ppn 1 arbp-819.11 & 908.11(j).

doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

ARBITRATION PETITION NO.819 OF 2011

Ajay Singh (Sunny) Deol )

of Mumbai Indian Inhabitant, )
residing at Plot No.22, Road No.11, )
Juhu-Vile Parle Development Scheme, )
Mumbai – 400 049. ) .. Petitioner
Vs.
Suneel Darshan )
carrying on his sole proprietary )
business under the name and style of, )
“Shree Krishna International”, )
132, Park Street-2, S.V.P. Nagar, )
Andheri (West), Mumbai- 400 053. ) .. Respondent
along with
ARBITRATION PETITION NO.908 OF 2011

Suneel Darshan )
carrying on his sole proprietary )
business under the name and style of, )
“Shree Krishna International”, )
132, Park Street-2, S.V.P. Nagar, )
Andheri (West), Mumbai- 400 053. ) .. Petitioner
Vs.
Ajay Singh (Sunny) Deol )
residing at Plot No.22, Road No.11, )
Juhu-Vile Parle Development Scheme, )
Mumbai – 400 049. ) .. Respondent
---
Mr.G.R.Joshi, Senior Advocate a/w Ms.Neeta Jain a/w Mr.Sunil Gangal
a/w Mr.Jayesh Mistry i/by M/s.RMG Law Associates for the petitioner
in Arb. Petn. No.819 of 2011 & for the respondent in Arb. Petn.908 of
2011.

Mr.Ajit Kapadia a/w Mr.Shyam Kapadia i/by Mr.Aditya Chitale for the
petitioner in Arb. Petn.908 of 2011 & for the respondent in Arb. Petn.
No.819 of 2011.
---
ppn 2 arbp-819.11 & 908.11(j).doc

CORAM : R.D. DHANUKA, J.

RESERVED ON : 27th February 2015
PRONOUNCED ON : 16th April 2015

JUDGMENT :­
. By these two petitions filed under Section 34 of the
Arbitration and Conciliation Act, 1996 (for short “the said Arbitration
Act), both the petitioners have challenged part of the impugned award
dated 6th June 2011 passed by the learned arbitrator rejecting the claim
made by Mr.Suneel Darshan-petitioner in Arbitration Petition No.908 of
2011 however, awarding arbitration costs of Rs.12,00,000/- (Rs. Twelve
Lacs only) against Mr.Ajay Singh (Sunny) Deol-the petitioner in
Arbitration Petition No.819 of 2011 who was the original respondent.
The respondent in the said petition was the original claimant in the
arbitral proceedings. Mr.Suneel Darshan is described as the claimant and
Mr.Ajay Singh (Sunny) Deol is described as the respondent in this
judgment. Some of the relevant facts for the purpose of deciding these
two petitions are as under :

2. Mr.Ajay Singh (Sunny) Deol-the respondent is an actor by

profession. The claimant is a film producer. The dispute arose between
the parties relating to production of a film. The said dispute was referred
to the former Chief Justice of the Supreme Court of India as the sole
arbitrator. On 13 th March 2007, the parties arrived at consent terms
duly signed by both the parties before the learned arbitrator. The parties
also signed the Articles of Agreement dated 14 th March 2007 recorded
in terms of settlement. On 15 th March 2007, the learned arbitrator made
an award in terms of the consent terms arrived at between the parties.
ppn 3 arbp-819.11 & 908.11(j).doc

3. Under the said consent terms, the respondent was suppose

to work as a lead star in a proposed film to be produced by the claimant.
The parties agreed that the respondent shall give 40 shooting dates for
completion of the said film excluding any date or dates on which the
respondent was unable to report for such shooting due to health reasons
and for dubbing. It was agreed that the subject of the proposed film will
be agreed by and between the parties within three months from the date
of publication of apology referred to in the consent terms. The claimant
agreed to publish an apology against the respondent in the publications
'Midday', 'Hindustan Times' and the trade journal 'Film Information'.
The claimant accordingly published the said apology as agreed.

4. It is the case of the claimant that the claimant forwarded one

script titled as “Kal Kisne Dekha” to the respondent. The respondent
however sought narration of the script in order to understand his role in
the film. In the month of November 2007, the respondent rejected the
said script. It is the case of the claimant that he thereafter started working
on another script called “Good Morning India” and forwarded the same
to the respondent on 2nd April 2008 and also sought time for narration of
the said script to the respondent.

5. On 29th April 2008, the writer of the script Mr. Robin Bhat
along with Mr.Kartike Singh narrated the script “Good Morning India”
to the respondent. The respondent liked the subject of the said script
but wanted to know the exact dialogues in order to understand his role
as a lead star in the film. The respondent also wanted to know about
music director in the film.
ppn 4 arbp-819.11 & 908.11(j).doc

6. It is the case of the claimant that on 30 th April 2008, the

Assistant Director Mr.Kartike Singh of the claimant addressed a letter
to the respondent stating that he would work with the dialogues and
would revert back to the respondent. However on 16th May 2008, the
claimant addressed a letter to the respondent making various allegations
alleging that the respondent was not co-operating with the venture and
was delaying the project.

7. By letter dated 28th May 2008, the respondent denied all the
allegations made by the claimant and informed that he had accepted the
subject of the film “Good Morning India”, however, without hearing the
dialogues, he could not proceed with the venture. He also placed on
record that Mr.Kartike Singh had informed him that he would revert
back with the dialogues.

8. It is the case of the respondent that during the period

between 21st May 2008 to 5th June 2008, the claimant forwarded
Standard Actors Agreement duly signed by him and sought 40
consecutive dates from the respondent. By a letter dated 9 th June 2008,
the respondent denied that he was delaying the project. By a letter
dated 10th June 2008, the respondent informed the claimant that he was
unnecessarily hasting his moves by asking 40 consecutive dates without
there being any agreement and finalization of the script “Good Morning
India.” On 18th June 2008, the claimant threatened the respondent for
legal action against the petitioner.

9. On 31st July 2008, the claimant forwarded various letters to

the respondent. The respondent was informed for the first time that the
ppn 5 arbp-819.11 & 908.11(j).doc

claimant had already executed an Agreement with M/s.Gemini Industries

and had received an advance of Rs.3,00,00,000/- (Rs.Three Crores only)
for the said film and that he would suffer damages, if that agreement
was terminated. On 14th August 2008, the said M/s.Gemini terminated
the said agreement with the claimant. The claimant claimed
Rs.20,00,00,000/- (Rs.Twenty Crores Only) as damages from the
respondent for the alleged breach committed by the respondent of the
consent award.

10. The dispute arose between the parties. The said dispute
was referred to a former Judge of the Supreme Court of India. The
claimant filed a statement of claim demanding a sum of
Rs.20,00,00,000/- (Rs.Twenty Crores only) with interest and costs. The
respondent denied the said claim and lodged a counter claim. Both the
parties examined witnesses. By an award dated 6 th June 2011, the
learned arbitrator dismissed the claim of the claimant and the counter
claim of the respondent. Learned arbitrator, however, awarded costs of
Rs.12,00,000/- (Rs.Twelve Lacs only) in favour of the claimant and
against the respondent. Both the parties have challenged part of the award
rendered by the learned arbitrator in these two petitions.

