CARBP-1267-2018 (final).doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION IN ITS COMMERCIAL DIVISION COMMERCIAL ARBITRATION PETITION NO. 1267 OF 2018 Conso Feeds Eara P.O., Neelamperoor, Alappuzha, District 686534, represented by its Managing Partner ] ] ] ] ...Petitioner Versus Alfa Laval (India) Pvt. Ltd. Registered Office at Mumbai-Pune Road, Dapodi, Pune – 411012, Through its Managing Director ] ] ] ] ...Respondent —————— Mr. Anil D’souza, Mr. Akash Rebello, Mr. Paras Gosar and Mr. Nadeem Shama for the Petitioner. Mr. Sharan Jagtiani, Senior Advocate a/w Mr. Rohil Bandekar, Mr. Nitin Khare, Mr. Ritwik Kulkarni and Mr. Akhil Khupade for the Respondent. —————— Coram : Sharmila U. Deshmukh, J. Reserved on : 10th July, 2026. Pronounced on : 6th August, 2026. Judgment : 1. The present Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 is at the instance of the original Claimant being partly aggrieved by the impugned Award to the extent that the Claims 15(2) to 15(8) have been held to be barred by Clauses 10 (a) and (b) of Techno Commercial Agreement dated 10th September, 2014 and capped by the Arbitrator to the extent of the amount of the Bank Sairaj 1 of 36 2026:BHC-OS:17613 CARBP-1267-2018 (final).doc Guarantee which is invoked and encashed by the Claimant. 2. The arbitration agreement was invoked by the Claimant seeking resolution of disputes which arose between the parties under an Agreement of 10th September, 2013 executed between the Claimant and the Respondent for the purchase and installation of fishmeal plant. 3. The Petition sets out that by purchase order of 11th September, 2013 read with Techno Commercial Agreement dated 10th September, 2013, the Claimant had purchased fishmeal plant from the Respondent, which the Respondent was required to supply, erect and commission. Despite various attempts, the plant could not be commissioned solely due to the faulty design and equipment supplied by the Respondent and the Claimant called upon the Respondent to take back the plant. As there was no refund of the price of the plant as initially claimed by the Claimant, arbitration was invoked. In the Section 11 application, the learned Sole Arbitrator came to be appointed by this Court. 4. The statement of the claim (SOC) sets out that the pursuant to the discussions and negotiations, on 10th September, 2013, the Respondent submitted the final quotation with detailed payment terms and in response thereof, on 11th September, 2013, the Claimant issued the purchase order, which was confirmed. The entire payment of Sairaj 2 of 36 CARBP-1267-2018 (final).doc the purchase order was paid in time aggregating to Rs. 4,94,49,669/- and Bank guarantee was issued in favor of the Respondent in the sum of Rs. 2.45 crores representing the balance payment and performance guarantee was given by the Respondent in favor of the Claimant. As per the Agreement, the erection and the commissioning of the fish meal plant was to be completed by 31st March, 2014, which was delayed for reasons attributable to the Respondent. On 5th September, 2014, the Respondent invoked the Bank guarantee which would have expired only on 24th September, 2014. On 19th September, 2014, the first trial run of the plaint was conducted, which failed. The email correspondences are relied upon to substantiate that the subsequent eight production trials till 12th December, 2014 also failed. 5. The Claimant had availed financial assistance to the tune of 7,06,75,777/- from Federal Bank in addition to incurring huge interest amount to the tune of Rs. 2,01,41,515/-. The claim under various heads was for sum of Rs. 17,64,81,771/-. 6. In its Written Statement-cum-Counterstatement of claim, the Respondent claimed that the Respondent could not erect and install the plant immediately as the site was not ready. The provisions of utilities could be made only in September, 2014 when the first trial was conducted. The Claimant failed to supply sufficient quantity of raw material to run the plaint at its optimum level. The commercial Sairaj 3 of 36 CARBP-1267-2018 (final).doc operation of the plant commenced on 12th November, 2014 without any interruption and that there was non-compliance of the conditions imposed by the Kerala Pollution Control Board for operating the said plant, which was violated resulting in pollution. The Claimant in collusion with the ICICI Bank got the performance bank guarantee encashed fraudulently much before the expiry date and further sent a legal notice on 21st October, 2015 demanding sum of Rs. 16,46,34,828/-. There was successful and satisfactory commission and performance trial of the fishmeal plant giving no cause of action for any liability upon the Respondent. The counter claim of the Respondent was for a sum of Rs. 44,50,000/- plus interest at the rate of 15% per annum being encashment of performance bank guarantee by the claimant. 7. The Learned Arbitrator held that there was breach of contract by the Respondent and the Claimant had performed its part of obligation under the Techno Legal Commercial Agreement dated 10th September, 2013 and Purchase Order dated 11th September, 2013. It further held that the Claimant had rightly invoked the performance bank guarantee and answered the counter claim against the Respondent. Insofar as the claim for Rs 17,64,81,771/- is concerned, the learned Arbitrator directed refund of purchase price of Rs. 4,45,00,000/- with interest therein at the rate of 9% p.a. from the date of Award till the payment Sairaj 4 of 36 CARBP-1267-2018 (final).doc and realization and upon such payment, the Respondent was entitled to take back its supplies and equipment from the Claimant’s site of the fishmeal plant, within a period of six months from the date of payment. The claims from 15(2) to 15(8) were held to fall within the ambit of Clause 10(a) and (b) of the general terms and conditions in Section VI of the Techno Commercial Agreement and held to be limited to amount of the bank guarantee which was invoked and encashed by the Claimant. 