbitrator. However, the pleadings and documents indicate that the said Order
was passed on 18.12.2015, which stands confirmed in Order dated 17.12.2019
in A.No.9670 of 2019 in O.P.No.592 of 2015 extending the mandate of the
Arbitral Tribunal. The Impugned Award also records that the first and the
preliminary meeting of the Arbitral Tribunal was held on 23.02.2016.
77. By the time first and the preliminary meeting of the Arbitral Tribunal
was held on 23.02.2016, Section 29A of the Arbitration and Conciliation Act,
1996 had been inserted by Act 3 of 2016 with retrospective effect from
23.10.2015.
78. As per Explanation to Section 29A of the Arbitration and Conciliation
Act, 1996, as it stood then, the Arbitral Tribunal is deemed to have entered upon
reference on the date on which the Arbitrator or all the Arbitrators as the case
may be have received the notice in writing all their appointment. Thus, it would
be in fact prior to 23.02.2016, the said date being the first date of sitting before
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the Arbitral Tribunal.
79. As per Section 29A(1) of the Arbitration and Conciliation Act, 1996,
inserted by Act 3 of 2016 with retrospective effect from 23.10.2015, the
impugned Award ought to have been passed within 12 months from the date of
reference. The records also reveal that the pleadings were completed on
23.12.2017 long after the period of limitation prescribed for making an award
had expired. Pursuant to Order dated 06.08.2018 of the Arbitral Tribunal,
amended claim was filed on 20.08.2018 by the Award Holder splitting the
consolidated claim of Rs.32,29,69,412/- against Award Debtor No.1 and Award
Debtor No.2 into Rs.12,36,99,851/- and Rs.19,92,69,561/- respectively as
mentioned in Table II of this Order.
80. Even when the amended claim dated 20.08.2018 was filed before the
Arbitral Tribunal, the limitation for passing the Award in terms of Section 29A
of the Arbitration and Conciliation Act, 1996, as inserted for the first time vide
Section 15 of the Act 3 of 2016 with retrospective effect from 23.10.2015 had
expired.
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81. However, unmindful of the same, all the parties including the Arbitral
Tribunal continued with the arbitral proceedings without expressly extending
the mandate as is contemplated under Sub-Section (3) to Section 29A of the
Arbitration and Conciliation Act, 1996 as inserted vide Section 15 of the Act 3
of 2016 with retrospective effect from 23.10.2015.
82. Since, the Arbitral Tribunal had also failed to note the same and
continued with the arbitral proceedings, it has to be therefore construed that
there was an implied consent to the Arbitral Tribunal to continue with the
Arbitral Proceedings by all the parties.
83. During the interregnum, Section 29A of the Arbitration and
Conciliation Act, 1996 was also amended vide Section 6A(1) of the Act 33 of
2019 with effect from 30.08.2019.
84. As per the amended Section 29A of the Arbitration and Conciliation
Act, 1996 with effect from 30.09.2019, an Award had to be made within a
period of 12 months from the date of completion of the pleadings under Section
23(4) of the Arbitration and Conciliation Act, 1996.
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85. Earlier the outer limit for passing the Award was 12 months from the
date of Arbitral Tribunal entering upon reference. After the Arbitral Tribunal
allowed the Award Holder to file a revised claim vide Order dated 06.08.2018, it
has to be construed that the delay in making of the Award, if any, was condoned
by all the parties as the trials commenced after the revised claim was filed
20.08.2018.
86. Thereafter, the Award Holder also filed A.No.9670 of 2019 in
O.P.No.592 of 2015 for extending the mandate of the Arbitral Tribunal. The
Court passed its Order on 17.12.2019 in A.No.9670 of 2019 in O.P.No.592 of
2015. Relevant portion of the said Order dated 17.12.2019 is extracted as
follows:-
“3. There is no disputation or contestation
between the three learned counsel that the
arbitral proceedings by the sole Arbitrator is
underway and that there was already one
extension of time by six months (Post 12+6=18
months) vide order dated 21.02.2019 made in
A.No.1425 of 2019.
4. Notwithstanding the consensus amongst
the three learned counsel, for the sake of stating
the correct legal position, this Court deems it
appropriate to make it clear that this petition is
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statutorily prescribed in Section 29A. A perusal of
the affidavit filed in support of the instant
application, more particularly Paragraph 3,
reveals that 23.02.2016 is the date on which
Hon’ble sole Arbitrator held a preliminary
meeting. This is plainly incorrect owing to the
language in which Section 29A(1) is couched.
