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2025 Supreme(Online)(KAR) 4853
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
MR JUSTICE V KAMESWAR RAO, MR JUSTICE S RACHAIAH, JJ
Jalavahini Consultant Service (P) Ltd – Appellant
Versus
Commissioner Of Horticulture – Respondent
COMAP NO. 63 OF 2022 c/w COMAP NO. 62 OF 2022
Advocate Appeared:
For the Appellant :SRI. NAGARAJ .S, ADVOCATE
For the Respondent: SRI. ADITYA VIKRAM BHAT, AGA FOR R1
The court upheld the principle that payments under a consultancy agreement must be proportionate to the work completed, rejecting claims for additional fees not supported by evidence.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to arbitral award - The appellant contested the setting aside of the award granting Rs.28,71,437/- for consultancy services, while the respondent's counter-claim of Rs.2,29,631/- was upheld - The court found that the learned Sessions Judge correctly determined that the appellant was entitled only to 2.5% of the actual work completed, amounting to Rs.15,45,639/-, and that the claim for additional work was not substantiated. (Paras 24-27)
(B) Contractual Obligations - The court emphasized that payments must be proportionate to the work completed as per the MOU, and the appellant's claim for additional fees was not supported by evidence. (Paras 22-23)
(C) Limitation - The court noted that the claim for additional work was made after the respondent's demand for a refund, which undermined its validity. (Paras 24-26)
(D) Public Policy - The court upheld the Sessions Judge's decision to set aside the arbitrator's award on the grounds of public policy and lack of evidence. (Paras 26-27)
Facts of the case:
The appellant was engaged as a Project Management and Implementation Consultant under a MOU for a project valued at Rs.10 crores, but claimed additional fees for work done beyond the original scope. The respondent counter-claimed for excess payments made.
Findings of Court:
The court upheld the Sessions Judge's ruling that the appellant was entitled only to a proportionate fee based on the actual work completed, and the claim for additional fees was dismissed.
Issues: The main issues included the validity of the appellant's claim for additional fees and the appropriateness of the Sessions Judge's ruling on the arbitrator's award.
Ratio Decidendi: The court ruled that the appellant's claims were not substantiated by evidence and that the learned Sessions Judge acted correctly in setting aside the arbitrator's award based on public policy considerations.
Result: Appeals dismissed.
CAV JUDGMENT
(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)
The challenge in these appeals is by M/s. Jalavahini Management Service Prigvate Limited to an order dated 14.12.2021 passed by the Court of LXXXV Addl. City Civil and Sessions Judge at Bengaluru in two appeals being Com.A.P.No.67/2020 and Com.A.P.No.46/2020.
2. The Com. A.P. No.67/2020 was filed by M/s. Jalavahini Management Consultant Service Private Limited (in short, ‘M/s. JMCSP Ltd.’), whereas the Com.A.P. No.46/2020 was filed by the Commissioner of Horticulture of the Karnataka State Department of Horticulture.
3. Suffice to state that the Com. A.P.46/2020 was allowed in as much as the award of the learned Arbitrator in AC 93/2019 allowing the claim of M/s. JMSP Ltd. to a sum of Rs.28,71,437/- which was allowed by the learned Arbitrator has been set aside and it was further held that the Commissioner of Horticulture is entitled to recover the amount of Rs.2,29,631/- from M/s. JMSP Ltd. The status of the parties in these appeals shall be referred as ‘Appellant’ to mean M/s.JMSP Limited and the respondent ‘Commissioner of Horticulture’.
4. The facts to be noted for the purpose of this order are, the respondent called a tender to engage the services of technical competent firms or groups for taking up consultancy services as “Project Management and Implementation Consultant” (in short, ‘PMIC’).
5. The appellant being a successful bidder, received Government Order dated 25.05.2009 appointing it as the PMIC and a Memorandum of Understanding (MOU) was executed on 25.05.2009 between the parties.
6. The consultation was for a period of 18 months from the date of order with a provision for extension of mutual agreement. According to the appellant, the MOU dated 25.05.2009 was to be in force till the completion of the civil works. According to the appellant, the remuneration of the appellant was fixed at Rs.25,00,000/-. It was the case of the appellant that, it has done its part of work and prepared the design, plan, estimates, detailed project report and tender documents, and the same were submitted to the respondent.
7. On the basis of the report submitted by the appellant, the respondent had entrusted the civil works to M/s. Krishna Constructions. The civil work continued till 14.05.2012. The work was supervised by the appellant as per the MOU.
8. It was the case of the appellant that the respondent has asked the appellant to carry out some extra work i.e., road formation, path ways, levelling fencing/compound to be taken up to the backward linkage center and forward linkage center vide letters dated 20.03.2012/05.04.2012. It was the case of the appellant that there was a delay in the progress of the work due to ban on sand mining and stone crushing, and also due to correction of the civil works and other allied reasons as required by the respondents. It was stated that the respondent was paid Rs.17.75 Lakhs. It was also the case of the appellant that the respondent was liable to pay a sum of Rs.28,71,437/- towards the additional work and supervision charges and further the balance amount of Rs.7,25,000/- as agreed under the work order.
9. When such was the case, the appellant received a letter dated 09.08.2017 from the respondent, wherein the respondent made a claim for Rs.2,29,360/- against the appellant. A legal notice got issued on 31.10.2017 to the respondent claiming Rs.35,96,437/-.
10. Suffice to state that the learned Arbitrator was appointed on the strength of the order passed by this Court in C.M.P. No.184/2018.
11. In its claim petition, the appellant had made a claim for Rs.81,81,847/- together with interest at the rate of 18% from the date of claim till the date of realization.
12. The respondent, who filed objections to the claim petition has also made a counter-claim. Based on the pleadings of the parties, the learned Arbitrator passed an award dated 06.03.2020 holding that the respondent is entitled to recover from the appellant a sum of Rs.2,29,631/-, after deductin
