The main legal point established in the judgment is that the claim for liquidated damages must be in compliance with the contractual provisions and the principles of reasonable compensation as established in relevant legal provisions and case law.

ANOOP V. MOHTA, J.

This is an Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, “the Arbitration Act”) filed by the original Respondent-Billimoria & Co., challenging the Judgment of the learned Single Judge dated 27 October 2015 passed in Arbitration Petition filed under Section 34 of the Arbitration Act, whereby, the award passed by the learned Arbitrator dated 27 March 2014 in respect of the claim for wrong deduction of liquidated damages is set aside.

2. Based upon a tender for general building work and civil work in respect of a project called “Raheja Waterfront” on land admeasuring 45 acres situated at Kulai Village, Mangalore, the Respondent submitted its offer. Appellant issued a letter of acceptance on 3 March 2012 and work order on 13 March 2012. The terms and conditions including the reciprocal obligations, were defined. Both the parties acted upon the same accordingly. The parties exchanged various correspondences including emails with regard to the various issues relating to the delay in development, non-compliances as well as defective work. The Appellant-Raheja Universal, issued termination notice on 27 December 2012. There was delay of 120 days at the time of termination of the contract. The Respondent replied to the termination notice and filed Arbitration Petition (Lodging) No. 1635 of 2012, on 28 December 2012. On 4 January 2013, an Arbitrator was appointed to adjudicate the disputes between the parties. The contract between the parties was terminated, as the construction could not be completed as per the schedule. That is the case of the Appellant. The Respondent accepted the termination, but reserved its right to make appropriate claims. The parties proceeded before the Arbitrator, based upon the documentary evidence. No oral evidence was led.

3. On 27 March 2014, the award was passed by the Arbitrator holding that the contract was validly terminated and the Appellant is entitled to liquidated damages from the Respondent. The award was modified on 12 July 2014, 15 July 2014 and 31 July 2014. The Respondent, filed Section 34 Petition and challenged the same part of the award.

4 After hearing both the parties and considering the submissions raised , the learned Single Judge, set aside the award. The learned Single Judge, on the issue of termination notice dated 27 December 2012, has recorded in para 26 and 27 as under:

“26. …...In the impugned award, the learned arbitrator has not dealt with the validity of the notice period as canvased by the petitioner and simplicitor held the action on the part of the respondent termination valid on the ground that there was gross delay on the part of the petitioner. In my view, the finding of the learned arbitrator is contrary to clause 27 and is perverse.”

“27. …....I am not inclined to accept the submission of the learned counsel for the respondent that since the petitioner was already issued several notices in past for showing progress of work, separate 15 days notice again for performance of the contract was not warranted or in the alternative that the said notice dated 27th December, 2012 was a 15 days notice as contemplated under section 27. This court cannot permit a party to supplement the reasons rendered by the learned arbitrator by relying upon the pleadings and documents which are not considered by the arbitrator and cannot probe into the mind of an arbitrator and assume that the learned arbitrator must have considered such pleadings, documents and submissions of parties which are not reflected in the award.”

5. Both the learned counsel read and referred the award and the reasons given by the learned Judge, apart from the documents placed on record and supporting Judgments. We have noted that once the termination of the contract was held to be not contrary to Clause 27 of the Contract, there was no question of claiming any liquidated damages. Admittedly, the contract was terminated prior to the stipulated date of completion.