Section 29A (1) as it stood prior to 30.08.2019
makes it clear that the reckoning date is the date
on which the Arbitral Tribunal enters upon
reference. The expression ‘arbitral tribunal
entered upon reference’ has also been explained
by way of an explanation to sub-section (1) of
Section 29A and the explanation makes it clear
that the date on which the arbitrator receives in
writing notice of his appointment will be the
reckoning date. In the instant case, the date on
which the Hon’ble Arbitrator received the order
dated 18.12.2015 made by this Court in
O.P.No.592 of 2015 is the reckoning date. That
date is not readily available with all the three
learned counsel, but there is no disputation that
18 months, even if computed from that date has
elapsed and six months extension also has
elapsed necessitating the instant application. It is
submitted that arbitration was elaborate and this
reason for seeking extension is articulated in the
affidavit by inter alia adverting to intervening
collateral proceedings.
5. Having perused the affidavit filed in
support of the instant application, having heard
all three learned counsel and having been
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satisfied that there is a case for extension of time
for Arbitral Tribunal to make the award, instant
application is ordered extending the time upto
30.06.2020 for the Hon’ble Arbitrator to make
award”
87. The above Order dated 17.12.2019 was also not challenged before the
Division Bench of this Court by the Award Holder No.2. Further, not only the
Award Debtor No.2 but also Award Debtor No.1 and Award Holder had
acquiesced into arbitral Proceedings, unmindful of the amendments brought to
the Arbitration and Conciliation Act, 1996 vide Section 6A(1) of the Act 33 of
2019 with effect from 30.08.2019. Thus, the impugned Award was to be passed
later by 30.06.2020. However, lockdown was imposed with effect 24.03.2020
due to outbreak of Covid-19 pandemic.
88. The Hon’ble Supreme Court suo moto came to the rescue of all
concerned by passing its Order in Writ Petition No.(Civil No.3 of 2020) first on
23.03.2020. The said Order was extended from time to time. Thus, the time for
passing the Award stood extended by a series of Orders of the Hon’ble Supreme
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Court. The last Order was passed on 10.01.2022 by the Ho’ble Supreme Court,
which extended the time up to 28.02.2022.
89. The Arbitral Tribunal had also specifically observed at Para 4 in
Pages 9-10 (Corrected Award) that by an Order dated 10.07.2020, the Hon’ble
Supreme Court had specifically extended the time limit for passing an Arbitral
Award under Section 29(A). Thereafter, the Impugned Award was passed on
29.12.2020. The said Award was corrected under Section 33(3) of the
Arbitration and Conciliation Act, 1996 on 17.02.2021.
90. Thus, it is not open for Award Debtor No.2 to state that the Arbitral
Tribunal has passed the Award long after its mandate had expired in accordance
with Section 29A of the Arbitration and Conciliation Act, 1996 as it stood.
91. It has to be construed that the proceedings before the Arbitral
Tribunal were regular and within the four corners of law and therefore, to that
extent the challenge to the Impugned Award by the Award Debtor No.2 viz.,
Petitioner in Arb.O.P.(Com.Div.) No.275 of 2021 is liable to be rejected.
Therefore, the preliminary objection of the Award Debtor No.2 to the Impugned
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Award is overruled.
92. I shall now deal with the merits and the preliminary objection of the
Award Debtor No.1 viz., Petitioner in Arb.O.P.(Com.Div.) No.138 of 2021.
93. As mentioned above, the claim of the Award Holder before the
Arbitral Tribunal was bifurcated into two separate claims for a sum of
Rs.12,36,99,851/- against Award Debtor No.1 and Rs.19,92,69,561/- against
Award Debtor No.2, for a total claim of Rs.32,29,69,412/- pursuant to the
Order dated 06.08.2018 of the Arbitral Tribunal.
94. The claim of the Award Holder under the revised claim itself on the
principal amount was for a sum of Rs.9,51,41,139/- against Award Debtors
No.1 and 2 are detailed below:-
TABLE-VI
Claim Nature of Claim Against 1st Against 2nd Total Claim
No. Respondent Respondent
1(A) Clearance of pending
Bills Rs.1,02,96,430/- –
Clearance of Rs.9,51,94,139/-
Dishonoured - Rs.8,48,97,709/-
Cheques
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95. Rest of the claims are towards interest on delayed payments,
compensation over reduced part of work, compensation towards mobilization
charges on deprived part of work etc.