8. Mr. D’souza, learned counsel appearing for the Petitioner would point out that the claims 15(2) to (7) were in respect of excise duty, sales tax, freight charge, etc. which were incurred by the Claimant towards the installation of the plant. He would further point out the relevant Issue No 5 as to the entitlement of the Claimant to the sum of Rs.17,64,81,771/- or any part thereof. He submits that as the Arbitrator has directed the refund of the purchase price of the plant, it is accepted that there is a breach of contract by the Respondent. He would submit that as the breach has been admitted, there was no question of application of clause 10(a) and 10(b) of the Agreement to direct losses. He submits that the claims raised by the claimant were not indirect, but actual expenses incurred and not a claim based on reimbursement of actual expenses. He submits that the defense of the claims being barred by Clause 10(a) is not the pleaded case of the Sairaj 5 of 36 CARBP-1267-2018 (final).doc Respondent and therefore the Claimant did not have an opportunity of dealing with the same. 9. He would submit that there is an inherent contradiction in the Award by pointing out that the learned Arbitrator while rejecting other claims held it to be barred by Clause 10(a) of the Techno Commercial Agreement contrary to its own finding that Clause 10(a) was attracted only after the machinery was supplied and commissioned. He submits that as the Tribunal has held that the plant has not commissioned, there is no question of clause 10(a) being applied to the present case. He has taken this Court in detail through the findings of the Arbitrator in paragraph 126 to 136 and 147 of the Award. He submits that the claim towards payment of interest under Claim 15(7) cannot be construed to be an indirect or consequential damage or liability as provided in Clause 10 and according to him, there is error in not awarding interest from date of payment of purchase price and pendente lite. He submits that by the clarificatory order passed under Section 33 of Arbitration Act, the Arbitrator has clarified that interest pendente lite has not been granted. He submits that once the Arbitrator comes to a conclusion that damages are payable due to failure to commission the plant, damages by way of interest from date of payment of purchase price and pendente lite has to follow. He submits that the Claimant is entitled to interest on all the claims as Sairaj 6 of 36 CARBP-1267-2018 (final).doc provided in Section 31(7) of the Arbitration Act and the refusal to award such interest is against the public policy of India and liable to be set aside. 10. He submits that Claims 15(2) to 15(7) cannot be treated as consequential damage or loss of profit as a matter of fundamental and substantive law of India. He submits that it is not a question of interpretation of contract, but a matter of application of substantive law. He submits that any finding to the contrary will be perverse, patently illegal as well as violative of public policy. He submits that the loss on account of payment of excise duty, sales tax, freight charges, etc. were clearly direct and not consequential loss and once the Arbitrator arrives at a conclusion that Clause 10(a) relates only to consequential damages, he could not have excluded Claims 15(1) to 15(7). He submits that the claims being direct damages were not capable of being excluded by Clause 10(a) and ought have been allowed. 11. He would further submit that upon plain reading of the Agreement, clause 10(a) and (b) is superseded by warranty clause and offer letter dated 10th September, 2014 by virtue of clause 10(h) as per the general terms and conditions. He submits that the warranty clause makes it clear that the Respondent is not responsible for any consequential or indirect damages and by providing an express clause Sairaj 7 of 36 CARBP-1267-2018 (final).doc for damages in the main Agreement, Clause 10(a) and (b) stands excluded. 12. He submits that the Petitioner’s claim is for expenses as well as loss of profits which are direct damages and Claim 15(8) which is loss of business opportunity is a direct damage and not an indirect damage. He submits that the Arbitrator erred in rejecting the arguments of the Claimant that the rule of contra proferentem must apply to the interpretation of clause 10(a). He submits that the contract must be interpreted against the person who has drafted the contract and in the present case, the offer sheet has been prepared by the Respondent and must be interpreted against the Respondent. 13. He submits that the reading of the Tribunal of Clause 10(a) amounts to rewriting of the contract between the parties and is an error apparent on the face of record, perverse and illegal. He submits that the interpretation of the Arbitrator of clause 10(a) of the contract is an impossible interpretation which would warrant interference under Section 34 of Arbitration Act. 14. He would further submit that the written statement of the Respondent does not speak of limitation of liability and despite thereof, the Arbitrator has limited the liability to the extent of bank guarantee. He submits that the claims set out in paragraph 130 of the Award have been accepted by the Arbitrator, however, the Arbitrator Sairaj 8 of 36 CARBP-1267-2018 (final).doc has limited the same to the amount of Bank guarantee, which is a perverse finding. In support, he relies upon the following decisions : Deepak Fertiliser and Petrochemical Corporation vs. Davy Mckee (London) Ltd.1 Union of India vs. Saraswat Trading Agency2 South East Asia Marine Engineering and Constructions Ltd. vs. Oil India Ltd.3 Delhi Metro Rail Corporation Ltd. vs. Delhi Airport Metro Express Pvt. Ltd.4 15. Per contra, Mr. Jagtiani, learned Senior Advocate appearing for the Respondent would submit that the apart from refund of purchase price, the other claims were in the nature of damages for the breach of the contract. He submits that the contention that the Respondent has not taken the defence of Claims 15(2) to 15(8) being excluded by Clause 10, cannot be entertained by Section 34 Court as it would amount to re-appreciation of evidence. He submits that it is well settled that the Arbitrator is the best judge of the quality and quantity of evidence. He further points out that the Respondent has specified that its liability as per the agreed terms is restricted to the performance guarantee and the Claimant had sufficient notice about denial of its claim by reason of Clause 10(a) of the Agreement. 