Tamil Nadu Water Supply and Drainage Board Vs. Satyanarayana Brothers Pvt. Ltd. - Court Judgment

Excerpt:
- land acquisition act (1 of 1894)section 18 :[tarun chatterjee & aftab alam,jj] recovery of bank loan - recovery of plea alleging practice of banks to make persons sign blank acknowledgement from before hand to extend time of limitation at the time of filing suits - absence of any conclusive evidence to point to entering dates at later stage held, plea is without merit and is liable to be rejected. indian contract act (9 of 1872) section 62: [tarun chatterjee & aftab alam,jj] novation of contract held, substitution of contract by new one can be only through consent of both the parties. in case of bank loan account, only withdrawal would constitute acquiescence on behalf of bank to a change in liability by novation. deposit of amount by a supposed third party towards liquidation of outstanding cannot ipso facto lead to novation. section 62: [tarun chatterjee & aftab alam,jj] alteration or variation in terms of contract bank loan agreement - held, it implies both parties have voluntarily agreed to such change. receiver cannot bring change so as to effect legal consequences for borrower or guarantor. section 70:[tarun chatterjee & aftab alam,jj] bank loan taken by trust -taking over management of trust by state and trust properties came to be vested in administrator -loan taken by administrator held, it shall also be deemed as loan taken by trust. trust, would be liable to repay loan as trust had been benefited from such loan. [ judgment of karnataka high court in r.f.a.no.205 of 1995, dated 29.9.2000 (kant), reversed]. indian contract act (9 of 1872) sections 73 & 74: [tarun chatterjee & l.s. panta, jj] remedies/relief-remedies for breach of contract - held, the right to assess damages arising from breach of condition of contract does not include a right to adjudicate upon a dispute relating to the very breach of condition of contract. holding a person liable for liquidated damages and quantifying the amount to be paid by way of liquidated damages are entirely different matters. fixing of liability is primary while quantification is secondary to it. section 126: [tarun chatterjee & aftab alam,jj] surety agreement surety can waive his rights available to him under various provisions of chapter viii - anyone has a right to waive advantage offered by law provided they have been made for sole benefit of an individual in his private caacity. there can however be no waiver of liability in exercise of such rights. [air 1992 kant 108, approved]. section 129: [tarun chatterjee & aftab alam,jj] surety agreement - continuing guarantee agreement in respect of loan - death of guarantor - absence of specific written document by deceased revoking guarantee held, guarantee stands and legal representatives of deceased are liable to pay loan. indian evidence act, 1872 section 114; [tarun chatterjee & aftab alam,jj] parties entering into contract for purpose of seriously conducting some business - plea of possession of executed documents with other party and alleging its suppression held, it is highly unimaginable that there would not be multiple copies of such document or at least one copy with the concerned parties. indian evidence act, 1872 section 115; [tarun chatterjee & aftab alam,jj] principle of estoppel applicability - loan transaction by public trust - sole beneficiary i.e. trust ratifying also all actions taken by others benefiting from same held, in general words, estoppel is a principle applicable when one person induces another or intentionally causes the other person to believe something to be true and to act upon such belief as to change his/her position. in such a case, the former shall be estopped from going back on the word given. the principle of estoppel is, however, only applicable in cases where the other party has changed his position relying upon the representation thereby made. estoppel is a complex legal notion, involving a combination of several essential elements, namely, statement to be acted upon, acting on the faith of it, resulting detriment to the actor. estoppel is often described as a rule of evidence, as indeed it may be so described. but the whole concert is more correctly viewed as a substantive rule of law. estoppel is different from contract both in its nature and consequences. but the relationship between the parties must also be such that the imputed truth of the statement is a necessary step in the constitution of the cause of action. the whole case of estoppel fails if the statement is not sufficiently clear and unqualified. where the public trust had been benefited from the loan transaction and it had ratified all actions taken by others benefiting from same, the trust being sole beneficiary was not only liable for repayment but was also estopped from denying its liability. [depuru veeraraghava reddi v depuru kamalamma, air 1951 mad 403, approved]. judgment of karnataka high court in r.f.a.no. 205 of 1995, dated 29.9.2000 reversed]. - order 1. in order to overcome the shortage of drinking water in the city of chennai, the government of tamil nadu formulated a scheme known as 'veeranam project' to provide drinking water to the city. while the appellant questioned the rejection of its case that the respondent had no claim against the appellant and the innocuous finding that the breach committed by the contractor was no longer available in view of the earlier decision, the respondent-contractor questioned the award on the ground that its just claims had been wrongly rejected in respect of damages suffered in view of the stoppage of the work on account of the appellant's failure to provide necessary assistance for obtaining foreign