AI Structured Summary
Not yet generated for this judgment
Judgment
G.S.Kulkarni, J.
1.This appeal under Section 37 of the Arbitration and  Conciliation Act,1996 (for short 'the Act') arises from the judgment and order dated 16
January 2017 of the learned Single Judge whereby the appellant's petition under Section 34 of the Act assailing the award of the learned sole
Arbitrator stands dismissed.
2.The issue which arises for consideration in this appeal is  as to whether the counter claim as raised by the respondent could be allowed by the
learned arbitrator, and whether the learned Single Judge was justified in affirming such arbitral award?
3.Facts: The appellant was appointed by the respondent as  a distributor/dealer of gas cylinders in the year 1989. An agreement was entered
between the parties which was renewed every five years. The dispute between the parties has arisen under the last dealership agreement dated 17
August 2004 titled as “HP GAS (Liquefied Petroleum Gas) Dealership (Domestic & Commercial) Agreement"" (for short “the dealership
agreementâ€). By this agreement, the appellant was appointed as a dealer of the respondent on Principal to Principal basis for the sale of
respondent's liquefied petroleum gas (LPG) cylinders, for household consumers and commercial consumers like  hotels, canteens, hospitals etc., but
not for any industrial use nor for any industrial consumer, in the territory or distribution area at Vashi, Navi Mumbai, on terms and conditions as
contained therein.
4.During the subsistence of the dealership agreement, a show cause notice dated 25 January 2006 was issued by the  respondent to the appellant
interalia alleging violation of clause 12 and 24A of the dealership agreement. The show cause notice alleged that during a refill audit, it was found
that there was positive variations of 46 numbers of 14.2 kg. cylinders and negative variations of 28 number of 5 kg. cylinders when an inspection was
undertaken. It was alleged that in maintaining the record of some customers, it was revealed that two consumers did not exist on the address as
recorded, Â however cylinders were supplied to these consumers from September,2005 to December,2005. This was disputed by the appellant by her
reply dated 3 February 2006 and according to her, an explanation was offered in regard to the said two consumers whose names were referred in the
show cause notice. The appellant also recorded that the accounts were not settled as also reconciliation of cylinders was not undertaken, defective
cylinders reimbursement was also not considered, the damage to the showroom for the purpose of art gallery and the repair expenditure account was
also not settled and not a rupee was paid by the respondent in this regard. The appellant also complained that she was issued show cause notices and
warning letters since one year, the cause of which was unknown.
5.The respondent however issued a suspension letter dated 3 June 2008 to the appellant. Consequent to the suspension of the appellant's dealership,
the petitioner had approached this Court challenging the suspension order dated 4 September 2008. The dispute was referred for arbitration to be
conducted by a retired employee of the respondent as per the arbitration clause namely clause 38 of the dealership agreement. It is the appellant's
case that though the dispute was referred to arbitration, the respondent had nonetheless issued a letter dated 13 September 2008 terminating the
dealership agreement. The respondent terminated the agency of the appellant alleging breaches of clauses 5, 6, 10, 11, 12, 24(a), 28B(a), 28B(g),
28B(h), 28B(i), 28B(k) of the dealership agreement. The termination letter further recorded that under clause 32(c) of the dealership agreement, the
appellant shall pay an amount of Rs.19,94,174.68, the full details of which were not specified in the order except for certain amounts as specified in
clause 7 which included an amount of Rs.2,24,510.68 as a penalty for various irregularities stated to be committed by the  appellant. It would be
relevant to note the details of the claims of the respondent as set out in paragraph 7 of the termination letter which  read thus: “7.Non Payment
of dues by the dealer  Following penalty was raised against you for various malpractices, however the payment has not been made to HPCL till
date.
