An arbitrator cannot lift the corporate veil or bind non-signatories, and damages for breach of contract require proof of actual loss.

ORDER

This is a petition filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act) challenging the award dated 01.12.2020 passed by the learned Arbitrator.

2. Heard both.

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

(i) The petitioner entered into a Memorandum of Understanding (MoU) dated 11.12.2015 with the respondent for providing financial assistance to the tune of Rs.2.50 Crores to be utilised by the respondent to meet their obligations for providing a performance bank guarantee of Rs.3.52 Crores in respect of a work order issued by the Kolkata Port Trust (KOPT). This money was agreed to be utilised as a margin money and the same would have to be returned to the petitioner within 30 days, but not later than 89 days at any cost from the date of the MoU. A promissory note was executed and a post dated cheque was given as a security towards the financial assistance that was extended to the respondent.

(ii) The grievance of the petitioner is that the said amount was not repaid back by the respondent as agreed under the MoU and the cheque that was deposited was also dishonoured. Hence, the petitioner initiated arbitration proceedings against the respondent as provided under Clause 3.6 of the MoU and for a direction to the respondent to pay a sum of Rs.2.50 Crores along with interest at the rate of 24% per annum.

(iii) Before the learned Arbitrator, the respondent filed a statement of defence and also made a counter claim. The defence taken by the respondent was as follows:

(a) The respondent was awarded with a handling agency licence by the KOPT and the respondent had to submit a performance bank guarantee to the tune of Rs.3.52 Crores to the KOPT in terms of the tender. Therefore, the respondent approached the petitioner for financial assistance and for executing the work together. It was also agreed between the parties that they would share the profit and loss in equal ratio.

(b) According to the respondent, the petitioner had to contribute a sum of Rs.2.5 Crores in order to enable the respondent to execute a performance bank guarantee to the tune of Rs.3.52 Crores in favour of the KOPT. Apart from that, the petitioner was also supposed to arrange for the equipment in order to enable the respondent to carry out the work.

(c) The petitioner did not fulfil their duties and responsibilities provided under the MoU and as a result, the respondent lost the tender and the performance bank guarantee amount to the tune of Rs.3.52 Crores was forfeited by the KOPT. In view of the same, the respondent alleged that a breach of the MoU was committed by the petitioner and as a consequence, the respondent sought for a counter claim to the tune of Rs.75 Crores along with interest.

(iv) Before the learned Arbitrator, The petitioner examined C.W.1 besides marking Ex.C.1 to Ex.C.59. The respondent examined R.W.1 and marked Ex.R.1 to Ex.R.30. Based on the pleadings, the learned Arbitrator framed the following issues:

“(1) Whether the clause of bank guarantee of the MoU dated 11.12.2015 would constitute an independent short term financial arrangement/ agreement between the parties de hors rest of the terms of the said MoU ?

(2) Whether the claimant is entitled to a sum of Rs.2,50,00,000/- from the respondent along with interest at the rate of 24%?

(3) Whether the claimant/respondent has committed material breach of the MoU dated 11.12.2015?

(4) Whether the breach of obligation under the MoU dated 11.12.2015 has caused the termination of the work order by Haldia Port Trust? And

(5) Whether the respondent is entitled to counter claim of Rs.75 lakhs along with