16. He would further submit that the entire submissions of Mr. 1 (1998) EWCA Civ 1753. 2 (2009) 16 SCC 504. 3 (2020) 5 SCC 164. 4 (2024) 6 SCC 357. Sairaj 9 of 36 CARBP-1267-2018 (final).doc D’souza is to assail the interpretation of the contract by the Arbitrator, which is impermissible in Section 34 Petition. He submits that the view taken by the Arbitrator being a possible view cannot be interfered and substituted by view of this Court. He has taken this Court to Clause 10(a) of the Agreement to contend that the same is divided in two parts and in the first part damages on account of the specified eventualities are excluded from the Respondent’s liability and second part capped the liability of the Respondent at the value of performance bank guarantee. He submits that it is also a possible interpretation that the warranty clause does not supersede Clause 10 of general terms and condition. He submits that the Award is founded on interpretation of the terms of the contract and there is no issue of violation of fundamental and substantive law of India. 17. He would further submit that power of the Arbitrator to award pre-reference interest, pendente lite interest, and post award interest under Section 31(7) is well settled and the relief sought in the present case was to award future interest and costs against the Respondent. He submits that the Arbitrator by the additional award has declined the Claimant’s relief of grant of pendente lite interest. He submits that discretion has been rightly exercised by the arbitrator, no interference is warranted. To support his contentions, reliance is placed on the following decisions: Sairaj 10 of 36 CARBP-1267-2018 (final).doc Securitrans India Pvt. Ltd. vs. FIS Payment Solutions and Services Pvt. Ltd.5 United India Insurance Company Ltd. vs. UPL Limited6 Thermax Ltd. vs. Rashtriya Chemicals and Fertilizers7 Associate Builders vs. Delhi Development Authority8 Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.9 Sangyong Engineering and Construction Company Ltd. vs. National Highways Authority of India10 Larsen Air Conditioning and Refrigration Company vs. Union of India11 Batliboi Environmental Engineers Ltd. vs. Hindustan Petroleum Corporation Limited12 Reliance Infrastructure Limited vs. State of Goa13 S. V. Sundaram vs. State of Karnataka14 Rajasthan State Mines and Minerals Ltd. vs. Eastern Engineering Enterprises15 Associated Engineering Co. vs. Government of Andhra Pradesh16 5 Judgment dated 23.12.2023 passed in CARBP No. 750 of 2024. 6 2026 SCC OnLine Bom 2679. 7 2025 SCC Online Bom 5010. 8 (2015) 3 SCC 49. 9 (2003) 5 SCC 705. 10 (2019) 15 SCC 131. 11 2023 SCC OnLine SC 982. 12 (2024) 2 SCC 375. 13 (2024) 1 SCC 479. 14 (2024) 3 SCC 623. 15 (1999) 9 SCC 283. 16 (1991) 4 SCC 93. Sairaj 11 of 36 CARBP-1267-2018 (final).doc Ramnath International Construction (P) Ltd. vs. Union of India17 Vilayati Ram Mittal (P) Ltd. vs. Reserve Bank of India18 John Peter Fernandes vs. Saraswati Ramchandra Ghanate since deceased and Others19 Pam Developments Private Limited vs. State of West Bengal20 UHL Power Company Limited vs. State of Himachal Pradesh21 Dyna Technologies Private Limited vs. Crompton Greaves Limited22 Parsa Kente Collieries Limited vs. Rajasthan Rajya Vidyut Utpadan Nigam Limited23 Rashtriya Ispat Nigam Limited vs. Dewan Chand Ram Saran24 South East Asia Marine Engineering and Constructions Limited vs. Oil India Limited25 Morgan Securities and Credits Private Limited vs. Videocon industries Limited26 Hyder Consulting (UK) Limited vs. Governor, State of Orissa through Chief Engineer27 Secretary, Irrigation Department, Government of 17 (2007) 2 SCC 453. 18 2017 SCC OnLine Bom 8479. 19 2023 SCC OnLine Bom 676. 20 2024 SCC OnLine SC 2247. 21 (2022) 4 SCC 116. 22 (2019) 20 SCC 1. 23 (2019) 7 SCC 236. 24 (2012) 5 SCC 306. 25 (2020) 5 SCC 164. 26 (2023) 1 SCC 602. 27 (2015) 2 SCC 189. Sairaj 12 of 36 CARBP-1267-2018 (final).doc Orissa vs. G. C. Roy28 NHAI vs. M. Hakeem29 S. V. Sundaram vs. State of Karnataka30 18. In rejoinder, Mr. D’souza would submit that there is a patent illegality as Clause 10(a) does not include interest and therefore, the Arbitrator could not have limited the claim for interest while capping the liability. He submits that the Award is severable as claim 15(1) has been granted and claim 15(2) to 15(8) has been rejected, which are different heads of the claim and therefore, good part of the Award can be retained while severing the bad part of the Award. He submits that the decision in the case of OPG Power Generation Private Limited vs. Enexio Power Cooling Solutions India31 will apply when the ultimate conclusion is not disturbed and not when there is an inherent contradiction and ultimate conclusion would change. He would further distinguish the judgment on interest cited by Mr. Jagtiani to contend that the bank interest claimed is pendente lite interest and Section 31(7) discretion has not been exercised. He submits that the bank interest is raised as claim only to show what has been paid as interest. 19. Rival contentions now fall for determination. 20. At the heart of controversy is Clause 10(a) and (b) and Warantee 28 (1992) 1 SCC 508. 29 (2021) 9 SCC 1. 30 (2024) 3 SCC 623. 31 2024 INSC 711. Sairaj 13 of 36 CARBP-1267-2018 (final).doc Clause of the Techno-Commercial Agreement dated 10th September, 2013. In so far as refund of purchase price is concerned, the Learned Arbitrator has held that there is breach of contract by the Respondent and had awarded refund of purchase price and rejected Claims 15(2) to 15(8). Claims 15(2) and 15(3) are claims for amounts of excise duty, state tax, freight and insurance charges. Claim 15(4) is a claim for expenses incurred for accommodation of Respondent’s engineers and officials. Claim 15(5) is a claim for expenses incurred for upgradation of infrastructure to suit contracted plant and supporting machinery including drier. Claim 15(6) is claim for raw material cost for seven trials. Claim 15(7) claims bank interest upto 31st October, 2016 and Claim 15(8) is damage suffered on account of business opportunity loss, mental agony and loss of reputation. 