A)Letter no. NMRO/LPG/KS dated 09.03.05 imposing penalty for Rs.40,364/Â
B)Letter no. NMRO/AA/LPG dated 23.11.06 imposing penalty for Rs.2,24,510.68/Â for various irregularities observed at the distributorship during
inspection under  MDG. C)Dues of Rs.84,600/ towards shortage of 47 nos of 14.2 kg cylinders and letter dated 28.05.07 issued for payment of the
same. D)Dues of Rs.6,90,000/ towards shortage of 276 nos 19 kg cylinders and letter dated 28.05.07 issued for payment of the same.â€(emphasis
supplied)
6.On the above backdrop, a statement of claim dated 30 Â October 2008 was filed by the appellant before the learned Arbitrator interalia making
prayers for setting aside of the termination of the dealership and in the alternative for a monetary award. The prayers of  the appellant in the
Statement of Claim read thus: “(a)quash and set aside the impugned orders dated 3rd June 2008 and 13th September 2008 and order and direct
the Respondent to restore Claimant's HP Gas Dealership Agency under Dealership Agreement dated 17th August  2004 and also order and direct
the Respondent to restore Claimant's possession in respect of dealership premises situated at Plot No.18/2, Section 10, Vashi, Navi Mumbai.
(b)in the alternative to prayer (a) above, order and direct the Respondent to make payment of an amount of Rs.24,44,076.09 to the Claimant, being
towards the dues recoverable by the claimant from the Respondent as per statement of dues Exhibit 'V' herein and the Respondent may be further
ordered and directed to make payment of an amount of RS.12,00,000/Â per annum, being towards reimbursement of future losses, for a minimum
period of 10 years, assuming that the Gas Agency Agreement of the Claimant, would be renewed by the Respondent, after it's expiry in due course on
or about 27th March 2009;
(c)interim orders as per prayers (a) & (b) above;
(d)Cost of this arbitration.â€
7.The respondent filed its reply dated 15 November 2008 to  the statement of claim as also raised the following counter claim:Â
“i.The suspension and termination letter dated 03/06/2008 and 13/09/2008 are legally valid and proper.
ii.To direct the Claimant to pay the sum of Rs.10,39,474.68 along with interest @ 18% per annum from the date of penalty towards the penalty as
more specifically mentioned herein above (Exhibit RÂ7, 16, 28).
iii.To direct the Claimant to pay the sum of  Rs.9,54,700.00 along with interest @ 18% per annum from the date of variation of stocks towards Stock
Variation as more specifically mentioned hereinabove (Exhibit RÂ30);
iv.To direct the Claimant to pay the sum of Rs.4,07,522.15 (reflecting in legacy account from the period 01/03/1995 to 30/06/2004 along with interest
@ 18% per annum towards the debit balance reflecting in legacy account as more specifically mentioned herein above (Exhibit R â€" 32).
vi.To direct the claimant to pay the sum of Rs.1,27,669.54 along with interest @ 18% per annum towards the debit balance reflecting in ERP accounts
as more specifically mentioned herein above. (Exhibit RÂ33, 34).
vii.To direct the Claimant to pay such amount as shown in the reconciled statement of account which the Respondent shall be submitting at the time of
hearing, along with interest from the date of the Award till the payment of the amount.
