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2025 Supreme(Online)(Mad) 36120
IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE CHIEF JUSTICE, CJ
Indo Pacific Software & Entertainment Ltd. – Appellant
Versus
Kone Corporation, Finland – Respondent
O.P.Nos.704 and 711 of 2007
For the Appellants/Petitioners: Shri Sankaranarayanan
For the Respondents: Not mentioned
The agreements dated 19.12.2005 were dominant and not superseded by subsequent agreements; the Arbitrator's award was set aside for being contrary to public policy and lacking evidential support.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11(6), 34 and 37 - Dispute concerning supply and installation of elevators and escalators - Appellant claimed unpaid dues and damages for non-supply; first respondent claimed cancellation charges - Arbitrator awarded partial relief to both parties, later set aside by Single Judge - Court held that the agreements dated 19.12.2005 were dominant and not superseded by subsequent agreements dated 16.2.2006, which only pertained to escalators - Award set aside as being contrary to public policy and perverse. (Paras 11, 15, 16, 17, 36, 42)
(B) Public Policy - Scope of interference with arbitral awards - Courts should not interfere unless findings are arbitrary, capricious, or perverse - An award based on insufficient evidence or contradictory findings is liable to be set aside. (Paras 11, 12, 22)
(C) Damages - Clause excluding consequential damages in contract valid - No entitlement for damages if expressly prohibited by contract terms. (Paras 30, 32)
Facts of the case:
Appellant engaged in engineering and construction entered into agreements with first respondent for elevators and escalators for two projects; disputes arose over non-supply and payment.
Findings of Court:
The learned Single Judge found that the Arbitrator's award was inconsistent and not supported by evidence, leading to its invalidation.
Issues: 1. Whether the agreements were superseded. 2. Whether the Arbitrator's findings were contrary to public policy. 3. Whether damages awarded were valid.
Ratio Decidendi: The agreements dated 19.12.2005 were deemed dominant, and the Arbitrator failed to consider the incorporation clause properly; the award was set aside for being perverse.
Result: Appeal dismissed with costs.
| Table of Content |
|---|
| 1. factual background of the case (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. scope of challenge under arbitration law (Para 9 , 10 , 11) |
| 3. issues framed by the arbitrator (Para 12 , 13 , 14) |
| 4. court's findings on arbitrator's award (Para 15 , 16) |
| 5. interpretation of contract clauses (Para 18 , 19 , 20 , 21) |
| 6. finality of court's previous decision (Para 22 , 23 , 24) |
| 7. limits of arbitrator's jurisdiction (Para 25 , 26 , 27) |
| 8. consideration of claim for damages (Para 28 , 29) |
| 9. validity of clauses excluding damages (Para 30 , 31) |
| 10. nature of damages claimed (Para 32 , 33 , 34 , 35) |
| 11. errors in damages awarded (Para 36 , 37 , 38) |
| 12. court's power to modify awards (Para 39 , 40 , 41) |
| 13. final decision of the court (Para 42) |
THE CHIEF JUSTICE
Appellant is engaged in the business of engineering and construction and provides comprehensive technical and allied services for infrastructure development. First respondent is engaged in the business of manufacture and supply of elevators and escalators, and maintenance thereon under the collaboration with Kone Corporation, Finland.
2. Appellant was also in the business of constructing and managing entertainment complexes. It needed elevators and escalators in two of its projects – one Wardhaman Nagar Project and the other VIP Road Project. The Wardhaman Nagar Project comprises a commercial multiplex, including Big Bazaar and a multiplex, while the VIP Road Project was another commercial and entertainment complex.
3. Appellant and first respondent had entered into two base agreements – both dated 19.12.2005 – one in respect of supply, erection and installation of one Goods-cum-Passenger Elevator and four Passenger Elevators (totally 5) along with service specifications valued at Rs.70,50,000/- and the other in respect of supply, erection and installation of seven escalators valued at Rs.1.22 Crores. Five elevators and one escalator were to be supplied to Wardhaman Nagar Project and six escalators for the VIP Road Project.
4. The agreements dated 19.12.2005 were executed by the parties as offer letters, which included a payment schedule. As regards supply of escalators, two definitive agreements, both dated 16.2.2006, were entered into. One agreement called Agreement “A” was for design and supply, priced at Rs.68,02,424/- and the other called Agreement “B” was for installation, testing and commissioning priced at Rs.54,92,566/-. Both agreements featured arbitration clauses and other provisions. No such definitive agreement was executed for elevators.
5. Only four elevators and one escalator were supplied and installed. It is appellant's case that VIP Road Project was left incomplete. It is also appellant's case that not even a single escalator was supplied for the Wardhaman Nagar Project. In short, of the total number of five elevators sought, four were supplied and one was not given; and of the total seven escalators required to be supplied, only one was given, six not supplied. Therefore, disputes arose.
6. Appellant paid a sum of Rs.72,33,490/-, leaving a balance of Rs.15,93,490/-, which first respondent claimed. First respondent also sought Rs.1,09,00,359/- as cancellation charges. In response, appellant raised a counter-claim totalling Rs.11,98,44,385/- citing loss of business income, non-supply of equipment, mental agony and loss of goodwill. Appellant relied on termination notices from various commercial tenants, which were marked as evidence to substantiate its claim of damages and loss of business.
7. Thereafter, first respondent filed two separate petitions, O.P.Nos.704 and 711 of 2007 – one regarding elevators and the other relating to escalators under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (the Act). Pursuant to a common order dated 19.9.2008, this court was pleased to appoint Mr.Justice S.Jagadeesan (Retired) as the Sole Arbitrator. The arbitrator and arbitral proceedings was common and the award dated 20.10.2010 also was common.
8. In the trial before