96. As per Tripartite Agreement for the work already completed by
Award Holder, Award Debtor No.2 agreed to pay the following amounts:-
TABLE-VII
Month August October November December January February March April
2012 2012 2012 2012 2013 2013 2013 2013
Amount 1.31 1.31 1.31 1.31 1.33 1.92
payable
by PDCs
(Rs.Cr)
Tranche 2.00 Corresponding to the progress of work and value of work done;
payments Basis terms of the Contractor Principal Agreement
payable
on
invoicing
97. Table VII contemplates a payment of Rs.2,00,00,000/- to be paid as
tranche payment, on invoicing by the Award Holder. On 10.09.2012, a sum of
Rs.2,00,77,911/- was also transferred to the Award Holder by Award Debtor
No.2.
98. Notwithstanding the aforesaid amount of Rs. 2,00,77,911/-, the Table
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VII also specifies payment of a sum of Rs.8.49 Crores
(1.31+1.31+1.31+1.31+1.33+1.92) as contemplated by Clause 3 of the
Tripartite Agreement dated 24.08.2012.
99. It is an admitted fact that the Award Debtor No.2 has also issued the
following five post dated cheques under Ex.66 Covering Letter dated
06.09.2012 drawn on Union Bank of India to the Award Holder.
TABLE-VIII
Sl.No. Date Cheque No. Name of Bank Amount (In Rs.)
1 15.11.2012 167911 United Bank of 13,100,000
India
2 15.12.2012 167912 United Bank of 13,100,000
India
3 15.01.2013 167913 United Bank of 13,100,100
India
4 15.02.2013 167914 United Bank of 13,100,000
India
5 15.03.2013 167915 United Bank of 13,300,000
India
100. These cheques were dishonored by Award Debtor No.2. There is no
dispute that no payments have been made on these dishonored cheques from
Award Debtor No.2 to Award Holder.
101. Independent of the above, a sum of Rs.3,81,99,311/- as mentioned
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in Table No.V were paid on various dates by the Award Debtor No.2 to Award
Holder. The amount of Rs.3,81,99,311/- was the amount withheld by the Award
Debtor No.1 and was paid by the Award Debtor No.2. It matches with the total
amount that was due as on the date of Tripartite Agreement dated 24.08.2012
from the Award Debtor No.2 in terms of Ex C37/86 dated 30.10.2012. In Ex
C37/86 dated 30.10.2012, the Award Debtor No.2 had categorically admitted
that the balance payment after considering the post dated cheques was
Rs.3,72,99,775/-. Payment of Rs.3,81,99,311/- were made thereafter on various
dates as in Table V.
102. Attempt of the Award Debtor No.2 before this Court that it has paid
a sum of Rs.5,82,77,222/- (Rs.2,00,77,911/- + Rs.3,81,99,311/-) thus has to
fail. The amount of Rs.3,81,99,311/- was paid by Award Debtor No.2 to the
Award Holder towards the amount withheld from the billed work up to the date
of signing of the Tripartite Agreement dated 24.08.2012. However, the
contention of the Award Debtor No.2 that there is no discussion in the
Impugned Award regarding the payment of Rs.2,00,77,911/- to the Award
Holder for a sum of Rs.2,00,77,911/-, is valid.
103. That apart, at Para 18 in Page 20 of the Impugned Award (Corrected
Award), the Arbitral Tribunal had computed the amount receivable as
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Rs.13,70,53,355/- (‘Due amount’ under Ex C-87) from Award Debtor No.1.
The Arbitral Tribunal has proceeded to adjust an amount of Rs.9,42,91,093/-
paid by Award Debtor No.1 to Award Holder. The Arbitral Tribunal has further
adjusted a sum of Rs.3,81,99,311/- paid by the Award Debtor No.2, to arrive at
the balance payable to the Award Holder. Relevant portion of Para 18 in Page
20 of the impugned Award (Corrected Award) reads as under:-
18.…………The claimant has also filed a
tabulation with regard to claim of pending bills
against the 1s respondent. This statement which is
labelled as ‘Statement after tripartite agreement’,
reflects the bill dated 13.10.2012 to the bill dated
22.01.2014. After the invoice amount there is an
additional column under the heading ‘Amount to
be added to offset the balance amount(B)’ and the
total is shown as Rs. 1,44,60,991/- which is the
corresponding amount shown as ‘Proportionate
release of recovered mobilisation charge’ at Pg.3
of Vol-10. Adding this amount the ‘New Gross Bill’
of Rs. 15,41,02,705/-, the total recoveries is
shown as Rs. 1,70,49,350/-, the amount
receivable is shown as Rs.13,70,53,355/- and the
amount received from 1st respondent is shown as
Rs.9,42,91,093/- and the amount received from
MARG is shown as Rs.3,81,99,311/- and the total
outstanding is shown as Rs.45,62,951/-. In the
bottom of the statement the total outstanding is
shown as Rs. 45,62,951+Rs.57,33,472/-, which is
the retention amount and the total
Rs.1,02,96,423/-. This amount is claimed under
Claim No.1 as Clearance of pending bills against
the 1st respondent…………..