viii.To direct the Claimant to pay Rs.1,00,000/ towards cost of the Arbitration proceedings to Respondent.â€
8.The appellant disputed the counter claim by filing a  rejoinder / reply dated 5 December 2008. In paragraph 25 of the reply, the respondent
substantively disputed the counter claim of the
appellant in the following terms: “25.With reference to the prayers made by the  Respondents for passing the award, by way of the so called
counter claim of the Respondent, the Claimant submit that the prayer for holding that the suspension and termination of the Claimant's dealership are
legal, valid and proper, is untenable and without any substance. Further the prayers for directing the Claimant to make various payments to the
Respondents in respect of various penalties, towards variation in stock, towards debit balance reflecting in legacy account and towards Debit balance
reflecting in ERP Account, are totally unjustified and unsubstantiated in support of the various amounts of penalties and damages etc. claimed by he
Respondents in the prayers, the Respondents have sought to rely upon Exhibits RÂ7, RÂ16, RÂ28, RÂ30, RÂ32, RÂ33 & RÂ34. As far as Exhibit
RÂ7, i.e. letter dated 9th March 2005 is concerned, the Claimant has clearly dealt with all the allegations levelled by the Respondents, by her letter
dated 17th March 2005 which is annexed as Exhibit 'E' to the Statement of Claim. As far as Exhibit RÂ16, i.e. letter dated 23rd November 2006 is
concerned, the Respondent has suitably replied to the same by her letter dated 30th November 2006 which is annexed as Exhibit 'K' to the Statement
of Claim. However, as far as Exhibits RÂ28, RÂ30, RÂ32, RÂ33 and RÂ34 are concerned, the Claimant does not admit any of these Exhibits and
put the Respondents to the strict proof of the contends and existence of the said Exhibits. The Claimant submits that the Claimant is not liable to make
payment of any of the said amounts as claimed by the Respondents in the aforesaid prayers. In any event the Respondents will have to prove all
their claims without any shadow of doubt, duly supported by documentary evidence and supporting vouchers and invoices for the same. As regards
the prayer for directing the Claimant to pay Rs.1,00,000/Â towards the cost of Arbitration Proceedings, the same is hypothetical figure and Claimants
are ready and willing to bear 50% of the actual costs of the Arbitration proceedings,as may be determined by the Hon'ble Arbitrator.
26.The claimant craves leave to rely upon two sets of documents i.e. Set 'A' for Financial Claim and Set 'B' for Stock Reconciliation. Both the
above sets of documents are being forwarded herewith separately.â€
9.In the arbitration proceedings, the appellant filed her affidavit of evidence dated 7 May 2009. The respondent however  neither filed any
affidavit of evidence nor contradicted the appellant's case by cross examining the appellant in regard to the case of the
appellant as asserted in the affidavit of evidence.
10.On this background, the learned Arbitrator proceeded to make the impugned award dated 11 September 2009 interalia  declaring the termination
of the appellant dealership agreement as legal and valid. In regard to the alternative monetary relief as prayed by the appellant for an amount of
Rs.24,44,076.09 and Rs.12,00,000/ alongwith interest as referred in paragraph 6 and 7 of the operative part of the award. The learned arbitrator
allowed the counter claim of the respondent as contained in paragraphs 11 to 15 of the operative  part of the award. The relevant directions in the
Award read thus: “6.Out of the remaining amount of Rs.2444076.09, the Claimant is entitled to Rs.4,01,244.88 (as is appearing in items 4 to 7 of
Exhibit U of the Statement of Claim) alongwith simple interest, provided the Claimant produces the necessary satisfactory documentary proofs of the
same. The Respondents are directed to pay these amounts along with simple interest from the date these amounts are due to the Claimant.
7.The Claimant is also entitled to Rs.83474.00 along with simple interest as mentioned in item 3 of the Exhibit U of the Statement of Claim if it is
verified and confirmed that the said amount has been encashed by the Respondents.
8.The Claim of Rs.12,92,744.00 as is appearing in item Nos.11 & 12 of the Exhibit U of the Statement of Claim is rejected for the reasons mentioned
in Point 13 of my findings, above.
9.The Claim of Rs.1,25,000.00 for repairs of the Art  Gallery is also rejected. As per Clause 15 of the Dealership Agreement, the Claimant is
responsible to maintain the dealership premises. The claimant has not substantiated this Claim and whether the same was carried out specifically at
the Respondents' directions.
10.The Claim of the remaining amount of Rs.5,41,613.21 as is appearing in item Nos.1, 2 & 10 of the Exhibit U of the Statement of Claim is also
rejected for the reasons mentioned in Point 4 of my findings, above.
11.The Claimant is directed to pay to the Respondent Corporation an amount of Rs.10,39,474.68 towards the penalties levied against her along with
simple interest from the date they were due, within a period of one month.