exchange for completion of the project.order1. in order to overcome the shortage of drinking water in the city of chennai, the government of tamil nadu formulated a scheme known as 'veeranam project' to provide drinking water to the city. tenders were invited for the said scheme and ultimately, the tender submitted by the respondent m/s. satyanarayana brothers pvt. ltd. was accepted. the work undertaken could not be completed within the stipulated time and the respondent sought extension to complete the work. though the time was extended, the respondent could not complete the same on account of disputes which were ultimately referred to the arbitration of two arbitrators appointed by the parties. the arbitrators appointed hon'ble mr. justice k.s. palaniswamy, a retired judge of the madras high court, as their umpire. on account of disagreement between the arbitrators the matter was referred to the umpire who held that the respondent was entitled to rs. 40,02,591/- from the appellant and after allowing the deduction for the same the respondent was liable to pay to the appellant a sum of rs. 2,69,93,674/- with interest @9% per annum from the date of the award. out of the said award, only a sum of rs. 5,000/- was awarded as damages for breach of contract.2. the award was filed by the umpire in the madras high court and was numbered as o.p. no. 428/79. while the appellant filed application no. 560/80 in the said o.p. no. 428/79 praying for a decree to be passed in terms of the award, the respondent being aggrieved by the award, filed o.p. no. 122/80 for setting aside the award. the learned single judge allowed the prayer for setting aside the award and consequently, the other application filed by the appellant for a decree to be passed in terms of the award was dismissed. c.s. no. 176/78, which had been filed by the appellant, was also dismissed.3. thereafter, the appellants preferred appeals, being o.s.a. nos. 248 of 1989 and 59 of 1993, against the order of the single judge. the said appeals were allowed by the division bench of the high court by its order dated 18/10/2001 and a decree was passed in terms of the award dated 10th september, 1979, passed by the umpire. aggrieved by the order dated 18/10/2001, by which osa 248/89 and 59/93 had been initially allowed by the division bench, the respondent filed slp(c) nos. 2096-2097 of 2002. the said special leave petitions were re-numbered as c.a. nos. 9136-9137 of 2003, and were disposed of by this court on 18/11/2003. the matter was remitted to the division bench of the high court and on remand, the division bench dismissed the said appeals, holding that foreign exchange was to be obtained by the joint efforts of the appellant and the respondent and that the government was not extending time reasonably but in a piece meal manner. accordingly, the high court held that the respondent had not committed any breach of the contract. aggrieved by the said order dated 24th march, 2004, the appellant preferred these appeals (c.a. nos. 2880-2881/05 2880-2881/05 ), which were dismissed by this court on 7th february, 2007. by consent of parties, the hon'ble mr. justice s. mohan, a retired judge of this court was appointed as sole arbitrator to decide the disputes between the parties. the learned arbitrator submitted his award on 26th october, 2007, holding that the respondent/claimant would be entitled to a sum of rs. 15,84,933.76p. thereafter, the parties were given the opportunity of filing their respective objections to the said award and ultimately the matter has come up for the acceptance of the award.4. at the very outset, it was sought to be urged on behalf of both the parties that the said award dated 26th october, 2007 was not acceptable to either party on account of an erroneous understanding of the respective cases made out by the parties. while the appellant questioned the rejection of its case that the respondent had no claim against the appellant and the innocuous finding that the breach committed by the contractor was no longer available in view of the earlier decision, the respondent-contractor questioned the award on the ground that its just claims had been wrongly rejected in respect of damages suffered in view of the stoppage of the work on account of the appellant's failure to provide necessary assistance for obtaining foreign exchange for completion of the project.5. both the parties are aggrieved by the award on the ground of non-application of mind by the arbitrator to the material before him. it is the common ground of the parties that the learned arbitrator misconducted himself in appreciating the case made out by of the respective parties vis-a-vis the materials on record. we have considered the submissions made and we have also looked into the award, which indicates that the learned arbitrator had legally misconducted himself thereby attracting the provisions of section 30(a) of the arbitration act, 1940. we, accordingly, set aside the award and remit the matter to the learned arbitrator for a fresh decision. however, in place of justice s. mohan, who had submitted his award, we appoint justice shivraj patil, a retired judge of this court to be the sole arbitrator to consider the matter and pass a fresh award in the light of the judgment of this court dated 07/02/2007 in c.a. nos. 2880-2881 of 2005 and file the same in this court. the learned arbitrator shall be entitled to settle his fees and other expenses which are to be equally shared by the parties and work out the procedure to be followed in conducting the arbitration proceedings. the learned arbitrator is requested to make his award expeditiously, but preferably within a period of six months from the date of entering upon the reference.