21. In paragraph no. 15 of the SOC, the Claimant has set out various claims against the Respondent, as under: 1. Price of the Plant Rs. 4,45,00,000.00 2. Excise Duty, Sales Tax Rs. 49,49,669.000 3. Freight charges and insurance Rs. 4,33,608.000 4. Expenses for accommodation of Alfalaval’s Engineers and Officials Rs. 4,15,250.000 5. For up-gradation of infrastructure to suit contracted Plant and supporting machinery including drier Rs. 2,61,27,517.000 6. Raw Materials cost for seven trial runs Rs. 18,22,335.000 7. Bank interest upto 31.10.2016 Rs. 2,26,83,392.000 8. Damage suffered on account of business Sairaj 14 of 36 CARBP-1267-2018 (final).doc loss’ opportunity loss, mental agony and loss of reputation limited to Rs. 8,00,00,000.00 Total Rs. 18,09,31,771.00 Less : Amount of performance Guarantee enforced to mitigate the loss without prejudice to any of the claims as above Rs. 44,50,000.00 Balance Payable Rs. 17,64,81,771.00 22. The Learned Arbitrator has held that Claims 15(2) to 15(8) fall within the ambit of Clause 10(a) and capped the same to the limit of bank guarantee. The general terms and conditions are contained in Clause 10(a), 10(b), 10(h) of the Agreement dated 10th September, 2013 and reads as under : “10. General a) Consequential Damages We shall not be liable for any consequential damages, loss of profit, costs and/or expenses if any incurred by you or by any other person employed by you or representing you directly or indirectly, any third party obligations entered into by you or any statutory / legal obligation, awards, damages, statutory or legal action, costs or expenses in relation to the performance or any other feature of the plant supplied and / or erected and / or commissioned by us. Our obligation in this contract including all causes and any representations made by us to you shall not exceed the value of the performance bank guarantee/corporate guarantee or any other compensation agreed by us in the contract and shall be applicable only to faults noticed and not corrected in the performance of the equipment during the warranty period. All the obligations under the warranty period given by us shall be subject to your operating the plant and equipment as per the agreed method of operation as normally understood/specifically mentioned by us. The Sairaj 15 of 36 CARBP-1267-2018 (final).doc performance warranty obligations are strictly subject to the battery limits, exclusions and output parameters mentioned in the contract. b) Secondary Liability Secondary liability such as indemnification for any loss caused by stoppage of the plant or due to any other reasons concerning this contract will under no circumstances be acceptable to us and we shall not be responsible for such losses. h) Order of Precedence Wherever any clauses as mentioned in this Contract are partly or fully at variance with the General Terms and Conditions of Sale, the printed form of which is enclosed, then clauses specifically entered into as part of this Contract shall have precedence and shall override the corresponding clauses in the General Terms and Conditions of Sale.” 23. The Respondent in paragraph 8 of its written statement cum counterstatement of claim specifically denied the liability for any consequential damages or any secondary liability, including indemnification for any reason concerning the contract and capping of the liability to the value of performance bank guarantee referrable to Clause 10(a) and (b) of the contract. The impugned Award records at paragraph 123, the case of the Respondent that the claims made in paragraph 15 of SOC are in teeth of Clause 10(a) and (b) and in nature of damages without any averments in support thereof by relying on Section 73 of Contract Act. In paragraph 124, the submission of Respondent is recorded that claims would be limited to warranty Sairaj 16 of 36 CARBP-1267-2018 (final).doc clause and there is no clause for refund. The defence of the Respondent was that none of the claims could be granted by the Learned Arbitrator as Clause 10(a) and 10(b) of the contract excluded the claims. The Respondent denied even Claim 15(1) seeking refund of purchase price. 24. In the background of such submission, the Learned Arbitrator considered whether Clause 10(a) and (b) can be pressed into service by the Respondent to oppose the claims made by the Claimant and held in paragraph no. 126 as under: “126. The next question, then is, whether Clause 10 (a) and (b) forming part of the General Terms and Conditions in Section V of the Techno Commercial Agreement dated 10.9.2013 and the clause relating to Warantee in Section IV of the said document relating to Price Schedule & Commercial Terms and Conditions can be pressed into service by the Respondent to oppose the claims made by the Claimant. In my opinion, a reading of the two clauses, it will be seen that the clause relating the Consequential Damages and Secondary Liability would apply in the event of the fish meal plant being supplied as contracted and it being commissioned by the Respondent and got ready for commercial operations without any defects or operational glitches. It is not material that the plant was not operated at the fullest capacity for any reason, but in the present case the plant was not able to function satisfactorily and certainly not demonstrated to be fit for commercial operations, free from any defect or deficiencies, which were found in one area or the other. Clause 10(a) of the Agreement dated 10.9.2013 dealing with Consequential Damages relates to indirect damages and not damages or compensation arising out of the direct consequences of the Respondent's failure to perform its obligations under the contract of supplying a functional fishmeal plant which can be taken to smooth Sairaj 17 of 36 CARBP-1267-2018 (final).doc commercial operations. At the highest, Clause 10(a) of the Techno Commercial Agreement will restrict only to the consequential or indirect damages or the damages mentioned in the said clause. However, this clause is also inclusive of certain foreseeable losses mentioned therein (which can be termed as direct consequences) and have been factored in by the parties for the purpose of exclusion. In my opinion, the claims of the Claimant on account of loss of profit, costs and expenditure incurred on the provision of raw materials for the trials, etc would fall within the ambit of this clause, since notwithstanding the fact they are included under the clause relating to consequential