12.The Claimant is also directed to pay an amount of Rs.954,700.00 to the RespondentÂCorporation towards stock variations along with simple
interest from the date it is due, within a period of one month.
13.The Claimant is also directed to pay an amount of RS.5,35,191.69 to the RespondentÂCorporation towards debit balance in legacy account
alongwith simple interest from the date it is due, within a period of one month.
14.The Claimant is also directed to pay an amount of Rs.1,27,669.54 to the RespondentÂCorporation towards debit balance in ERP account alongwith
simple interest from the date it is due, within a period of one month.
15.The Claimant is also directed to pay an amount of Rs.1,07,298.00 to the RespondentÂCorporation towards the nonÂpaid showroom & go down
license fee alongwith simple interest from the date it is due, within a period of one month.†(emphasis supplied)
11.Being aggrieved by the above award of the learned Sole  Arbitrator,the appellant approached the learned Single Judge in a petition under Section
34 of the Act. The grievance of the appellant in the Section 34 petition interalia was that the impugned award to the extent it allowed the counter
claim of the respondent was based on no evidence as also there were no reasons as contained in the award to support the said findings. It was
categorically urged by the appellant that the operative award against the appellant was based on surmises and conjectures. The appellant contended
that the learned Arbitrator had allowed the counter claim of the respondent without examining the correctness or otherwise of the respondent's
contention and merely believing that whatever was contended by the respondent was a gospel truth. The appellant in paragraph 3 of her petition
under Section 34 has raised the said grounds in challenging the award.
12.By the impugned order, the learned Single Judge  dismissed the appellant's petition under Section 34 of the Act. The basic premise for the
learned Single Judge to reach to a conclusion to dismiss the appellant's petition, was that once the arbitrator had held on facts that there was a breach
of the dealership agreement by the appellant, nothing further remained to be adjudicated, as the appellant did not advance an argument that the
calculation as made by the respondent in making the counter claim was incorrect. The learned Single Judge observed that it was open for the
appellant to contend before the learned Arbitrator that the penalties calculated were under wrong parameters or the calculations are not correct.
However this opportunity was not availed by the appellant. The learned Single Judge was of the opinion that once a specific amount wasÂ
asserted by the respondent as due and payable, at least the appellant who was disputing the said amount ought to have asserted a counter figure. The
learned Single Judge accordingly refused to interfere with the award.
13.The learned Counsel for the appellant would submit that  the learned Single Judge has completely overlooked that there was no evidence before
the learned Arbitrator, which would even remotely justify allowing the respondent's counter claim. It is submitted that the following observation as
made by the learned Single Judge in  paragraph 18 of the impugned order is a clear error: “.... When the Arbitrator held on facts that there
were breaches and the Petitioner was liable, nothing further remained to be adjudicated as the Petitioner did not advance the alternate argument which
is sought to be advanced today. It was open to the Petitioner to contend that the penalty is calculated under wrong parameters or that the calculations
are not correct.†It is further submitted that the said observation is contrary to the record as firstly the learned Single Judge overlooked that the
appellant had disputed the counter claim in paragraph 25 of the written statement/reply, as also had filed affidavit of evidence. The respondent
however had neither filed affidavit of evidence nor made any attempt to prove the said claims on the basis of any other material, when the same were
disputed by the appellant.
