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IN THE HIGH COURT OF JUDICATURE AT MADRAS
N.ANAND VENKATESH
Cantonment Board, St. Thomas Mount & Pallavaram – Appellant
Versus
Babuji Civil Constructions – Respondent
ORDER :
1. This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act) challenging the award dated 16.8.2022 passed by the sole Arbitrator.
2. Heard Both.
3. The facts leading to filing of this petition are as follows:
(i) The petitioner invited e-tenders dated 24.3.2017 for the work of maintenance and repairs to drains and culverts at St.Thomas Mount and Pallavaram for the year 2017-18. The earnest money deposit (EMD) was fixed as 1% of the estimated cost and the EMD would be returned to the unsuccessful tenderer. The security deposit of 5% of the contract value would also be received from the successful tenderer at the time of award of the contract.
(ii) The respondent/claimant participated in the tender and their bid was accepted by the petitioner vide letter dated 12.6.2017. Further, the respondent/claimant was directed to deposit the security deposit of Rs.5 lakhs and execute an agreement with the petitioner. Pursuant to that, the petitioner and the respondent/ claimant entered into an agreement on 29.6.2017 and the respondent/claimant remitted a sum of Rs.5 lakhs towards security deposit and the work order was issued to the re
Premature termination of a contract does not grant right to forfeit the security deposit without proof of actual loss, as it constitutes a penalty under the contract law.
The main legal point established in the judgment is that the arbitrator's decision must be in accordance with the terms of the agreement, and failure to do so can result in the decision being set asi....
Point of law: Not only is the writ jurisdiction of this Court invoked in a purely contractual matter, having no colour of public law and the writ remedy is thus not maintainable.
A party to a contract taking security deposit from the other party to ensure due performance of the contract, is not entitled to forfeit the deposit on ground of default when no loss is caused to him....
The court held that the tribunal's award of refund and risk and cost compensation was justified, but the risk and cost amount should be modified to reflect the corrected value of work done.
The court affirmed the right to forfeit a security deposit for non-completion of work as per contract terms, emphasizing the necessity of proving actual damages.
The court held that a contract's termination after expiration is unlawful, necessitating the return of forfeited amounts when unjustified actions take place.
A party's entitlement to damages in breach of contract cases must correlate with actual damages suffered; security deposits can be refunded when no loss is incurred by the other party.
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