damages, they find place in the limitations on liability covered by the said clause and are intended to be part of the limited liability of the Respondent. Damages on account of direct consequence of the breach of the contract or non-performance of the contract which fall outside the specified consequences or other than those specified only will not fall within the ambit of either of the clauses 10(a) and 10(b). The claimant will therefore be entitled to claim only such damages for direct losses or compensation as is warranted and not specifically excluded on account of breach of contract and the failure to perform the contract by the Respondent. I do not agree with the submission of the Counsel for the Claimant, that the doctrine of contra-proferentum should be applied in the facts of the present case to interpret the contract against the Respondent, or to hold that the Claimant was not aware of this clause in the agreement, it not having been brought to its notice, as there is no material on record to support this argument. 25. It would also be apposite to reproduce paragraph 129 and 130 of the Award which reads as under: “129. As mentioned before the Claimant has claimed a total amount Rs. 17,64,81,771.00 from the Respondent as a sum total of the various heads of claim. The first claim of Rs. 4,45,00,000/- being the price of the plant. There is no dispute that the Sairaj 18 of 36 CARBP-1267-2018 (final).doc Respondent has received the said amount from the Claimant. Having held that the Respondent has failed to supply, erect, commission and provide a fishmeal plant as contemplated under the Contract between the parties, Claimant is presently saddled with the equipment which it is not in a position to use or operate. The Respondent having failed to provide a plant as per the contract, the Claimant will be entitled to compensatory damages as a direct result of its failures. I do not read the Clauses in the agreement relating to consequential damages and warrantee to hold that such compensation is barred or excluded and there is no specific bar (as was in the case law relied upon by the Counsel for the Respondent) to the grant of compensation for the direct loss arising on the failure of the Respondent. In my view, the loss of price paid for the defective and deficient supply, erection and defaults in setting up and commissioning the fish meal plan is a direct consequence of the Respondent's failure and the Claimant is entitled to be compensated for it. I therefore hold that the Respondent is liable to pay to the Claimant the amount of Rs.4,45,00,000/ as compensation. The claimant will be entitled to interest at the rate of 9% p.a. from the date of the Award till payment and realisation. 130. The claims under the other heads viz. Claim of Rs. 49,49,669/ towards of payment of excise duty, sales tax etc i.e. claim 15(2); Claim of Rs. 4,33,608/ towards freight charges and insurance i.e. Claim 15 (3); Claim of Rs. 4,12,250 towards expenses for the accommodation of Alfa Laval's engineers and officials i.e. Claim 15 (4); Claim of Rs. 2,61,27,517/ towards upgradation of infrastructure to suit contracted plant and supporting machinery; Claim of Rs. 18,22,335/ towards raw materials for the cost of seven trial runs i.e. Claim 15(6); claim of Rs.2,26,83,392/ towards bank interest upto 31.10.216 i.e. Claim 15(7); and Rs.8,00,00,000/ towards damage suffered on account of business loss, opportunity loss, mental agony, and loss of reputation i.e. Claim 15(8), would, in my opinion, all Sairaj 19 of 36 CARBP-1267-2018 (final).doc fall within the ambit of Clause 10(a) and (b) of the General Terms and Conditions in Section VI of the Techno Commercial Agreement. These claims are limited to the amount of the bank guarantee which is invoked and encashed by the Claimant.” 26. The learned Arbitrator has interpreted Clause 10(a) to be restricted to consequential or indirect damages, damages specified therein and even direct consequences for purpose of exclusion. Clause 10(a) specified loss of profits, cots/expenses, statutory obligation apart from consequential/indirect damages. The latter portion of Clause 10(a) restricted the liability to extent of performance guarantee. By reason of specific mention of loss of profits, costs and expenses, etc. in clause 10(a), though under the heading of consequential damages, the learned Arbitrator has held that the Claims 15(2) to 15(8) fall within ambit of Clause 10(a) and capped to the limit of performance bank guarantee. The learned Arbitrator has interpreted Clause 10(a) as an agreement between the parties specifying certain liabilities of the Respondent to be limited to the extent of performance bank guarantee. 27. A case of inconsistency in paragraph 126 of the Award is sought to be raised by Mr. D’souza contending that in first part of paragraph 126, the Learned Arbitrator has held that Clause 10(a) and (b) do not apply to the present case on account of non commissioning of the Sairaj 20 of 36 CARBP-1267-2018 (final).doc plant as contracted, whereas in the second part of paragraph 126, the Arbitrator has denied the claims of Claimant by taking recourse to Clause 10(a). A conjoint reading of paragraph 126, 129 and 130 would disclose that the Learned Arbitrator has first put all claims in the basket of Clause 10(a) and (b) of contract in view of the defence that none of the claims can be granted by reason of the said Clause. Thereafter by an interpretative process, the Learned Arbitrator has analysed the claims in the context of Clause 10(a) and (b) to hold that Claim 15(1) pertaining to refund of purchase price is a direct result of the failure of Respondent to provide the plant and would not be covered by the contract clauses relating to consequential damages and warrantee to hold that such compensation is barred or excluded. Though a contention was raised about Section 73 of Contract Act, the Learned Arbitrator has granted Claim 15(1) by interpreting Clause 10(a) for its exclusion from the said clause. The learned Arbitrator has not applied the principles of Section 73 of Contract Act to grant Claim 15(1), but has interpreted Clause 10(a) to hold that the claim 15(1) is direct result of failure which will not be covered by clause of consequential damages and warantee. It is pertinent to note that there is no sequiter to the finding in the first part of paragraph 126. The Claimant is a beneficiary of the interpretation of Clause 10(a) as the learned Arbitrator has ruled that the claim for refund of purchase price Sairaj 21 of 36 CARBP-1267-2018 (final).doc does not form part of consequential damages and is direct result of the failure. 