14.The second grievance as urged by the learned Counsel for  the appellant is on the following observations as made by the learned  Single
Judge: “....Once a specific amount is asserted by one party as due, at least the party disputing it must assert a counter figure.  It is submitted
that this observation ought not to have been made as the appellant had disputed and denied the entire claim of the  respondent, hence there was no
requirement to assert a counter figure. It is submitted that the observations of the learned Single Judge that “the appellant had not disputed the
quantum of claim by the  respondentâ€, is also not correct, as letters dated 5 June 2008, 9 June 2008 and 16 June 2008 of the appellant clearly
indicated that the claims made by the respondent were denied and disputed by the appellant. A reference is also made to paragraph 25 (supra) of
the appellant's reply to the counter claim, to contend that the appellant had all times disputed the quantum of the claim as raised by the respondent and
this has been completely overlooked by the learned Single Judge, is what is urged on behalf of the appellant. Learned Counsel for the appellant, next
submitted that ultimately the respondent's claim was a money claim arising under breach of the terms and conditions of the dealership agreement, for
penalty and reconciliation etc. which was not only required to be proved on evidence but also required to be decided by the learned Arbitrator solely
considering the evidence on record. It is submitted that when this claim as raised by the respondent was disputed by the appellant then the obligation
on the learned Arbitrator was to decide the issues on evidence. It is submitted that the learned arbitrator ought to have decided the issues on
reconciliation of accounts, which would be not only the determination of the obligations but also of the issue as to it was whose obligation to reconcile
the accounts under the contract, and only after such determination decide the monetary claims on evidence. It is submitted that the learned Arbitrator
merely held that the responsibility of reconciliation of the accounts was on the appellant and blanketly allowed the claim of the respondent. It is
submitted that even under Clause 27 of the dealership agreement it was provided that after termination of the agreement, in case the dealer (appellant)
did not reconcile the accounts, then in that event after seven days the respondent itself certify the accounts as settled, even this certification was not
undertaken by the respondent, and thus the findings of the learned Arbitrator were contrary to the express terms and conditions of the dealership
agreement. Â
15.It is next submitted by the learned Counsel for the  appellant that as regards the respondent's claim no.(ii) for penalty, mere producing of letters
and the correspondence alleging breach was surely not sufficient to award the said claim, as the claim for penalty was in the nature of damages,
which was required to be proved. It is thus submitted that without the counter claim being proved by the respondent on evidence, the same could
not have been allowed.
16.On the other hand, the learned Counsel for the  respondent has supported the impugned order passed by the learned Single Judge as also the
impugned award. It is submitted that the learned Arbitrator has taken into consideration the entire material as placed on record in making the award
in regard to the counter claim as made by the respondent. It is submitted that the documents on the record of the arbitral tribunal were sufficient for
the respondent to prove its claim for damages and there was no need for the respondent to lead oral evidence to substantiate the claim. It is
submitted that the learned Single Judge has taken into consideration the parameters of dispute under the dealership agreement in dismissing the
appellant's petition under Section 34 of the Act by the impugned order. Learned Counsel for the respondent was also not in a position to point out
the material on the basis of which the claims of the respondent were allowed. When asked as to whether the appellant had admitted the respondent's
contention or the claim for penalty, learned Counsel for  the respondent could not point out anything to show that the  appellant had admitted any of
the claims of the respondent as made in the counter claim.
17.We have heard the learned Counsel for the parties. We  have perused the record, the impugned award and the impugned order passed by the
learned Single Judge.
18.The learned Counsel for the appellant at the outset submitted that the challenge of the appellant was confined only to the award of the counter
claim by the learned Arbitrator and that the appellant is 'not' interested to agitate any issue in regard to the termination of the dealership agreement,
though it was a subject matter of arbitration.