11. By the said arbitral award dated 6th June 2011, the learned
arbitrator though rendered various findings of facts in favour of
Mr.Darshan-original claimant, the learned arbitrator has held that the
claimant had not able to prove that he has suffered any damages much
less damages in the sum of Rs.20 crores. The learned arbitrator held
that the claimant was ready and willing to perform and that the
respondent committed breaches of the agreement and the consent terms.
ppn 6 arbp-819.11 & 908.11(j).doc

The claimant had not able to prove that he had suffered any loss or
damages as a result of the breaches. It is held that the claimant thus
would be only entitled to costs of arbitration quantified at Rs.12 lacs
from the respondent.

12. The claimant has impugned the certain findings rendered

by the learned arbitrator against him and rejection of the claim for
damages in the Arbitration Petition No.908 of 2011. The original
respondent has also impugned some of the findings rendered by the
learned arbitrator against him and has impugned the award in so far as
the costs of arbitration directed to be paid to the claimant by the
respondent in the sum of Rs.12 lacs is concerned.

13. The learned arbitrator in the impugned award framed nine

issues. It is held by the learned arbitrator that the arbitral tribunal had
jurisdiction to decide the dispute arising out of the consent terms and
also had jurisdiction to decide whether the parties had orally agreed on
the number of subjects that were to be put to the respondent and whether
the 40 dates were to be allotted consecutively.

14. In the impugned award, the learned arbitrator held that the
respondent had committed breach of consent terms by keeping on
varying his demands on how the subject was to be agreed upon and
answered the said issue in the affirmative accordingly. However, in so
far as the claim for damages dealt with by the learned arbitrator while
dealing with issue nos.(vi) and (vii) is concerned, he rendered a finding
that there was no evidence on record to show that the agreement marked
as exhibit ‘C-31’ was the agreement which had been entered into by
ppn 7 arbp-819.11 & 908.11(j).doc

the claimant with M/s.Gemini Industries and Imaging Limited. The

contents of the said agreement had not been proved by anybody. It is
held that no person from Gemini Industries and Imaging Limited had
been brought to prove the said agreement. The learned arbitrator has
held that there was no explanation as to who was the Asian Capital
Consolidated Fund and how it was connected with the claimant or M/s.
Gemini Industries and Imaging Limited. The learned arbitrator has
rendered finding that the agreement, if any, with M/s. Gemini Industries
and Imaging Limited appeared to have come to an end in November
2007 when the cheque was dishonoured. The letters at exhibit ‘C-27’
had been procured for the purpose of creating evidence. No reliance
could be placed on those letters. The learned arbitrator accordingly
held that the claimant had not been able to prove that he had any
subsisting agreement under which he was to receive a sum of Rs.33
crores and accordingly rejected the claim of Rs.20 crores.

15. Mr. Kapadia, learned counsel for the claimant invited my

attention to various findings rendered by the learned arbitrator in
favour of the claimant and would submit that though the learned
arbitrator has held that the respondent had committed breaches of the
agreement, he has rejected the claim for damages.

16. It is submitted that the finding of the learned arbitrator that

the agreement with M/s. Gemini Industries and Imagine Limited was
an assignment and would attract stamp duty is totally perverse and
illegal. He submits that the said writing was an agreement to assign in
future. He submits that the said writing would clearly contemplate the
ppn 8 arbp-819.11 & 908.11(j).doc

future assignment of right and more particularly in the 4 th recital thereof.

He submits that the agreement to assign would not amount to an
assignment itself.

17. In so far as consideration under the said agreement is

concerned, the learned counsel submits that first cheque of Rs.3 crores
paid by the said M/s.Gemini Industries was encashed by the claimant.
In so far as the second cheque issued to the claimant by the said M/s.
Gemini is concerned, the said cheque was dishonoured in view of the
instructions given by the said M/s.Gemini to stop the payment. The
claimant did not deposit the 3rd and 4th cheques issued by the said
M/s.Gemini. He submits that M/s.Gemini ultimately terminated the
said agreement in the month of June 2008. The cheque no.599662
was already referred to in the said agreement with M/s.Gemini which
cheque was issued by Asian Capital Consolidated Fund which was
sole proprietary concern of the said M/s. Gemini. He submits that the
claimant returned the said Rs.3 crores back to the said M/s. Gemini. He
submits that the signature on the agreement on behalf of the said
M/s.Gemini and the signature on the cheque issued on behalf of Asian
Capital Consolidated Fund were of the same person. The finding of the
learned arbitrator that the connection between the said M/s. Gemini
Industries and the said Asian Capital Consolidated Fund could not be
established by the claimant is totally perverse. Learned counsel submits
that the learned arbitrator has committed fundamental errors of law by
holding that the agreement between the claimant and the said M/s.
Gemini was an assignment and it required stamping.

18. Learned counsel for the claimant then submits that though
ppn 9 arbp-819.11 & 908.11(j).doc

the witness examined by the claimant, in his affidavit in lieu of

examination-in-chief, has annexed a copy of the agreement between the
claimant and the said M/s. Gemini and had deposed that the contents
of the said agreement were true and correct and though the said witness
had identified the signatures of the parties thereon, the learned arbitrator
though marked the said agreement as exhibit 'C-31' however erroneously
held that the contents of the said document were not proved. He submits
that there was no cross-examination on the said deposition of the
witness examined by the respondent. The learned arbitrator therefore
ought to have considered the said document as proved. He submits that
ignoring such proved documents would show a patent illegality on the
face of the award and thus this part of the award deserves to be set aside
on this ground alone.

19. Learned counsel invited my attention to the correspondence

entered into between the claimant and the said M/s.Gemini. M/s. Gemini
had terminated the said agreement and had called upon the claimant to
pay Rs.11 crores by way of damages. The claimant had replied to the
said notice of termination and denied the claim of Rs.11 crores. He
submits that though initially the said witness could not identify the
signature of the representative of M/s. Gemini, later on he had identified
the same. The learned arbitrator has erroneously drawn an adverse
inference merely on that ground. In support of this submission, the
learned counsel invited my attention to various oral evidence led by the
parties.

20. In so far as the finding of the learned arbitrator that the

claimant could not prove the loss/damages is concerned, the learned
ppn 10 arbp-819.11 & 908.11(j).doc

counsel for the claimant invited my attention to various parts of the

oral evidence. He submits that the claimant had not assigned video
and satellite rights in the said proposed film for future. He submits that
the finding of the learned arbitrator that the document entered into
between the claimant and the said M/s.Gemini was concocted is totally
perverse and contrary to the proved facts on record.

21. Learned counsel for the claimant then submits that there
was no market price of the said movie available. The claimant had
claimed compensation for loss of profit on the premise that if the said
movie would have been released, the claimant would have earned profit
which the claimant was deprived of in view of the breach of the contract
committed by the respondent. He submits that in this case, the
consideration which the claimant was entitled to receive from the said
M/s. Gemini for the said film was proved and was known to both the
parties. The expenses required to be incurred on production of the
film would not be ascertained as the same was not incurred upto the
stage of production. Even if the revenue was uncertain in view of no
market for the film available, certain expenses were required to be
incurred which could not be disputed. The claimant was producing the
film for commercial exploitation. The respondent was fully aware of the
said fact. He submits that the respondent was fully aware that since he
had committed breaches, the claimant was not able to produce a film
and had suffered financial loss.