Judgment:
ORDER

1. In order to overcome the shortage of drinking water in the City of Chennai, the Government of Tamil Nadu formulated a scheme known as 'Veeranam Project' to provide drinking water to the city. Tenders were invited for the said scheme and ultimately, the tender submitted by the respondent M/s. Satyanarayana Brothers Pvt. Ltd. was accepted. The work undertaken could not be completed within the stipulated time and the respondent sought extension to complete the work. Though the time was extended, the respondent could not complete the same on account of disputes which were ultimately referred to the arbitration of two arbitrators appointed by the parties. The arbitrators appointed Hon'ble Mr. Justice K.S. Palaniswamy, a retired Judge of the Madras High Court, as their umpire. On account of disagreement between the arbitrators the matter was referred to the umpire who held that the respondent was entitled to Rs. 40,02,591/- from the appellant and after allowing the deduction for the same the respondent was liable to pay to the appellant a sum of Rs. 2,69,93,674/- with interest @9% per annum from the date of the Award. Out of the said Award, only a sum of Rs. 5,000/- was awarded as damages for breach of contract.

2. The Award was filed by the umpire in the Madras High Court and was numbered as O.P. No. 428/79. While the appellant filed Application No. 560/80 in the said O.P. No. 428/79 praying for a decree to be passed in terms of the Award, the respondent being aggrieved by the Award, filed O.P. No. 122/80 for setting aside the Award. The learned single Judge allowed the prayer for setting aside the Award and consequently, the other application filed by the appellant for a decree to be passed in terms of the Award was dismissed. C.S. No. 176/78, which had been filed by the appellant, was also dismissed.

3. Thereafter, the appellants preferred appeals, being O.S.A. Nos. 248 of 1989 and 59 of 1993, against the order of the Single Judge. The said appeals were allowed by the Division Bench of the High Court by its order dated 18/10/2001 and a decree was passed in terms of the Award dated 10th September, 1979, passed by the umpire. Aggrieved by the order dated 18/10/2001, by which OSA 248/89 and 59/93 had been initially allowed by the Division Bench, the respondent filed SLP(C) Nos. 2096-2097 of 2002. The said special leave petitions were re-numbered as C.A. Nos. 9136-9137 of 2003, and were disposed of by this Court on 18/11/2003. The matter was remitted to the Division Bench of the High Court and on remand, the Division Bench dismissed the said appeals, holding that foreign exchange was to be obtained by the joint efforts of the appellant and the respondent and that the Government was not extending time reasonably but in a piece meal manner. Accordingly, the High Court held that the respondent had not committed any breach of the contract. Aggrieved by the said order dated 24th March, 2004, the appellant preferred these appeals (C.A. Nos. 2880-2881/05 2880-2881/05 ), which were dismissed by this Court on 7th February, 2007. By consent of parties, the Hon'ble Mr. Justice S. Mohan, a retired Judge of this Court was appointed as Sole Arbitrator to decide the disputes between the parties. The learned Arbitrator submitted his Award on 26th October, 2007, holding that the respondent/claimant would be entitled to a sum of Rs. 15,84,933.76p. Thereafter, the parties were given the opportunity of filing their respective objections to the said Award and ultimately the matter has come up for the acceptance of the Award.

4. At the very outset, it was sought to be urged on behalf of both the parties that the said Award dated 26th October, 2007 was not acceptable to either party on account of an erroneous understanding of the respective cases made out by the parties. While the appellant questioned the rejection of its case that the respondent had no claim against the appellant and the innocuous finding that the breach committed by the contractor was no longer available in view of the earlier decision, the respondent-contractor questioned the Award on the ground that its just claims had been wrongly rejected in respect of damages suffered in view of the stoppage of the work on account of the appellant's failure to provide necessary assistance for obtaining foreign exchange for completion of the project.

5. Both the parties are aggrieved by the Award on the ground of non-application of mind by the Arbitrator to the material before him. It is the common ground of the parties that the learned Arbitrator misconducted himself in appreciating the case made out by of the respective parties vis-a-vis the materials on record. We have considered the submissions made and we have also looked into the Award, which indicates that the learned Arbitrator had legally misconducted himself thereby attracting the provisions of Section 30(a) of the Arbitration Act, 1940. We, accordingly, set aside the Award and remit the matter to the learned Arbitrator for a fresh decision. However, in place of Justice S. Mohan, who had submitted his Award, we appoint Justice Shivraj Patil, a retired Judge of this Court to be the sole Arbitrator to consider the matter and pass a fresh Award in the light of the judgment of this Court dated 07/02/2007 in C.A. Nos. 2880-2881 of 2005 and file the same in this Court. The learned Arbitrator shall be entitled to settle his fees and other expenses which are to be equally shared by the parties and work out the procedure to be followed in conducting the arbitration proceedings. The learned Arbitrator is requested to make his Award expeditiously, but preferably within a period of six months from the date of entering upon the reference.