19.The dispute between the parties has arisen under the  dealership agreement dated 17 August 2004. We have already noted the counter claim as
made by the respondent. Counter claim no.(ii) is a claim in the nature of penalty under which the respondent has claimed an amount of
Rs.10,39,474.68 alongwith interest. counter claim no.(iii) of the respondent was for an amount of Rs.9,54,700/Â alongwith interest towards stock
variation. Claim No.(iv) was of Rs.4,07,522.15 for the period from 1 March 1995 to 30 June 2004 towards the debit balance reflecting in legacy
account and claim no. (vi) of Rs.1,27,669.54 was towards debit balance reflecting in the ERP accounts. It is thus clear that Claim no.(ii) was for a
penalty, the claim no.(iii) was in regard to the amount on variation of stock of cylinders, the claim Nos.(iv) and (vi) pertain to the claim as under
legacy account and ERP account. The claims are such which surely required the respondent to prove each of the claim on evidence. Moreover, in
regard to the claim for penalty which is in the nature of damages, an obligation on the respondent was to prove the damages suffered by it. In
regard to the variation under stock, the same was also required to be proved on evidence . As regards the claim on accounts, the accounts were
required to be proved on evidence. All this for the reason that the appellant had disputed these claims and  there was no express admission of any
liability towards the respondent. The relevant clause in the contract in regard to  reconciliation of accounts is clause no.27 which reads thus:Â‐
“27.Settlement of accounts: The Dealer shall settle, in the event of termination of this agreement for any reason, all accounts within seven days of
such termination and in the event of the Dealer declining or neglecting or failing to settle accounts within such period, account certified by one of the
Corporation's Officers, shall be absolutely final and conclusive for all purposes.†A perusal of the above clause clearly indicate that in the  event of
termination of the agreement, the accounts were required to be settled by the dealer within seven days and in the event of dealer declining or
neglecting to settle the accounts within such period, the accounts certified by one of the Corporation's officers, shall be absolutely final and conclusive
for all the purposes. Admittedly, there is no certification of the accounts by the officers of the respondent nor it is a case that the appellant has
admitted the accounts at any point of time. This necessarily required the respondent to lead evidence, oral or documentary, and to prove the said
claim on accounts. The respondent also never stepped into the witness box nor was there any attempt to prove the accounts. In regard to the
stock variation also there is no evidence led. Nonetheless, the learned Arbitrator proceeded to make the impugned order.
20.It is not the case that the appellant either expressly or even impliedly admitted these claims but the same were very much disputed. This is clear
from the appellant's case as made out in the reply of the appellant to the counter claim dated 5 December 2018 that the appellant disputed these
claims of the respondent as noted by us above. Apart from this the appellant by its letters dated 17 March 2005, 23 November 2006 and 30
November 2006 had refuted these claims of the respondent. The documents of the respondent namely R28, R30, RÂ32, RÂ33 and RÂ34 on the basis
of which the respondent was asserting its claim were also disputed and denied by the appellant  when the appellant made the following statements in
her reply:  “The claimant does not admit any of these exhibits and put the respondent to strict proof of its  contents and existence of the said
exhibits.â€Â “The claimant submits that the claimant is not liable to make payment of any of the said amounts as claimed by the respondents in
the aforesaid prayers.â€Â The claimant further submits that “in any  event the Respondents will have to prove all their claims claims without any
shadow of doubt, duly supported by documentary evidence and supporting vouchers and invoices for the same.â€
21.It is quite astonishing that despite the clear stand of the Appellant disputing the respondent's counter claim, the respondent chose not to lead any
evidence and prove the facts on the basis of which the counter claim was being made by the respondent. The  learned Arbitrator appears to have
accepted the case of the respondent as made out in the reply to the written statement and the documents purporting to support the case as sacrosanct
and proceeded on an assumptions and surmises that the respondent was not required to prove the claim. The contention of the respondent is that
even if the strict rules of evidence are not applicable in arbitration proceedings, however that would not mean that the basic requirement in law to
accept the respondent's case qua the counter claim, without an iota of evidence to prove the counter claim could be dispensed with. In our opinion,
there is much substance in the contentions as urged on behalf of appellant that the learned arbitrator could not have done away with the requirement in
law namely the obligation on the respondent to prove each of the claim on evidence. A perusal of the impugned award and more particularly
paragraphs 13 and 14 indicate that there is no discussion whatsoever on the counter claims which are monetary claims as made by the respondent.Â
The record does not indicate any cogent and acceptable evidence documentary which can be said to prove any of the counter claims of the
respondent. The learned arbitrator completely discarded and dispensed with the obligation and burden on the respondent to prove the claim and
straight way proceed to award the counter claims as per the operative part of the award. This approach of the learned Arbitrator was perverse to say
the least.