22. Learned counsel for the claimant then submits that the
claimant had produced the accounts for three years. The claimant had
produced three movies prior to the execution of the agreement with the
ppn 11 arbp-819.11 & 908.11(j).doc

respondent. The claimant had produced and proved the expenses

incurred by the claimant on three movies. Even if no profit was earned
in respect of the said three movies, the respondent could not dispute
that the expenses were incurred by claimant in producing those three
films. The claimant had incurred expenses under the said agreement.
Learned counsel invited my attention to the particulars of the claim and
submits that after considering the amount which the claimant would have
recovered from the said M/s.Gemini under the said agreement and after
deducting the average expenditure in the sum of Rs.13 crores, the
claimant would have suffered loss of profit in the sum of Rs.20 crores.

23. Learned counsel for the claimant submits that though there
was adequate material produced by the claimant before the learned
arbitrator to prove that the claimant had suffered loss of profit, the
learned arbitrator has rejected the said claim without considering the
evidence produced by the claimant. The claimant had also produced a
letter from another producer exchanged with the respondent in respect
of the movie “Goli” which indicated that the respondent would have
charged a sum of Rs.5 crores for the said movie. He submits that as far
as this case is concerned, the consideration amount was of Rs.50 lacs
and thus the claimant would have at least made a profit of Rs.4.5 crores.

24. Learned counsel for the claimant then submits that even the
counter claim of the respondent for Rs.5 crores would also suggest that
there was loss of profit of Rs.5 crores suffered by the claimant. The
learned arbitrator thus would have considered at least the said
undisputed position and would have granted the claim for loss of profit
in favour of the claimant.
ppn 12 arbp-819.11 & 908.11(j).doc

25. Mr.Kapadia, learned counsel appearing for the claimant

placed reliance on the following judgments in support of various
submissions :-
i) Judgment of the Madras High Court in the case of G.Martirosi Vs.
A.K.C.T. Subramaniam Chettiar, reported in AIR 1930 Mad 723;
ii) Judgment of this Court in the case of Mahanagar Gas Ltd. Vs.
Babulal Uttamchand & Co., reported in 2013 (5) Bom.C.R.756;
iii) Judgment in the case of 786 Chaplin Vs. Hicks, reported in (1911)
2 K.B. 786;
iv) Judgment of 528 Victoria Laundry (Windsor) LD.Vs. Newman
Industries LD. Vs. Coulson & Co. LD. (Third parties), reported
in (1949) 2 K.B. 528;
v) Judgment of the Privy Council in the case of A.V.Joseph Vs. R.
Shew Bux, delivered on 8th November 1918 in Privy Council
Appeal No.112 of 1917;
vi) Judgment of the Calcutta High Court in the case of F.T. Kingsley
Vs.The Secretary of State for India in Council, reported in AIR
1923 Cal. 49;
vii) Judgment of the Supreme Court in the case of A.T. Brij Paul
Singh and Ors. Vs. State of Gujarat, reported in AIR 1984 SC
1703;
viii) Judgment of the Delhi High Court in the case of Delhi
Development Authority Vs.S.S. Jetely, reported in 2011 (2)
ARBLR 213 (Delhi);
ix) Judgment of the Madras High Court in the case of Chief
Controlling Revenue Authority, Madras Vs. Sudarsanam Picture,
Madras, reported in AIR 1968 Mad 319;
ppn 13 arbp-819.11 & 908.11(j).doc

x) Judgment of the Supreme Court in the case of Hindustan Steel

Ltd. Vs.Messrs Dilip Construction Company, reported in AIR
1969 SC 1238;
xi) Judgment of the Delhi High Court in the case of Time Warner
Entertainment Company, L.P. & Ors. Vs. RPG Netcom & Ors.
and Columbia Pictures Industries Inc. & Ors. Vs. Globe & Ors.,
reported in AIR 2007 Delhi 226;
xii) Judgment of this Court in the case of Shemaroo Entertainment
Pvt. Ltd. Vs. Afzal Khan, proprietor of Shaboo Arts and Ors.,
reported in 2008 (110) BOMLR 3346;
xiii) Judgment of the Delhi High Court in the case of Suresh Kumar
Vs. Satish Mehra & Anr. and Satish Mehra Vs. Suresh Kumar
& Anr., reported in 2012 VIAD (Delhi) 321;
xiv) Judgment of the Delhi High Court in the case of Delhi State Civil
Supplies Corporation Ltd. Vs. Union of India (UOI) (Army
Purchase Organisation), decided on 4th September 2009 in OMP
Nos.207 and 208 of 2000 and 159 of 2001;
xv) Judgment of the Supreme Court in the case of K.P. Poulose Vs.
State of Kerala & Anr., reported in AIR 1975 SC 1259;
xvi) Judgment of the Supreme Court in the case of Javer Chand and
Ors. Vs. Pukhraj Surana, reported in AIR 1961 SC 1655;
xvii) Judgment of the Full Bench of this Court in the case of Hemendra
Rasiklal Ghia Vs.Subodh Mody, reported in 2008 (6) ALLMR 352.

26. Learned counsel for the claimant submits that the learned
arbitrator is required to make guess work while determining the loss of
profit as claimed by the claimant. The learned arbitrator was not bound
by the strict provisions of the Evidence Act. He submits that inspite of
ppn 14 arbp-819.11 & 908.11(j).doc

the sufficient material produced before the learned arbitrator in support

of his claim for loss of profit, the learned arbitrator disregarded the
material produced by the claimant on frivolous grounds.

27. In so far as the finding of the learned arbitrator that the

agreement entered into between the claimant and the said M/s.Gemini
was an agreement to enter into an agreement for assignment is
concerned, he submits that the said documents did not require any
stamping. The respondent had objected to the said documents only on
the ground of insufficient payment of stamp duty paid and on no other
ground when the same was tendered. The learned arbitrator ultimately
had marked the said documents as exhibits. No objection was raised by
the respondent regarding mode of proof of the said documents. The
learned arbitrator had initially upheld the objection of the respondent
regarding insufficient payment of stamp duty. The respondent thus
could not have challenged the mode of proof of the said documents
once having marked as exhibits after considering the objection raised
by the respondent by the learned arbitrator at a later stage. The learned
arbitrator did not send the said documents for adjudication rightly as
there was no short fall in payment of stamp duty on the said documents.

28. Learned counsel for the claimant submits that the finding of
the learned arbitrator that two letters relied upon by the claimant were
procured and fabricated is totally illegal. He submits that if, according
to the learned arbitrator, the documents were not sufficiently stamped,
the learned arbitrator was bound to refer to the said documents to the
Collector for adjudication. In support of this submission, learned counsel
placed reliance on the judgment of the Supreme Court in the case of
ppn 15 arbp-819.11 & 908.11(j).doc

Hindustan Steel Ltd. (supra).

29. Per contra, Mr.Joshi, learned senior counsel appearing for

the respondent submits that the agreement entered into between the
claimant and the respondent was an agreement to enter into an agreement
and thus was not capable of specific performance. He submits that the
claimant was not ready and willing to perform his part of the obligation
and thus was not entitled to any claim for damages. He submits that
since the learned arbitrator has rendered findings of facts while rejecting
the claim for damages made by the claimant which findings of facts are
not perverse, such findings of facts cannot be interfered with by this
Court under Section 34 of the Arbitration Act.