28. The second portion of paragraph 126 of the Award read with paragraph 129 and 130 makes it abundantly clear that Clause 10(a) is held to be applicable to the claims raised by the Claimant. If the Award is read as a whole, the same clearly proceeds on the applicability of clause 10(a) and renders findings on various claims raised by the Claimant. The interpretation placed by the learned Arbitrator on Clause 10(a) as recorded in second part of paragraph 126 is not only a possible interpretation but it appeals to this Court. In the case of Securitrans India Pvt. Ltd. vs. FIS Payment Solutions and Services Pvt. Ltd. (supra), the Co-ordinate Bench has held that the Award has to be read in its entirety and finding of perversity can be recorded when there are absolutely no reasons for reaching the conclusion. Such is not the case here. 29. The first part of Clause 10(a) of contract excludes the liability of Respondent in respect of (a) consequential damage (b) loss of profit (c) costs and/or expenses incurred by the Claimant (d) statutory obligation (e) awards, (f) damages (g) statutory or legal action and (g) costs or expenses in relations to performance or any other feature of the plant supplied and/or erected. The learned Arbitrator has interpreted this clause to grant Claim 15(1) and to cap Claim 15(2) to 15(8) to the Sairaj 22 of 36 CARBP-1267-2018 (final).doc extent of performance bank guarantee. 30. The rejection of Claim 15(2) to 15(8) to the fullest extent is assailed as being violative of fundamental and substantive law. In Vijay Karia and Others vs Prysmian Cavi E Sistemi SRL and Others32, the Hon’ble Apex Court has held that the fundamental policy of Indian law must amount to breach of some legal principle or legislation which is so basic to Indian law that it is not susceptible of being compromised. “Fundamental Policy” refers to the core values of India’s public policy as a nation, which may find expression not only in statutes but also time-honoured, hallowed principles which are followed by Courts. 31. It is therefore not permissible for the Court to interfere even when there is breach of substantive law and it must be shown that the law so breached forms bedrock of Indian law. The present case is a case of interpretation of terms of the contract and whether the claims stands excluded by an agreement between the parties. Even accepting for the moment that the Claimant, under the law, would be entitled to such claims in the event of breach by the Respondent, it is open for the parties to arrive at an arrangement by which, the liability is excluded and limited. This is precisely the interpretation of Clause 10(a) of contract by learned Arbitrator. Mr. D’souza would contend that claims of the Claimant were not indirect but actual expenses incurred. The 32 AIR 2020 SC 1807. Sairaj 23 of 36 CARBP-1267-2018 (final).doc submission would require this Court to interpret the nature of claims, whether consequential or direct, and substitute its own interpretation with the interpretation of the Learned Arbitrator, which is impermissible. It is within the jurisdiction of the Learned Arbitrator to interpret the terms of the contract and the view taken is a possible view that Claims 15(2) to 15(8) are covered by Clause 10(a) to the extent of performance guarantee. Clause 10(a) specifically mentions loss of profit, costs and/or expenses, statutory obligations for purpose of exclusion and limits it only to the performance guarantee. Section 5 of Arbitration Act must be given its full effect to minimise judicial intervention when the view cannot be said to be impossible. It is not only a plausible view, but a possible view which is required to be upheld. 32. In the case of Vilayati Ram Mittal (P) vs. Reserve Bank of India (supra), the Hon’ble Division Bench of this Court has held that it is for the Arbitrator to decide the effect of the clause and deal with the same. In that case by virtue of the clause, the contractor was not held to be entitled for any loss suffered on account of delay and the Hon’ble Division Bench has held that this clause binds both the parties and it is not open for the Appellant therein to construe clause 18 so as to seek the benefit and contend that the clause is binding between the parties but do not bind the Arbitrator or the Court. It further held that if the Sairaj 24 of 36 CARBP-1267-2018 (final).doc clause specifically prohibits any claim on the account of delay, by ignoring the said clause, the Arbitrator cannot travel beyond his jurisdiction as that would constitute the jurisdictional error. 33. In the case of UHL Power Company Limited vs. State of H. P. (supra), the Hon’ble Apex Court has held in paragraph 18, 19 and 22 as under : “18. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1], the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus : (SCC p. 12, para 24) “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.” Sairaj 25 of 36 CARBP-1267-2018 (final).doc 19. In Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd. [Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236 : (2019) 3 SCC (Civ) 552] , adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306], wherein it has been observed that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if a term of the contract has been construed in a reasonable manner, then the award ought not to be set aside on this ground, it has been held thus : (Parsa Kente Collieries case [Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236 : (2019) 3 SCC (Civ) 552] , SCC pp. 244-45, para 9) “9.1. … It is further observed and held that construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. It is further observed by this Court in the aforesaid decision in para 33 that when a court is applying the “public policy” test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. It is further observed that thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. 