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104. If the total adjustment of Rs.13,24,90,404/- (Rs.9,42,91,093/- +
Rs.3,81,99,311/-) was correct, the balance to be paid by the Award Debtor No.1
towards the Award Holder should have been restricted to only Rs.45,62,951/-.
However, the Arbitral Tribunal has awarded a sum of Rs.57,33,472/-. The
explanation in Paragraph 18 at Page 20 is completely misleading and fallacious.
The Arbitral Tribunal has fallen to the trap of Confirmation Bias at Para 18 in
page 20 of the Award.
105. Thus, a sum of Rs.3,81,99,311/- paid by the Award Debtor No.2 to
Award Holder which was paid outside of the scope of Tripartite Agreement
dated 24.08.2012 has been set off in the Impugned Award against the amount
due from the Award Debtor No.1 to the Award Holder by the Arbitral Tribunal
in the Impugned Award.
106. Thus, there is no consistency in the impugned Award and the
Impugned Award passed by the Arbitral Tribunal is unintelligible. The
impugned Award has also failed to discuss the payment of Rs.2,00,77,911/-
received by the Award Holder from the Award Debtor No.2. The impugned
Award appears to have wrongly set off the aforesaid amount of Rs.3,81,99,311/-
paid by the Award Debtor No.2 to Award Holder outside the Tripartite
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Agreement dated 24.08.2012 against the liability of Award Debtor No.1. The
aforesaid amount of Rs.3,81,99,311/- was due to Award Holder from Award
Debtor No.2 under Contract Principal Agreement signed between them and was
outside the Tripartite Agreement dated 24.08.2012.
107. That apart, the Arbitral Tribunal in response to Section 16
Application filed by the Award debtor No.2 in its order dated 29.04.2019 had
stated that Orders will be passed in the main claims itself as to whether it will
decide claims arising out of the Tripartite Agreement date 24.08.2012 and/or
claims prior to the said date. However, it has not given a clear finding on merits
in the Impugned Award on this issue.
108. These aspects ought to have been properly discussed chronologically
in the Impugned Award. Therefore, the conclusion in the Impugned Award that a
sum of Rs.3,81,99,311/- paid by the Award Debtor No.2 towards the liability of
Award Debtor No.1 appears to be an incorrect and an improbable conclusion on
facts and this would amount to patent illegality in terms of the decision of the
Hon’ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd
Vs. National Highway Authority of India (NHAI) AIR 2019 SC 5041.
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109. Since, the Arbitral Tribunal has also failed to note that the Award
Debtor No.2 had also paid a sum of Rs.2,00,77,911/- on 10.09.2012
immediately after Tripartite Agreement was signed on 24.08.2012, which
ought to have been discussed in the Impugned Award, the challenge to the
Impugned Award by the Award Debtor No.2 is meritorious to that extent. Thus,
Arb.O.P.(Com.Div.) No.275 of 2021 qua Award Holder, is liable to be allowed
to that extent.
110. The Arbitral Tribunal had dismissed Claim 1(B) of the Award Holder
in Table II, against the Award Debtor No.2, towards interest on delayed
payments for lack of stipulation to that effect under the terms of the Tripartite
Agreement dated 24.08.2012. However, in terms of section 31(7) of the
Arbitration and Conciliation Act, 1996 only in absence of a contract to the
contrary, the Arbitral Tribunal would not be inhibited from granting interest on
delayed payments.
111. The Arbitral Tribunal had also dismissed claims 4, 5 & 7 of the
Award Holder in Table II, against the Award Debtor No.2, towards
compensation under the relevant heads. However, in terms of Section 73 of the
Indian Contract Act, 1872, the Arbitral Tribunal is well within its powers to
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grant compensation for any loss or damage which are neither remote nor
indirect.
112. These aspects have not been considered by the Arbitral Tribunal.
Therefore, to that extent, the Impugned Award of the Arbitral Tribunal has to be
held in conflict with the fundamental policy of Indian law and liable to be set
aside. Thus, Arb.O.P.(Com.Div.) No.132 of 2021 qua Award Debtor No.2 is
liable to be allowed to that extent.