30. In so far as the issue no.(iv) answered by the learned

arbitrator 'as to whether the agreement entered into between the claimant
and the respondent was a concluded agreement or not' is concerned, he
submits that the identity of the subject or identity of the core of the
subject was not agreed and thus the said agreement was at the most an
agreement to enter into an agreement. The said agreement was not a
concluded agreement. He submits that the respondent being a lead actor
was required to be satisfied with the subject of the film. There was thus
no breach of the alleged agreement committed by the respondent. In his
alternate submission, he submits that since the claimant was not willing
to perform his part of the obligation, no damages could be claimed by
him.

31. Learned senior counsel submits that for the purpose of

making a claim for specific performance, the claimant is required to
ppn 16 arbp-819.11 & 908.11(j).doc

prove his readiness and willingness to perform his part of the obligation
all throughout which the claimant failed in this case. In support of this
submission, learned counsel placed reliance on the judgment of the
Privy Council in the case of Abdullah Bey Chedid and Ors. Vs.
Tenenbaum, reported in AIR 1934 Privy Council 91.

32. It is submitted by the learned senior counsel that the onus

was on the claimant to prove that he had complied with his part of the
obligation for claiming specific performance and damages. In support
of this submission, he relied upon the judgment of the Privy Council in
the case of Tan Ah Boon Vs. State of Johore, reported in AIR 1936
Privy Council 236.

33. It is submitted by the learned senior counsel that the

respondent was not agreeable to comply with the agreement as it stood
on the ground that the payment terms had changed. The claimant had
no finance to produce the film. In support of this submission, he invited
my attention to the oral evidence of the claimant and in particular his
reply to question nos.26, 27 and 28 to demonstrate that the claimant had
no financiers available. In so far the consideration payable to the
respondent under the said agreement of Rs.50 lacs is concerned, the
learned senior counsel submits that the said consideration was payable
by the claimant to the respondent during the shooting period excluding
dubbing period. The claimant, however, did not pay any amount. The
claimant, on the contrary, deposed in the oral evidence, according to
which, the payment consideration was allegedly altered. The claimant
did not show any readiness and willingness on his part. He submits that
since the claimant had suggested the amendment to the consideration
ppn 17 arbp-819.11 & 908.11(j).doc

amount in the agreement, it would clearly indicate that the claimant

was not ready and willing to comply with his part of the obligation.

34. Learned senior counsel invited my attention to the cross-

examination of the respondent in which the claimant had put suggestion
to the witness that the activity of dubbing comes after shooting was over.
The claimant, thus, wanted to alter the terms of the payment and had
suggested that the last instalment was due only after dubbing was over,
which was contrary to the terms and conditions of the said agreement.

35. Learned senior counsel for the respondent submits that the
claimant in his evidence had deposed that he was ready to make the film
if finance was given to him by the respondent. He submits that even
profit and loss account and balance sheet produced by the claimant
would also indicate that there was huge loss suffered by the claimant
in the years 2006, 2007 and 2008. Capital account of the claimant was
in negative. In reply to question nos.318 to 321, the claimant had
admitted that he had suffered loss.

36. In so far as the MOU between the claimant and M/s. Gemini
alleged to have been executed on 2nd November 2007 is concerned, the
learned senior counsel submits that on the date of execution of the said
agreement, it was not the case of the claimant that the respondent had
committed any breach of the said MOU. He submits that since one
cheque, out of four cheques, was dishonoured and other two cheques
alleged to have been issued in favour of the claimant were not deposited
by the claimant, the said alleged agreement even otherwise would not
have been survived. The learned arbitrator has rightly rendered finding of
ppn 18 arbp-819.11 & 908.11(j).doc

fact that the claimant had failed to prove the said documents. He
submits that in any event, the said document was terminated by the said
M/s. Gemini with immediate effect.

37. In so far as the cheques alleged to have been issued by the

said M/s. Gemini in favour of the claimant is concerned, the learned
senior counsel invited my attention to the reply of the claimant in the
cross-examination and in particular question nos.240 and 241 and 324
to 326 and would submit that though the said witness was called upon
to produce the cheques relied upon by the claimant, the claimant did not
produce the said cheques. The claimant had not received any bank
guarantee from the said M/s.Gemini which was supposed to be given by
it to the claimant under the said writing.

38. Learned senior counsel invited my attention to the income

tax returns filed by the claimant including his accounts. Learned senior
counsel invited my attention to the cross-examination of the claimant
and in particular question nos.243 to 245 and would submit that even,
according to the claimant, the said amount of Rs.3 crores received from
the said M/s.Gemini was shown as advance refundable in the income
tax returns filed by the claimant. He submits that it was not the case of
the claimant before the learned arbitrator that Asian Capital Consolidated
Fund was the sole proprietary concern of Mr.Manohar Prasad who was
also the sole proprietor of the said M/s.Gemini.

39. In so far as the finding of the learned arbitrator on the

alleged letters exchanged between the claimant and M/s.Gemini is
ppn 19 arbp-819.11 & 908.11(j).doc

concerned, it is submitted by the learned senior counsel that when the

entire chain of correspondence is disputed, the party who relies upon
such document and correspondence has to prove all such letters. The
claimant failed to prove the existence and the contents of those
correspondence alleged to have been entered into between the claimant
and the said M/s.Gemini. This Court cannot interfere with such finding
of fact on that issue. The claimant had failed to prove the delivery of
those letters and also that the said letters were posted by the claimant
though the oral evidence led by the claimant.

40. Learned senior counsel invited my attention to the reply of

the claimant to question nos.219 and 220 and would submit that the
claimant even could not identify the alleged signature of Mr.Manohar
Prasad who was alleged to be signatory of the said writing entered into
between the claimant and the said M/s.Gemini. The learned arbitrator
has rendered finding that execution of the said writing was not proved
by the claimant. He submits that the learned arbitrator has rightly
rendered finding that the said writing was procured by the claimant for
the purpose of creating evidence. He submits that since the agreement
was not proved by the claimant, the claim for damages did not survive.

41. Learned senior counsel for the respondent submits that the
said writing entered into between the claimant and the said M/s.
Gemini was required to be stamped in accordance with Article 5(iv)(a)
of the Maharashtra Stamp Act whereas the said writing was alleged to
have been executed on the stamp paper of Rs.100/- only. He submits
that merely because the said agreement was marked as exhibit, the
ppn 20 arbp-819.11 & 908.11(j).doc

contents thereof were not proved. Learned arbitrator rightly gave a

ruling that the said document was marked subject to proof of contents.
The claimant never urged that in view of the deposition in the affidavit
of evidence, the contents of the said documents were also proved and
shall be marked as exhibit fully and unconditionally. The claimant did
not examine any other witness to prove the contents of the said document.

42. Learned senior counsel for the respondent placed reliance

on the judgment of this Court in the case of Liladhar Ratanlal Vyas Vs.
Holkarmal Sohanlal and Anr., reported in 1959 BCI 163 and in
particular paragraph 8 and would submit that the claimant not having
proved the said writing between the claimant and the said M/s.Gemini,
the said document could not have been marked as exhibit by the
learned arbitrator. No inspection of the said writing was given to the
respondent by the claimant.

43. Learned senior counsel submits that the claimant has been
cross-examined on the accounts relied upon by the claimant. The
claimant failed to prove the entries in the accounts. The claimant did
not examine any Chartered Accountant.

