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TMI Blog2010 (9) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... g of machinery and equipment namely a boiler plant. The Appellant in turn issued two Letters of Intent both dated 17th December 1996 to the Respondents - one for erection and the other for fabrication of the machinery. The Letters of Intent were for a sum of ₹ 75, 00,000 and ₹ 25, 00, 280 respectively. The disputes between the parties arise under these Letters of Intent. 4. Both the Letters of Intent contained an arbitration clause as under: - In case of any difference or dispute between the parties in respect of any matter arising out of, or in relation to this Order, the same shall be referred to two arbitrators, one to be nominated by each party, as per the provisions of the Indian Arbitration Act and consequent modifications, if any. However, the applicability of this clause shall be as per the Rules prevailing under this Act. 5. The Respondents admittedly furnished the bank guarantee as per the terms and conditions of the agreements. It is also admitted that the Respondents mobilized their resources and commenced work on 29th March 1997. However on the instructions of the Appellant the work came to a standstill on 20th May 1997 on account of a strike and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies and -- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agreed upon by the parties,-- (a) a party fails to act as required under that procedure; or (b) the parties, or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the present case neither of the arbitrators proposed the name of a third arbitrator. The question of the said arbitrators having failed to agree on the appointment of the third arbitrator therefore does not arise. 12. The Legislature was obviously conscious of the same and has used these expressions deliberately not only in different sections of the said Act but in section 11 itself in different circumstances. The clearest and most important indication of this is that these expressions have been used in subsection (4) itself. Sub-section (4) (a) pertains to a case where a party fails to appoint an arbitrator within thirty days whereas clause (b) pertains to a case where the two appointed arbitrators fail to agree on the third arbitrator within thirty days. If the Legislature intended withdrawing the power of the two appointed arbitrators to appoint the third arbitrator in the event of their having failed to appoint him within thirty days it would have so provided. In other words in that event instead of the words fail to agree on in section 11 (4) (b) would have been the words fail to appoint . To accept Mr. Khandeparkar submission would be to rewrite se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The appointed arbitrators would in that case be held to have failed to act without undue delay within the ambit of that expression in section 14 (1) (a) leading to a termination of their mandate. The remedy then would be under section 15 (2) for the appointment of a substitute arbitrator. Whether the delay is undue or not would depend upon the facts of each case. Sections of 14 and 15 read as under: - 14. Failure or impossibility to act.--(1) The mandate of an arbitrator shall terminate if-- (a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and (b) he withdraws from his office or the parties agree to the termination of his mandate. (2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. (3) If, under this section or sub-section (3) of Section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal made and published the award on 18 th December 2004 for a sum of ₹ 31, 35,810 together with interest at 18% per annum on the principal sum of ₹ 20,14,135 from the date of the award till payment in favour of the Respondents. The Respondents made an application under section 33 seeking correction of certain errors in the award. The arbitral tribunal by a further award dated 15th February 2005, made various corrections. As a result thereof the amount of the award stood reduced to ₹ 30, 84,176 and the interest was made payable on the sum of ₹ 21, 17,251. Both counsel agreed that nothing turn on the modified award as far as this petition is concerned. 19. The arbitral tribunal termed the 12 claims as issues and dealt with each of them separately. I will deal with the award accordingly. Claim nos. 2, 3, 5 and 11 were rejected. As regards claim no. 12 the parties were directed to bear their own costs. I therefore proceed to deal with the award in respect of the other claims. 20. It is necessary at the outset to consider the award in so far as it deals with the appellants allegation that the quality of the Respondents work was unsatisfactory. The ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents to stop the work stating that he had received instructions to that effect from the head office. The site-in-charge did not disclose any reasons as to why the work was to be stopped. The witness stated that therefore the Respondents were required to discontinue the work and that the uncertain situation continued to date. 24. Moreover even assuming that the request in March 1999 to stop the work constituted a termination of the agreements it would make no difference. What is important is the fact that prior thereto there was no termination of the agreements. It is this that weighed with the arbitral tribunal in coming to the conclusion that the Petitioner had not established that the quality of the Respondents work was unsatisfactory. 25. Mr. Khandeparkar also relied upon a letter dated 28th July 1998 addressed by the Appellant to the Respondents which contains various allegations about the progress and the quality of the Respondents' work. I do not see how the failure to refer to this letter would warrant the award being set aside on the ground that the arbitral tribunal had failed to take into consideration crucial evidence. The letter merely contains various a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... house rent, salary and bonus paid to the engineer respectively. The claim had been computed for the extended period of the contract namely from April 1999 till March 2001. 30. The award has dealt with this claim more than just satisfactorily. The engineer's presence at the site was established. In fact the Petitioner's witness had admitted his presence at site up to April 1999. The correspondence exchanged between the Appellant and Saurashtra Chemicals Ltd established that he had worked at site even thereafter. As per the appointment letter produced by the Respondents the site engineer was, in addition to salary, to be paid bonus. The inference that he had been paid a salary and bonus as per the terms of the letter of appointment proved before arbitral tribunal is reasonable and justified. Once it is established that the employer i.e. the Respondents had in fact engaged the engineer and that the engineer had worked at site, it is only reasonable to presume that he had been paid a salary and provided the facilities as stipulated in his letter of appointment. Moreover as noted in paragraphs 30 to 34 of the award the documents on record also established the same. In any eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al computed the incomplete work to the extent of ₹ 31, 69,120. This is a finding of fact and cannot seriously be challenged. What was challenged before me was the quantification of the damages. The arbitral tribunal computed damages at 15% of the value of the incomplete work. This percentage, it was held, represented the loss of profit. Mr. Khandeparkar submitted that there was no basis for arriving at the percentage. He submitted that there was neither any pleading nor any evidence to establish the profit to be at 15% of the value of the work. 37. The submission that the Respondents had not pleaded that the loss of profit is to the extent of 15% of the value of the work is not well founded. Paragraph 8 of the statement of claim tabulates the claims. Claim C 11 reads: Claim for loss of profits due to the abrupt stop of work pertaining to the LOIs by the Opponent-details enclosed-Rs.15,00,000. The aggregate value of the two Letters of Intent was about ₹ 1,00,00,000. It is obvious, therefore, that by claiming a sum of ₹ 15, 00,000 towards loss of profit the contention was that the Respondents had provided/accepted the work on the basis that its profit margin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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