The main legal point established in the judgment is that a contract may be valid even if entered into in violation of internal procedures, and claims for loss of profit can be maintainable and logically computed.

JUDGMENT

(Prayer: Original Side Appeal filed under Clause 15 of Letters Patent, to set aside the impugned order dated 11.01.2022 in Arb.O.P.No.332 of 2021, passed by the Learned Single Judge.)

D. Bharatha Chakravarthy.J.,

A. The Appeal :  

This Original Side Appeal is directed against the order of a learned Single Judge, dated 11.01.2022 in Arb.O.P.No.332 of 2021 and A.No.1699 of 2021, thereby, dismissing the application filed by the Appellant to set aside the Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1966.

B. The facts of the case:        

2. The brief facts leading to the filing of the appeal is that the appellant, namely, Pondicherry University floated a tender inviting offers for design, development and delivery of 3D Visual E-Learning content for various courses. The respondent participated in the tender and was declared as the successful bidder. Accordingly, the appellant awarded the work on 27.04.2015, and a form of agreement in respect thereof was entered on 07.07.2015. As per Clause 9 of the said agreement, any dispute arising out of the agreement shall be settled through Arbitration. According to the respondent, they had delivered the Visual E-Learning Solutions for 32 subjects of Phase-I, which were verified, received and utilised by the University. The respondent submitted their initial invoice for Rs.84.74 Lakhs, which the Appellant/University did not pay. The respondent also submitted their further invoice valued at Rs.106.72 Lakhs in respect of the said subjects. The Appellant/University neither made any payment nor called upon the respondent to supply the content for the other remaining subjects. Therefore, the respondent invoked Arbitration proceedings.

2.1. By an order, dated 03.07.2018 in O.P.No.912 of 2017, this Court appointed a Sole Arbitrator. After due conduct of arbitration, by an award dated 17.06.2009, the learned Sole Arbitrator partly decreed the claim by passing an award directing the Appellant/University:

(i) To pay a sum of Rs.1,78,11,800/- together with interest at the rate of 12% per annum, from 01.09.2015 till the date of the award, totalling a sum of Rs.2,59,16,169/- ;

(ii) Further directing the Appellant/University to pay another sum of Rs.34,80,000/- towards loss of profit, however, without any further interest; and (iii) The Appellant was also further directed to pay further interest at the rate of 12% per annum on the award amount totalling to a sum of Rs.2,93,96,169/- at the rate of 12% per annum till the date of realisation of the award. 2.3. Aggrieved by the said award, the Appellant herein filed an Arb.O.P.No.332 of 2021 under Section 34 of the Arbitration and Conciliation Act, praying to set aside the award. 2.4. The learned Single Judge after considering the submissions made on either side, dismissed the petition by order dated 11.01.2022 against which the present Original Side Appeal is laid before this Court.

C. The Submissions:

3. Mr. P.H.Arvindh Pandian, learned Senior Counsel appearing on behalf of the Appellant/University, firstly would submit that the entire award is liable to be set aside as the contract itself is void. According to the learned Senior Counsel, the mandatory approval of the Academic Council and the Finance Committee were not taken note of and the very action of calling for the tender for entering into the contract was completely irregular. When a Public Sector Institution which is bound by its statutes having the force of law, proceeds with entering into a contract in total violation of said statutes, then the contract would be void ab initio. The learned Arbitrator did not consider this very basic fact about the contract being void ab initio. Thus the award is in violation of the Fundamental Policy of Indian Law and thus suffers from patent illegality and is liable to be