44. On the issue raised by the claimant that the learned

arbitrator ought to have considered the reasonable sum for the purpose of
awarding loss of profit is concerned, the learned senior counsel submits
that no foundation was laid by the claimant for the purpose of
claiming loss of profit. He submits that since the claimant made an
attempt to prove the claim for loss of profit and had failed, the learned
ppn 21 arbp-819.11 & 908.11(j).doc

arbitrator could not have awarded any sum on the basis of any guess
work. The claimant failed to prove the revenue as well as expenditure.
No claim for nominal damages was made by the claimant. The learned
arbitrator did not decide that there was no mitigation of loss as the
claimant did not raise such plea of alternate method of computation of
damages. Learned senior counsel placed reliance on the commentary of
Mulla on the Contract Act on the issue of proof of damages.

45. Learned senior counsel submits that even if the finding of

the learned arbitrator that the respondent had committed breaches is
considered as correct, that itself will not make the claimant entitled to
claim loss of profit unless the same would have been proved by the
claimant. In support of his submission, learned senior counsel relied
upon paragraphs 15 and 16 of the judgment of the Division Bench of this
Court in the case of Maharashtra State Electricity Board, Bombay
Vs.Sterlite Industries (India) Ltd., reported in 2000 (3) Bom.C.R. 347.
Learned senior counsel also placed reliance on the judgment of the
Division Bench of this Court delivered on 3rd January 2013 in the case
of Edifice Developers and Project Engineers Ltd. Vs. M/s. Essar
Projects (India) Ltd. passed in Appeal No.11 of 2012 in Arbitration
Petition No.313 of 2007 and in particular paragraphs 7 to 12 thereof.

46. It is submitted by the learned senior counsel that the

claimant in this case had not claimed reimbursement of expenses but
had claimed loss of profit. In so far as reliance on the letter exchanged
between another film producer and the respondent in support of his
submission that even that letter would indicate that the loss of profit of
Rs.4.5 crores is concerned, he submits that there was no such plea
ppn 22 arbp-819.11 & 908.11(j).doc

raised by the claimant before the learned arbitrator. Each film may have
a different quantum of profit or loss.

47. Learned senior counsel submits that since the findings

rendered by the learned arbitrator while rejecting the claim for loss of
profit are not perverse, thus no interference with such findings of facts
is permissible under Section 34 of the Arbitration Act. The learned senior
counsel placed reliance on the judgment of the Supreme Court in the
case of Associate Builders Vs. Delhi Development Authority, reported in
2014 (4) ARBLR 307 (SC).

48. Learned senior counsel distinguished the judgments relied

upon by the claimant on the ground that damages can be different in the
facts of each case. He submits that thought the learned arbitrator had
rendered finding of fact that the claimant had committed breaches of the
obligations, the learned arbitrator has rightly rejected the claim for loss of
profit and had rendered findings of facts which findings are pure findings
of facts and no interference is warranted with such findings of facts.

49. In so far as the award of arbitration costs by the learned

arbitrator against the respondent is concerned, the learned senior counsel
for the respondent submits that the order for costs follows the success by
a party. Since the learned arbitrator has rejected the claim for damages,
the learned arbitrator could not have awarded the arbitration costs in
favour of the claimant. It is submitted that in any event, the costs of
Rs.12 lacs in favour of the claimant is disproportionate. This Court has
power to interfere with such finding of facts and that part of the said
award be set aside.
ppn 23 arbp-819.11 & 908.11(j).doc

50. In the rejoinder, Mr.Kapadia, learned counsel for the

claimant submits that the parties had acted upon the agreement entered
into between them as conclusive and binding. The claimant had given
an apology in favour of the respondent under the said agreement. The
respondent thus cannot be allowed to raise this plea at this stage. The
said agreement was conclusive and binding. Learned counsel placed
reliance on the judgment of Delhi High Court in the case of Delhi State
Civil Supplies Corporation Ltd. (supra). He submits that the learned
arbitrator has rendered finding of fact that the said contract entered into
between the parties existed and thus no interference with such finding
of fact is warranted.

51. In so far the submission of the learned senior counsel that

the claimant had no financial capacity to produce a film is concerned,
the learned counsel for the claimant submits that the respondent had not
raised any such plea that the claimant had no financial capacity. The
respondent ought to have led evidence on this issue. Learned counsel
for the claimant distinguished the judgment of the Privy Council in the
case of Tan Ah Boon Vs. State of Johore (supra) on the ground that the
said matter was dealing with the land transaction. In so far as the issue
of financial capacity of the claimant raised by the respondent is
concerned, it is submitted that the same was never raised any time
during the period prior to the date of invoking the arbitration agreement.
The learned arbitrator has rejected this submission of the respondent in
the impugned award.

52. In so far as the consideration payable by the said

M/s.Gemini to the claimant is concerned, learned counsel submits that
ppn 24 arbp-819.11 & 908.11(j).doc

the said M/s.Gemini had already paid Rs.3 crores to the claimant under
the said agreement. Further amount at that stage was not required to be
paid to the claimant. He submits that since the film was not complete in
all respect, the amount received by the claimant from M/s.Gemini was
rightly shown as refundable advance in the books of account of the
claimant.

53. In so far as the three letters exchanged between the claimant

and M/s.Gemini which were not marked as exhibits are concerned, the
learned counsel for the claimant submits that the witness examined by
the claimant had proved the signature of the claimant. The contents of
letter dated 31st July 2008, 14th August 2008 and 22nd August 2008 were
proved by the author himself who was a witness. The other two letters of
M/s.Gemini were inseparable chain of events and thus ought to have
been marked as exhibits by the learned arbitrator. Though the claimant
could not have identified the signature of Mr.Manohar Prasad initially, he
had subsequently identified the signature of Mr.Manohar Prasad as is
recorded by the learned arbitrator himself in the notes of evidence. In
support of the submission that the objection regarding admissibility of the
documents has to be raised, when it arises while tendering such
documents and the said objection cannot be postponed, learned counsel
relied upon the judgment of this Court in the case of Hemendra Rasiklal
Ghia Vs.Subodh Mody (supra) and in particular paragraphs 48 and 58
thereof.

54. In so far as the finding of the learned arbitrator that the

agreement entered into between the claimant and M/s.Gemini is not
proved is concerned, he submits that the said finding is contrary to
ppn 25 arbp-819.11 & 908.11(j).doc

Section 47 read with Section 60 of the Evidence Act. The respondent

only had raised an objection about insufficient stamp duty and not
about the mode and manner of execution of the said documents. The
contents of the said documents were deemed to have been proved or
otherwise proved in view of deposition in paragraph 27 of the affidavit
in lieu of examination-in-chief of the claimant. In support of this
submission, learned counsel placed reliance on the judgment of the
Supreme Court in the case of Javer Chand & Ors. Vs. Pukhraj Surana
(supra) and in particular paragraph 8 thereof. Learned counsel also
placed reliance on the judgment of the Supreme Court in the case of
K.P. Poulose Vs. State of Kerala and Anr. (supra) and in particular
paragraphs 3 to 5 thereof.