22.The learned Arbitrator acted contrary to the basic  requirement of law when more particularly when one of the claims being of a penalty for
breach of the contract which was surely required to be proved as per the requirement of Section 73 of the Contract Act. Admittedly, on this claim of
penalty the respondent did not lead any evidence. On the other hand, the appellant not only disputed the documents on the basis of which the
respondent had made the claim for penalty but also had filed her affidavit of evidence and was ready and willing to be crossÂexamined. In this
situation, it would have been prudent as also a requirement of law for the learned Arbitrator to consider whether the respondent either on oral and/or
documentary evidence, proved its claim for penalty/damages as also the other claims. Further when there was a dispute on reconciliation of
accounts, then, the learned arbitrator himself ought to have gone into the issue of reconciliation and on the basis of evidence, the monetary liability
could have been fastened on the appropriate party to the dispute.
23.This is a case where the respondent asserted breach of  contract (dealership agreement) on the part of the appellant and as a consequence of a
breach of contract, the respondent made a counterclaim interÂalia seeking penalty and other claims which pertain to variation of stock, debit balance
of the account between the parties. Once a claim for penalty is made, then necessarily the provisions of Chapter VI of the Contract Act which deal
with consequence of breach of contract and the provisions of Sections 73 and 74 of the Contract Act which deal with award of compensation when a
party suffers on account of breach of contract and compensation for breach of contract when penalty is stipulated in the agreement itself respectively,
are attracted. It cannot be disputed that a liability to pay damages must arise under the contract and not otherwise. The Arbitrator has power to
decide the question of liability for a particular amount as damages. In the assumption of damages, the arbitrator was required to consider the legal
obligations the law would confer on the parties to prove such claims. Once there was no evidence on record, oral or documentary, which could
prove the damages suffered by the respondent, then, Â certainly it can be said that there was a patent illegality on the face of the award. All these
requirements have been completely overlooked by the learned Arbitrator.
24.In our opinion, the learned arbitrator has gravely faltered in overlooking the fundamental provisions under Section 73 of the Contract Act, namely
unless the party proves the damages suffered by it on account of breach of contract, it is not entitled to any damages on compensation. If the counter
claims of the respondent are to be seen in the context of clauses 5, 6, 10, 11, 12, 24(a), 28B(a) and B(k), B(g), B(h), these are claims which can be
only proved on evidence and in event any claim for damages/penalty on these breaches has to be on the proof of damages suffered in the absence of
any liquidated damages agreed between the parties. Even if the parties were to agree on a quantum of liquidated damages, the party claiming such
damages was required to prove the actual damage suffered by it. (See “Kailash Nath Associates Vs. DDA†)
25.With respect we may observe that all the above basic  illegalities in the award of the learned sole arbitrator have not been considered by the
learned Single Judge. The learned Single Judge in our thoughtful opinion has clearly erred in making the observations as made in paragraph 18 of
the impugned order as noted by us above. The said observations of the learned Single Judge in the impugned order are to the effect that once there is
a breach of contract, then, automatically the claim for damages would be required to be awarded without the party proving its claim for damages.
Such a proposition certainly cannot be accepted in law. Thus, with certitude we observe that the impugned award was in conflict with the
fundamental policy of Indian Law and being contrary to the fundamental principles of law. The learned Single Judge was thus not correct in dismissing
the Section 34 petition filed by the appellant.
26.In the circumstances, the impugned order passed by the learned Single Judge dismissing the appellant's Section 34 petition, cannot be sustained.Â
We accordingly allow this appeal by the following order:Â ORDER
(i)The impugned order dated 16 January 2017 passed by the learned Single Judge, is set aside.
(ii)Arbitration Petition No.1007 of 2009 stands allowed  whereby the Award dated 11 September 2009 passed by the learned Sole Arbitrator, to the
extent it allowed the counter claim of the respondent stands quashed and set aside.
(iii)Respondent to pay cost of Rs.50,000/ to the appellant  within two weeks from today.