113. All though, the Award Debtor No.1 has been directed to pay a sum
of Rs.57,33,472/-, the Court is of the view that in the light of the subsequent
development under the Insolvency and Bankruptcy Code, 2016 before the
NCLT, content of which has been mentioned above, the claim of the Award
Holder against Award Debtor No.1 has to fail, in terms of the decision of the
Hon’ble Supreme Court in Ghanshyam Mishra and Sons Private Ltd through
the authorised signatory Vs. Edelweiss Asset Reconstruction Company Ltd
through the Director and others, (2021) 9 SCC 657.
114. The Hon’ble Supreme Court in Ghanshyam Mishra (supra) held
that on the date of approval of resolution plan by the adjudicating authority, all
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such claims, which are not a part of resolution plan, shall stand extinguished
and no person will be entitled to initiate or continue any proceedings in respect
to a claim, which is not part of the resolution plan. Relevant part of the decision
of the Hon’ble Supreme Court of India reads as under:-
“61. It could thus be seen that one of the
dominant objects of the I&B Code is to see to it
that an attempt has to be made to revive the
corporate debtor and make it a running concern.
For that, a resolution applicant has to prepare a
resolution plan on the basis of the information
memorandum. The information memorandum,
which is required to be prepared in accordance
with Section 29 of the I&B Code along with
Regulation 36 of the Regulations, is required to
contain various details, which have been gathered
by RP after receipt of various claims in response
to the statutorily mandated public notice. The
resolution plan is required to provide for the
payment of insolvency resolution process costs,
management of the affairs of the corporate debtor
after approval of the resolution plan; the
implementation and supervision of the resolution
plan. It is only after the adjudicating authority
satisfies itself that the plan as approved by CoC
with the requisite voting share of financial
creditors meets the requirement as referred to in
sub-section (2) of Section 30, grants its approval
to it. It is only thereafter that the said plan is
binding on the corporate debtor as well as its
employees, members, creditors, guarantors andhttps://www.mhc.tn.gov.in/judis
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Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021other stakeholders involved in the resolution
plan. The moratorium order passed by the
adjudicating authority under Section 14 shall
cease to operate once the adjudicating authority
approves the resolution plan. The scheme of the
I&B Code therefore is, to make an attempt, by
divesting the erstwhile management of its powers
and vesting it in a professional agency to
continue the business of the corporate debtor as a
going concern until a resolution plan is drawn up.
Once the resolution plan is approved, the
management is handed over under the plan to
the successful applicant so that the corporate
debtor is able to pay back its debts and get back
on its feet.
67. Perusal of Section 29 of the I&B Code
read with Regulation 36 of the Regulations would
reveal that it requires RP to prepare an
information memorandum containing various
details of the corporate debtor so that the
resolution applicant submitting a plan is aware of
the assets and liabilities of the corporate debtor,
including the details about the creditors and the
amounts claimed by them. It is also required to
contain the details of guarantees that have been
given in relation to the debts of the corporate
debtor by other persons. The details with regard
to all material litigation and an ongoing
investigation or proceeding initiated by the
Government and statutory authorities are also
required to be contained in the information
memorandum. So also the details regarding the
number of workers and employees and liabilities
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Page No.63 of 69
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021of the corporate debtor towards them are
required to be contained in the information
memorandum.
68. All these details are required to be
contained in the information memorandum so that
the resolution applicant is aware as to what are
the liabilities that he may have to face and
provide for a plan, which apart from satisfying a
part of such liabilities would also ensure, that the
corporate debtor is revived and made a running
establishment. The legislative intent of making
the resolution plan binding on all the
stakeholders after it gets the seal of approval
from the adjudicating authority upon its
satisfaction, that the resolution plan approved by
CoC meets the requirement as referred to in sub-
section (2) of Section 30 is that after the
approval of the resolution plan, no surprise
claims should be flung on the successful
resolution applicant. The dominant purpose is
that he should start with fresh slate on the basis
of the resolution plan approved.
90. The law laid down in Zile Singh [Zile
Singh v. State of Haryana, (2004) 8 SCC 1] has
been subsequently followed in various judgments
of this Court, including in CIT v. Gold Coin
Health Food (P) Ltd. [CIT v. Gold Coin Health
Food (P) Ltd., (2008) 9 SCC 622] (three-Judge
Bench).