55. In so far as the award of arbitration costs by the learned

arbitrator is concerned, it is submitted by the learned counsel that since
all the findings on the plea of specific performance including the finding
that the respondent had committed breach of contract are in favour of
the claimant though the claimant could not succeed on the ground that
the claimant had alleged to have failed to prove the alleged loss of
profit, the learned arbitrator has rightly awarded the arbitration costs of
Rs.12 lacs in favour of the claimant. The claimant had incurred
arbitration cost much more than what has been awarded by the learned
arbitrator. He submits that no interference is thus warranted with the
award of arbitration costs of Rs.12 lacs by the learned arbitrator in favour
of the claimant is concerned.
REASONS AND CONCLUSIONS
56. I have heard the learned counsel for the parties and have
given my anxious consideration to the rival submissions made by the
ppn 26 arbp-819.11 & 908.11(j).doc

learned counsel. Both the parties have impugned part of the arbitral
award dated 6th June 2011 made by the learned arbitrator. The learned
arbitrator framed 9 issues for consideration. It is held by the learned
arbitrator that he had jurisdiction to decide the disputes arising out of the
consent terms and to decide whether the parties had orally agreed on the
number of subjects to be put to the respondent and whether the forty dates
were to be allotted consecutively. The respondent did not seriously
dispute the finding of the learned arbitrator holding that he had
jurisdiction to decide the disputes arising out of the consent terms.

57. Insofar as the issue raised by the respondent that the consent
terms were a mere 'Agreement to agree' and was not a concluded contract
is concerned, the learned arbitrator rejected the said submission of the
respondent. It is held by the learned arbitrator that in the said agreement
the parties had provided that a subject would be agreed upon within three
months and the respondent should give forty shooting dates. The consent
terms further provided that the film should be made within seven months
from the date the parties agree upon the subject. It is held that there was
thus a concluded contract on that aspect. The learned arbitrator held that
merely because the subject was to be subsequently decided and/or an
Actor Producer Agreement in the usual form was to be subsequently
signed, and/or the fact that it was not set out how the forty shooting dates
had to be alloted did not make it an 'Agreement to agree.'

58. It is held that merely because the name of the actress was to
be decided later did not detract from the fact that there was a concluded
contract. All these matters were the matters of working of the binding
ppn 27 arbp-819.11 & 908.11(j).doc

contract. The learned arbitrator thus decided the said issue in favour of
the petitioner. In my view the learned arbitrator has interpreted the terms
of the contract and has rightly come to the conclusion that the consent
terms and the articles of agreement were not 'Agreement to agree' as
canvassed by the respondent. The interpretation of the learned arbitrator
on this issue is a possible interpretation and thus cannot be substituted by
another interpretation by this court under section 34 of the Arbitration
Act.

59. Insofar as submission of the learned senior counsel for the

respondent that there was alteration in the terms of the payment which
would indicate that the claimant was not ready and willing to comply
with his part of obligation is concerned, in my view there is no substance
in this submissions. The learned arbitrator has dealt with this issue and
has held that the even if there was any such understanding between the
parties for modifying the consideration amount, the payment would have
to be made as per the agreement. It is held that even though the
respondent initially claimed that there was no understanding, finally the
respondent was also relying on an understanding not spelt out in the
terms. It is held that it was thus clear that there was an understanding
between the parties. It is held that the parties must have orally agreed on
the number of subjects that were to be put to the respondent. The learned
arbitrator held that the question whether the forty days were to be alloted
by the respondent were to be consecutive or not was to be orally agreed
upon. Those two considerations were mere oral understanding on how
the consent terms were to be carried forward and would not be reduced to
writing. In my view the finding rendered by the learned arbitrator is not
ppn 28 arbp-819.11 & 908.11(j).doc

perverse and does not warrant any interference. There is no merit in this
submission of the learned senior counsel for the respondent on this issue.

60. Insofar as the submission of the learned senior counsel for

the respondent that the obligation to prove that the claimant was
althroughout ready and willing to perform his part of the obligation which
the respondent had failed to prove is concerned, a perusal of the award
indicates that the learned arbitrator has dealt with this issue while dealing
with the issue as to whether claimant had committed any breach of the
contract or not. The learned arbitrator has after referring to the oral and
documentary evidence rendered by both the parties has rendered a finding
that the case of the respondent that no subject was discussed at the
meeting of 29th June 2009 between the parties was proved false by the
respondent's own statement in paragraph 13 of his affidavit evidence
dated 7th June 2010. It is held that the said statement in paragraph 13
belies the case of the respondent that the meeting had been fixed with
Mr.Sunil Shah and that he was surprised to see the claimant at that
meeting. By that date, the period of three months was already over. Both
the parties were in agreement that time was not the essence.

61. The learned arbitrator noticed that it was not possible to

believe that no subject would be discussed which took place after three
months, when the meeting was held with a view to proceed further.
When the respondent was confronted with the said statement made in the
affidavit of evidence, he chose to say that the same was a mistake. The
learned arbitrator held that initially the respondent did not admit that any
meeting took place in November 2007 however he was then forced to
ppn 29 arbp-819.11 & 908.11(j).doc

admit that the meeting had taken place but he then claimed that it was for
the narration of the story.

62. The learned arbitrator held that on one hand the respondent
had claimed that he could not agree upon a subject without the script
being first narrated to him and on the other hand in his letter dated 22 nd
April 2008, he claimed that he did not read scripts before approving the
subject of the film. The learned arbitrator rendered a finding of fact that
the respondent was reiterating that the script would only follow an
approval of a subject and that the script would not be sent without the
subject being discussed or approved. However his evidence in paragraph
14 of his affidavit was contrary to the said case and was belied by his
own letters. The learned arbitrator has held that when the parties had
provided that the subject of the film was to be mutually agreed upon
within a period of three months, they did not intend that script with
dialogues to be first narrated by the writer in the presence of the director
and thereafter, the script to be read by the respondent before he would
accept the subject.

63. Learned arbitrator has held that there was no reason to

disbelieve the claimant when he claimed that the understanding was that
two subjects would be narrated to the respondent and he would choose
one. In the month of September 2007, the claimant had sent the script of
'Kal Kisne Dekha' to the respondent. The learned arbitrator has rendered
a finding that the subject could be discussed between the parties without
scripts. The respondent had admitted in his cross examination that there
could be more than one lead star in the film. The learned arbitrator
ppn 30 arbp-819.11 & 908.11(j).doc

rejected the submission of the respondent that the respondent had no

dishonest intention from the start. It is held by the learned arbitrator that
the evidence in this matter suggested that the respondent had no intention
from the beginning of not honouring the consent terms. It is also held that
it was clear that the respondent was trying his best to put spokes in the
performance of the agreement and he was purposely not carrying forward
the consent terms. The learned arbitrator rendered a finding of fact that
the respondent has committed the breach of consent terms by keeping on
varying his demands on how the subject was to be agreed upon.

64. Insofar as submission of the learned counsel for the

respondent that the claimant was not ready and willing to perform his
part of obligations under the consent terms and thus claimant was not
entitled to claim specific performance of the agreement is concerned, the
learned arbitrator has rendered a finding that the claimant had indicated
his readiness and willingness by putting two subjects to the respondent
and was spending time and money in getting two scripts ready. It is held
that insisting on 40 consecutive dates by the claimant would not mean
that the claimant was not ready and willing to abide by the consent terms.
Insofar as issue of financial capacity of the claimant to produce the film is
concerned, the learned arbitrator rejected the said contention on the
ground that the respondent did not deny that the claimant was capable of
raising finances. It is held that the claimant had not sold video and
satellite rights for any of his films which had a value even post release.