9.2. Similar is the view taken by this Court in NHAI v. ITD Cementation India Ltd. [NHAI v. ITD Cementation India Ltd., (2015) 14 SCC 21 : (2016) 2 SCC (Civ) 716], SCC para 25 and SAIL v. Gupta Brother Steel Tubes Ltd. [SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63 : Sairaj 26 of 36 CARBP-1267-2018 (final).doc (2009) 4 SCC (Civ) 16] , SCC para 29.” (emphasis supplied) 22. In the instant case, we are of the view that the interpretation of the relevant clauses of the implementation agreement, as arrived at by the learned sole arbitrator, are both, possible and plausible. Merely because another view could have been taken, can hardly be a ground for the learned Single Judge to have interfered with the arbitral award. In the given facts and circumstances of the case, the appellate court has rightly held that the learned Single Judge exceeded his jurisdiction in interfering with the award by questioning the interpretation given to the relevant clauses of the implementation agreement, as the reasons given are backed by logic.” 34. The scope of interference under Section 34 of the Arbitration Act is well-settled. In Associate Builders vs. Delhi Development Authority (supra), the Hon’ble Apex Court has held in paragraph 42.3, 44 and 45 as under : “42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under: “28.Rules applicable to substance of dispute. —(1)-(2)*** (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.” This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. Sairaj 27 of 36 CARBP-1267-2018 (final).doc In MSK Projects (I) (JV) Ltd. v. State of Rajasthan [(2011) 10 SCC 573 : (2012) 3 SCC (Civ) 818] , the Court held : (SCC pp. 581-82, para 17) “17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. (See Gobardhan Das v. Lachhmi Ram [(1954) 1 SCC 566 : AIR 1954 SC 689], Thawardas Pherumal v. Union of India [AIR 1955 SC 468], Union of India v. Kishorilal Gupta & Bros. [AIR 1959 SC 1362], Alopi Parshad & Sons Ltd. v. Union of India [AIR 1960 SC 588] , Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji [AIR 1965 SC 214] and Renusagar Power Co. Ltd. v. General Electric Co. [(1984) 4 SCC 679 : AIR 1985 SC 1156] )” (emphasis supplied) In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [(2012) 5 SCC 306] , the Court held : (SCC pp. 320-21, paras 43-45) “43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the Sairaj 28 of 36 CARBP-1267-2018 (final).doc award and substitute its view in place of the interpretation accepted by the arbitrator. (emphasis supplied) 44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd. [(2009) 10 SCC 63 : (2009) 4 SCC (Civ) 16] and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v. ONGC Ltd. [(2010) 11 SCC 296 : (2010) 4 SCC (Civ) 459] to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf. 45. This para 43 reads as follows : (Sumitomo case [(2010) 11 SCC 296 : (2010) 4 SCC (Civ) 459] , SCC p. 313) ‘43. … The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. [(2009) 5 SCC 142 : (2009) 2 SCC (Civ) 406] the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.” (emphasis supplied) Sairaj 29 of 36 CARBP-1267-2018 (final).doc 35. The settled position in law prohibits Section 34 Court from substituting its own view in place of Arbitrator’s interpretation. The error in construction is considered as an error within jurisdiction, which does not warrant interference. In my view, the interpretation of Clause 10(a) of the contract by the impugned Award cannot be said to be an impossible view. 36. In so far as the supersession of Clause 10 by warrantee clause is concerned, the learned Arbitrator held in paragraph nos. 127 as under : 127. In so far as the clause of Warantee is concerned, it will not apply in the present case as the plant is admittedly not commissioned or handed over to the Claimant. Respondent has never called upon the Claimant to take over the plant and as asserted by the Claimant in its mails, the responsibility in supplying the plant remained with the Respondent. The contract between the parties is not for the supply of individual parts or only equipment. In my opinion the clause of Warantee will apply only after the commissioning of the plant as agreed by the parties, which has not happened. This will also include handing over an operational plant to the Claimant. I find this because the warrantee is subject to certain conditions which show that the plant should be in the entire charge and operations of the purchaser i.e. the Claimant. This clause also reiterates that the Respondent shall not be responsible for any consequential or indirect damages only and does not cover direct damages. These clause do not, in my reading, absolve the Respondent on liability arising on account of direct damages or compensation on account of direct consequences.” 37. The warrantee clause warrantee all equipment offered by Respondent against the material, workmanship, manufacturing defects for period of 12 month and that Respondent shall not be responsible Sairaj 30 of 36 CARBP-1267-2018 (final).doc for any consequential or indirect damages. The contention is that there is an express clause for damages in the main agreement and therefore Clause 10(a) and (b) stands excluded by virtue of Clause 10(h) of the contract as the warantee clause excludes only consequential damages. The warantee clause binds the Respondent against defects specified i.e. against material, workmanship and manufacturing defects for particular period. The clause being a warantee clause, the Learned Arbitrator has held that the same would not apply as the plant is not commissioned and handed over, which cannot be interfered with. 38. Insofar as the claim on account of interest is concerned, the submissions are conflated in as much the interest sought as Claim 15(7) is characterised as interest pendente lite as well as a direct consequence of the breach suffered by the Respondent. Mr. D’souza would contend that the Claim 15(7) which is Bank interest upto 31st October, 2016 paid on financial loan which has been obtained by the Claimant, should have been granted as interest pendente lite. The concept of interest pendente lite is different from interest claimed as head of loss and as a direct consequence of breach. In the present case, Claim 15(7) is claimed as head of loss and not as interest pendente lite and the award of interest pendente lite would constitute interest for the period from filing of the statement of claim till the Award of Arbitrator. In the application under Section 33, the claim was for Sairaj 31 of 36 CARBP-1267-2018 (final).doc payment of interest pendente lite, which has been declined by Learned Arbitrator in exercise of its jurisdiction which meets the parameters of Section 31(7) of the Arbitration Act. The Learned Arbitrator has considered the claim of interest as indirect loss and has capped it within the limited liability clause. 