102.1. That once a resolution plan is duly
approved by the adjudicating authority under
sub-section (1) of Section 31, the claims as
provided in the resolution plan shall stand frozen
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Page No.64 of 69
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
and will be binding on the corporate debtor and
its employees, members, creditors, including the
Central Government, any State Government or
any local authority, guarantors and other
stakeholders. On the date of approval of
resolution plan by the adjudicating authority, all
such claims, which are not a part of resolution
plan, shall stand extinguished and no person will
be entitled to initiate or continue any
proceedings in respect to a claim, which is not
part of the resolution plan.”
115. In fact, earlier also, the Hon’ble Supreme Court in Committee of
Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta and Ors.,
(2020) 8 SCC 531, held that a successful resolution applicant cannot suddenly
be faced with undecided claims after the resolution plan submitted by him has
been accepted as this would amount to a hydra head popping up which would
throw into uncertainty amounts payable by a perspective resolution applicant
who would successfully take over the business of the corporate debtor. Relevant
portion of the decision of the Hon’ble Supreme Court reads as under:-
“107. For the same reason, the impugned
NCLAT judgment in holding that a claim that may
exist apart from those decided on merits by the
resolution professional and by the Adjudicating
Authority/Appellate Tribunal can now be decided
by an appropriate forum in terms of Section 60https://www.mhc.tn.gov.in/judis
Page No.65 of 69
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021(6) of the Code, also militates against the
rationale of Section 31 of the Code. A successful
resolution applicant cannot suddenly be faced
with “undecided” claims after the resolution
plan submitted by him has been accepted as this
would amount to a hydra head popping up which
would throw into uncertainty amounts payable by
a prospective resolution applicant who would
successfully take over the business of the
corporate debtor. All claims must be submitted to
and decided by the resolution professional so that
a prospective resolution applicant knows exactly
what has to be paid in order that it may then take
over and run the business of the corporate debtor.
This the successful resolution applicant does on a
fresh slate, as has been pointed out by us
hereinabove. For these reasons, NCLAT judgment
must also be set aside on this count.”
116. The Calcutta High Court in the case of Sirpur Paper Mills Limited
Vs. I.K.Merchants Pvt Ltd (formerly Known as I.K.Merchants) has also
followed the above views of the Hon’ble Supreme Court of India.
117. The Arbitral Tribunal although may have restricted the Award
amount to Rs.57,33,472/- against Award Holder No.1, instead of
Rs.1,02,96,430/-, the claims are not enforceable against Award Holder No.1, in
the light of the provisions of the Insolvency and Bankruptcy Code, 2016 and the
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Page No.66 of 69
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
interpretation of Hon’ble Supreme Court in Ghanshyam Mishra (supra) and
Essar Steel India Limited (supra). Thus, Arb.O.P.(Com.Div.) No.132 of 2021
qua Award Debtor No.1 is liable to be dismissed to that extent.
118. Thus, the conclusions in the Impugned Award are both incorrect and
improbable on the facts of the case, and have therefore resulted in patent
illegality susceptible to a valid challenge by all the parties hereto.
119. In the result:-
i. Arb.O.P.(Com.Div.) No.132 of 2021 is allowed to the
extent it ignores various amounts claimed by the claimant
against Award Debtor No.2 in Claim Nos.1(A), 4, 5 & 7 in
Table II.
ii. Arb.O.P.(Com.Div.) No.275 of 2021 is allowed as the
Impugned Award suffers from patent illegality insofar as it
fails to discuss the fallout of the Order dated 29.04.2019
under Section 16 application and the payment of
Rs.2,00,77,911/- made by the Award Debtor No.2 to the
Award Holder.
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Page No.67 of 69
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021iii. Arb.O.P.(Com.Div.) No.138 of 2021 is allowed in the
light of the subsequent development under the provisions of
the Insolvency and Bankruptcy Code, 2016 and in the light of
the judgments of the Hon’ble Supreme Court in Essar Steel
India Limited (Supra) and Ghanshyam Mishra and Sons
Private Limited (Supra).
iv. No costs. All the connected applications are closed.
14.10.2024
Index : Yes/No
Internet : Yes/No
Speaking Order/Non-Speaking Order
Neutral Citation : Yes/Norgm/nst
C.SARAVANAN, J.
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Page No.68 of 69
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
rgm/nst
Pre-Delivery Order in
Arb.O.P.(Com.Div.) Nos.132, 138 and 275 of 2021
and
A.Nos.3167 and 4635 of 2021
and
A.Nos.4217 and 4219 of 2023
14.10.2024
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Page No.69 of 69