65. The learned arbitrator has held that the respondent never
allowed the consent terms to get past the first stage of agreeing upon the
ppn 31 arbp-819.11 & 908.11(j).doc

subject of the film and thus a party in breach could not be heard to say
that the other party was not willing to comply with the terms which were
to be fulfilled later. It is held that even if the claimant was not ready and
willing, at the highest he would not be entitled to damages and that would
not preclude the learned arbitrator from holding that respondent was in
breach. It is held that there was no substance in the contention that the
claimant was not ready and willing.

66. In my view the learned arbitrator has considered the oral as

well as documentary evidence led by both the parties in detail in the
impugned award and has rightly rendered a finding of fact that the
claimant was ready and willing to perform his part of the obligation under
the agreement and that the respondent had committed breaches of his
obligations under the agreement which findings are not perverse and thus
no interference with such findings of fact is permissible under section 34
of the Arbitration Act. In my view the learned senior counsel for the
respondent could not demonstrate as to how the findings of fact rendered
by the learned arbitrator on the issue of readiness and willingness and
breach are perverse.

67. Insofar as judgment of Privy Council in case of Abdullah

Bey Chedid (supra) relied upon by the respondent is concerned, there is
no dispute about the proposition of law that the readiness and willingness
to carry out the obligation is always be a condition precedent for the
plaintiffs to recover damages in respect of breach of two concurrent
obligations. In this case, the learned arbitrator in my view has rightly
rendered a finding of fact that the respondent had no intention from the
ppn 32 arbp-819.11 & 908.11(j).doc

start to carry out his obligation under the agreement and was on one or
the other ground refusing to comply with his part of the obligation. The
judgment of the Privy Council in case of Abdullah Bey Chedid (supra)
thus relied upon by the respondent does not assist him.

68. Insofar as judgment of Privy Council in case of Tan Ah

Boon (supra) relied upon by the respondent is concerned, it is held that
no plaintiff can maintain an action for specific performance and damages
unless he avers and proves that he has performed or at all times been
ready and willing to perform his part of the the contract. There is no
dispute about the said proposition of law. In this case the claimant has
proved that he was ready and willing to perform his part of the obligation
under the agreement.

69. The learned arbitrator though rendered a finding of fact in

favour of the claimant that he was ready and willing to perform his part
of the obligations under the agreement and that the respondent had
committed breaches of his obligation under the agreement, the learned
arbitrator has refused to grant the claim for damages in favour of the
claimant.

70. In support of the claim for loss of profit of Rs.20 crores

made by the claimant, he relied upon an agreement with Gemini
Industries and Imaging Limited. The said document was initially marked
for identification by the learned arbitrator on the ground that the same
was not adequately stamped on the objection raised by the respondent.
However, the said document was subsequently marked as Ex.C-31 during
ppn 33 arbp-819.11 & 908.11(j).doc

the course of cross examination in view of the respondent having called

upon the claimant to produce the letter dated 13 th September, 2010 which
contained the reference to the said agreement dated 2 nd November 2007
entered into between the claimant and the Gemini Industries and Imaging
Limited. The learned arbitrator after considering the objection raised by
the respondent marked the said agreement as Ex.C-31 however clarified
that the contents thereof had not been proved by the claimant.

71. A perusal of the award indicates that the learned arbitrator

accepted the submission made by the respondent that there was no
evidence on record to show that the agreement marked as Ex-C-31 was
the agreement which had been entered into by the claimant with the said
Gemini Industries and Imaging Limited. It is held that no person from
Gemini Industries and Imaging Limited had been brought to prove the
said agreement. The learned arbitrator noticed that four cheques had
been issued under the said agreement not by Gemini Industries and
Imaging Limited but by one M/s.Asian Capital Consolidated Fund in
favour of the claimant. There was no explanation of who the said
M/s.Asian Capital Consolidated Fund was and how it was connected with
the claimant or Gemini Industries and Imaging Limited.

72. It is held that the only first cheque of Rs.3 crores was
honoured. The second cheque dated 13 th November, 2007 was
dishonoured for the reason 'payment countermanded by the Drawer'. The
claimant did not give any explanation as to why the said payment had
been countermanded. The other two cheques were admittedly not
deposited by the claimant. The learned arbitrator held that the claimant
did not give any explanation as to why payment of the second cheque was
ppn 34 arbp-819.11 & 908.11(j).doc

countermanded within a period of less than 11 days after the agreement.

It is held that it could not be said that the cheque was dishonoured
because the respondent was not agreeing to the subject or was committing
default. A perusal of the record indicates that the claimant had failed to
produce those cheques before the learned arbitrator though was called
upon to produce in the cross examination.

73. A perusal of the oral evidence led by the claimant indicates

that the claimant who had entered the witness box even could not identify
the signature of the person who had alleged to have signed the said
agreement on behalf of Gemini Industries and Imaging Limited on the
letter. The said witness identified the signature much later after the matter
was adjourned for recording further cross examination of the claimant.
The claimant did not examine any witness from the said Gemini
Industries and Imaging Limited to prove the said agreement and the
contents thereof. In my view merely because the said agreement was
marked as exhibit in view of the respondent calling upon the claimant to
produce the notice issued to him by the Income Tax Department and
while producing a letter dated 13 th September 2010 which contained a
reference to the agreement dated 2nd November 2007, the contents of the
said document were not proved by the claimant. Merely because a
document is marked as exhibit, contents of such document are not proved
automatically.

74. The learned arbitrator rightly took cognizance of the

admitted fact that the claimant was not even able to identify the signature
of the representative who had alleged to have signed the said agreement
on behalf of Gemini Industries and Imaging Limited initially. The
ppn 35 arbp-819.11 & 908.11(j).doc

claimant could not give any explanation about the alleged consideration
mentioned in the said alleged agreement and could not produce the
original cheques though called upon by the respondent. In my view the
findings rendered by the learned arbitrator that the claimant could not
produce any evidence on record to show that the said agreement was the
agreement which had been entered into by the claimant with Gemini
Industries and Imaging Limited is not perverse and the contents thereof
had not been proved by anybody is not perverse but in my view is based
on the oral as well as documentary evidence led by the parties and thus
no interference with such finding of fact is warranted.

75. Insofar as submission of the learned counsel for the claimant

that the witness examined by the claimant had proved the contents of the
said agreement by leading oral evidence and by deposing that the
contents of the said agreement were correct is concerned, the said witness
of the claimant however could not even identify the signature of the
person who had alleged to have signed the said agreement on behalf of
Gemini Industries and Imaging Limited on the letter. The learned
arbitrator in my view has thus rightly held that the contents of the said
agreement were not proved.

76. Insofar as the submission of the learned senior counsel for

the respondent that the learned arbitrator could not have marked the said
agreement as Ex.C-31 at the first instance is concerned, in my view
when the said document was produced pursuant to the notice to produce,
the respondent did not raise any objection about the insufficiency of the
stamp or the mode and manner of the execution of the said agreement.
ppn 36 arbp-819.11 & 908.11(j).doc

The full bench of this court case in of Hemendra Rasiklal Ghia (supra)
has held that a question as to admissibility of document should be
decided when it arises and should not be reserved till the judgment of the
case is given. There is no provision enabling the court to postponing the
objection regarding admissibility of the proof of the document. I am
respectfully bound by the judgment of the Full Bench of this court which
applies to the facts of this case. The respondent not having raised any
objection about the mode and manner of execution of the document when
the said document was tendered could not be allowed to raise that issue at
the time of hearing of the matter.

