Liquidated damages must be genuinely reflective of actual loss; their retention without proof of damage is unjustified under relevant contract provisions.

ORDER :

N. Anand Venkatesh, J.

This petition has been filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act) against the award dated 06.4.2022 passed by the learned Arbitrator to the extent the claims made by the respondent/claimant were allowed.

2. Heard both.

3. The facts leading to filing of this petition are as follows:

(i) The petitioner issued a tender dated 24.2.2013 for restoration of the damaged revetment structure at east of east quay due to cyclones ‘Thane’ and ‘Nilam’. The respondent submitted his tender and was declared as a successful bidder, pursuant to which, the parties entered into an agreement on 03.10.2013. The work involved as many as 11 kinds of work and the respondent took over the site and commenced the work on 18.10.2013. As per the agreement, the time for completion of work was 10 months from the date of taking over the site and it was expected to be completed on 17.8.2014. However, the work was completed only on 24.9.2016 after extension of time was granted by the petitioner. Thus, there was a delay of 768 days in completing the work.

(ii) The petitioner sought to recover the liquidated damages from the respondent and withheld a sum of Rs.49,19,960/- towards the same. Apart from that, the respondent also had other claims against the petitioner. The trigger notice was issued and a petition was filed before this Court in O.P.No.763 of 2018 by the respondent. Pursuant to the order dated 06.12.2018 passed in the said original petition, the learned Arbitrator was appointed by this Court.

(iii) In the claim statement filed before the learned Arbitrator, the respondent/claimant made the following claims against the petitioner:

“A. To repay/return the liquidated damages to an extent of Rs.49,19,960/- (Rupees Forty Nine Lakhs Nineteen Thousand Nine Hundred and Sixty Only) wrongfully deducted from the claimant together with 18% interest per annum as mentioned in Annexure – A;

B. To return the Service Tax of a sum of Rs.7,23,754/- (Rupees Seven Lakhs Twenty Three Thousand Seven Hundred and Fifty Four Only) deducted contrary to the agreement from the claimant together with 18% interest per annum as mentioned in Annexure – B;

C. To return a sum of Rs.2,18,836/-(Rupees Two Lakhs Eighteen Thousand Eight Hundred and Thirty Six Only) wrongly deducted towards the room rent charges from the claimant together with 18% interest per annum as mentioned in Annexure – C;

D. To pay a sum of Rs.1,06,60,000/-(Rupees One Crore Six Lakhs and Sixty Thousand Only) towards the rental charges of the machinery viz., Excavator Ex 220 and a container for the extended period as mentioned in Annexure – D;

E. To pay a sum of Rs.29,38,000/-(Rupees Twenty Nine Lakhs and Thirty Eight Thousand Only) towards the salaries paid to the employees for the extended period as mentioned in Annexure – E;

F. To pay a sum of Rs.36,48,147.40/-(Rupees Thirty Six Lakhs Forty Eight Thousand Hundred and Forty Seven and Forty Paise Only) towards the escalation of materials procurement cost incurred during the extended period to the claimant as mentioned in Annexure – F;

G. To pay a sum of Rs.2,54,002/- (Rupees Two Lakhs Fifty Four Thousand and Two Only) towards the renewal of insurance charges which was time and again renewed by the claimant as mentioned in Annexure G;

H. To pay a sum of Rs.1,03,423.30/-(Rupees One Lakh Three Thousand Four Hundred and Twenty Three and Thirty Paise Only) towards the renewal of bank guarantee charges which was time and again renewed by the claimant as mentioned in Annexure – H';

I. To pay a sum of Rs.1,20,000/-