39. As far as the award of interest pendente lite is concerned, in the case of Morgan Securities and Credits Private Limited vs. Videocon Industries Limited (supra), the Hon’ble Apex Court considered the expression “unless the Award otherwise directs“ in Section 31(7)(b) of the Act to hold that wide discretion is conferred upon the Arbitrator to determine the rate of reasonable pre-award interest. 40. Dealing with the citations relied upon by Mr. D’souza, in the case of Deepak Fertiliser and Petrochemical Corporation vs. Davy Mckee (London) Ltd. (supra), the England and Wales Court of Appeal was considering an appeal arising under the Commercial Court in respect of the contractual claims raised in that case. While dealing with the issue as to whether the losses claimed are excluded from recovery by virtue of clause 6.8 of the contract therein which provided that the party shall not be liable for loss of anticipated profits, catalyst, raw-material and products or for indirect or consequential damages by reason of which all heads of claims against the party were held to be excluded. It was held that direct and natural result of the destruction of plant was that Sairaj 32 of 36 CARBP-1267-2018 (final).doc the party was left without a methanol plant, wasted overheads incurred during the reconstruction of the plant, as well as profits lost during that period, which are no more remote as losses than the cost of reconstruction. It held that the costs incurred cannot be categorized as an indirect or consequential loss or damage nor could its cost be categorized as constituting a loss of profit. 41. The distinguishing feature, in the present case, is the limited powers vested in Section 34 Court, once the Arbitrator has interpreted the terms of the contract which view cannot be said to be an impossible view. In that case the proceedings arose out of Commercial Court litigation which leaves the field wide open for the Appellate Court to re-appreciate the findings. 42. In the case of Union of India vs. Saraswat Trading Agency and Others (supra), the Hon’ble Apex Court considered the question of interest for pre-reference period and dealt with the power of arbitrator to award interest pendente lite and if so on what principles. It held that the Arbitrator has the power to award interest pendente lite. There is no quarrel with the said decision however, in the present case, as discussed above, the claim for interest is claimed as a head of loss and not as interest pendente lite. Further, Arbitrator in his discretion declined to grant interest pendente lite. 43. In the case of South East Asia Marine Engineering and Sairaj 33 of 36 CARBP-1267-2018 (final).doc Constructions Limited vs. Oil India Limited (supra), the Hon’ble Apex Court considered the scope of Section 34 of the Arbitration Act. Pertinently, the Court noted the case of Dyna Technologies (P) Ltd. vs. Crompton Greaves Limited33 and held that where two views are possible, the Court cannot interfere in the plausible view taken by the Arbitrator supported by reasoning. In the facts of that case, the Hon’ble Apex Court did not subscribe the reasons provided by Arbitrator or High Court as it failed to apply the standard of consideration of all clauses of contract while interpreting clause 23 of the contract therein. In that case, clause in question was in respect of change in law which results in additional costs/reduction in cost to contractor and which was required to be reimbursed. The Arbitral Tribunal had held that clause must be liberally construed and any circular of government circular would result in change in law. The High Court reasoned that clause 23 is akin to force majeure clause. In such facts, the Hon’ble Apex Court considered that the wide interpretation by Arbitral Tribunal cannot be accepted and that document forming the written contract shall be read as whole which was the basic rule ignored by the Arbitral Tribunal while interpreting the contract. The decision turned on the terms of the contract contained therein, which is rendered in a different factual scenario. The decision cannot be cited 33 (2019) 20 SCC 1. Sairaj 34 of 36 CARBP-1267-2018 (final).doc as a proposition that even if the view taken is possible view, it is open for Section 34 Court to substitute its own view. 44. In the case of Delhi Metro Rail Corporation Limited vs. Delhi Airport Metro Express Pvt. Ltd. (supra), the Hon’ble Apex Court considered the scope of interference with the Arbitral Award, with which there is no quarrel. 45. The grounds on which the Award can be set aside are set out in Section 34 of the Arbitration Act. The learned Arbitrator has interpreted the terms of the contract to hold that claims 15(2) to 15(8) of the claims raised by the Claimant are covered by clause 10(a) and are capped at the limited liability of performance guarantee. The view being possible view cannot be said to be patently illegal or so perverse that no reasonable person could have arrived at the same. Perversity as is settled is a finding based on no evidence and arrived at by ignoring the vital evidence, which would be liable to be set aside under the head of patent illegality. The error, if any, in construction of contract, is an error within jurisdiction incapable of being corrected in Section 34 jurisdiction. 46. In light of the discussion above, I do not find the impugned order to suffer from perversity or patent illegality or such as violates the fundamental policy of Indian law. 47. Resultantly, the Arbitration Petition fails and stands dismissed. Sairaj 35 of 36 CARBP-1267-2018 (final).doc 48. Nothing survives for consideration in pending Applications, if any, and the same stand disposed of. [Sharmila U. Deshmukh, J.] Sairaj 36 of 36