77. Insofar as finding of the learned arbitrator that the alleged

letter dated 14th August 2008 addressed by the said Gemini Industries and
Imaging Limited was procured for the purpose of creating evidence is
concerned, a perusal of the award indicates that the learned arbitrator
noticed that the said document was taken on record as the claimant had
claimed that he was familiar with the signature of the joint managing
director of Gemini Industries and Imaging Limited. However in cross
examination when he was shown the signature acknowledging the receipt
of one of the letter of the claimant, he could not identify the signature
which signature was the same as that on the letter of Gemini Industries
and Imaging Limited. The learned arbitrator held that the offices of the
said Gemini Industries and Imaging Limited was in Chennai. If the letter
had been sent by the post as claimed by the claimant, there could not have
been any acknowledgement of receipt of the said letter on the copy of the
said letter. The learned arbitrator has thus rendered a finding of fact that
the letters Ex.C-27 had been procured by the claimant for the purpose of
ppn 37 arbp-819.11 & 908.11(j).doc

creating evidence and thus no reliance on those letters could be placed. It

is is held that the agreement if any with Gemini Industries and Imaging
Limited appeared to have come to an end in November 2007.

78. In my view there is no substance in the submission made by

the learned counsel for the claimant that the said letter dated 2 nd
November 2007 was in continuity and was one of the letter in chain of
correspondence and thus existence and contents of all the three letters
were proved by the claimant. In my view Mr.Joshi, learned senior
counsel for the respondent is right in his submission that since the
respondent had disputed all the three letters, the claimant was required to
prove the existence and contents of all the three letters. In my view the
finding of fact is rendered by the learned arbitrator after considering the
oral as well as documentary that the said letters were procured for the
purpose of creating evidence by the claimant which finding in my view
is not perverse and no interference with such finding is thus warranted.
The claimant did not examine any witness to prove that the said letter
was alleged to have been addressed.

79. Insofar as rejection of the claim for loss of profit made by

the claimant is concerned, learned counsel appearing for both the parties
have addressed this court at length and have cited several judgments for
consideration of this court. It is not in dispute that the claimant had
placed reliance on the alleged agreement dated 2 nd November 2007
entered into between the claimant and the said Gemini Industries and
Imaging Limited in which there was mention of an alleged consideration
of Rs.33 crores. The claimant had also alleged that for producing a film
ppn 38 arbp-819.11 & 908.11(j).doc

which was subject matter of the agreement entered into between the
parties, the claimant would have incurred expenditure of of Rs.13 crores
and accordingly claimed loss of profit in the sum of Rs.20 crores. The
respondent had disputed this claim for loss of profit on the ground that
the respondent had not committed any breach and in the alternative that
the claimant had not proved any such loss of profit. The respondent also
placed reliance on various parts of the cross examination of the claimant
and also the documentary evidence produced by the claimant himself in
support of the submission of the respondent that the claimant had
suffered losses even in past when produced other movies and never made
any profit.

80. A perusal of the award clearly indicates that the learned

arbitrator had rendered a finding of fact that there was no evidence on
record to show that the agreement at Ex.C-31 was the agreement which
was entered into by the claimant with Gemini Industries and Imaging
Limited. It is also held that the contents of the said agreement had not
been proved by anybody. The learned arbitrator has rendered a finding of
fact that the claimant could not explain as to why the second cheque
which was dishonoured for the reasons 'Payment countermanded by the
drawer was why countermanded'. The claimant did not deposit admittedly
the other two cheques. The cheque of Rs.3 crores which was encashed by
the claimant was not shown as consideration by the claimant in his
income tax return but was shown as refundable advance. The learned
arbitrator has thus rightly considered that since the claimant had failed to
prove that he had any subsisting agreement under which he was to
receive a sum of R 33 crores, claimant had not been able to prove that he
ppn 39 arbp-819.11 & 908.11(j).doc

had suffered any damages much less damages in a sum of Rs. 20 crores.
In my view the learned arbitrator has rightly rendered such finding of fact
while rejecting the claim for loss of profit which finding is not perverse
but is based on oral as well as documentary evidence led by the parties
and thus no interference with such finding of fact is permissible.

81. Be that as it may, a perusal of record even otherwise

indicates that the claimant had admitted in his cross examination that he
was ready to make the film if the finance was provided to him by the
respondent. In the balance-sheet for the year 2006 to 2008 produced by
the claimant, admittedly indicated a huge loss suffered by the claimant.
The claimant also admitted in his cross examination that he had suffered
huge loss. The capital account of the claimant was in negative. A perusal
of the evidence led by the claimant would clearly indicate that he had not
earned any profit for last several years in producing the film. The
claimant thus could not prove that even if the respondent would have
complied with his part of the obligation and if would not have committed
breaches, claimant would have made any profit on producing the said
film. In my view the claimant neither could prove the consideration if any
on the said film by producing the said alleged agreement with the said
Gemini Industries and Imaging Limited nor could produce the expenses
which the claimant was required to incur for the purpose of producing the
said film.

82. In my view the onus was on the claimant to prove by leading

evidence that not only the respondent had committed breaches but also
that due to such breaches on the part of the respondent the claimant had
ppn 40 arbp-819.11 & 908.11(j).doc

suffered losses. Though the claimant proved that the respondent had
committed breaches however could not prove that the claimant suffered
any loss of profit.

83. Insofar as submission of the learned counsel for the claimant

that the letter produced by the claimant which was exchanged between
another film producer and the respondent which would indicate that the
respondent was to get a sum of Rs. 5 crores from another film producer
for producing a film and on that basis the claimant would have earned a
profit of Rs.4.5 crores is concerned, in my view there is no substance in
this submission of the learned counsel for the claimant. Neither the
claimant had raised such plea before the learned arbitrator nor had proved
the terms and conditions of the said agreement if any between the
respondent and the said film producer. In any event production of each
film may result in different quantum of profit or loss and thus reliance
placed on the said letter was totally misplaced.

84. Insofar as submission of the claimant that once the learned

arbitrator had rendered a finding of fact that the respondent had
committed breaches of his obligation under the said agreement, the
learned arbitrator ought to have allowed the compensation on the basis of
guess work and ought to have allowed reasonable compensation to the
claimant is concerned, a perusal of the record indicates that there was no
such plea raised by the claimant. Be that as it may, the claimant had led
oral evidence to prove the claim of loss of profit of Rs.20 crores by
relying upon the documents which were not proved by the claimant. In
my view once the claimant had entered the witness box and had led
ppn 41 arbp-819.11 & 908.11(j).doc

evidence in support of his claim for loss of profit and had failed to prove
such loss of profit, the learned arbitrator could not have awarded any
compensation on the basis of guess work.

85. Insofar as the submission of the learned counsel for the

claimant that he had incurred expenditure on taking various steps under
the said agreement and thus the learned arbitrator should have allowed
reasonable compensation by way of reimbursement of expenses is
concerned, a perusal of the record indicates that the claimant had neither
pleaded for reimbursement of the expenses nor has proved the quantum
of any such expenses alleged to have been incurred by the claimant.
There is thus no merit in this submission of the learned counsel for the
claimant.

86. Supreme Court in case of M/s.Kailash Nath and Associates

vs. Delhi Development Authority & Anr. delivered on 9th January 2015 in
Civil Appeal No.193 of 2015 has considered the issue of award of
compensation and after adverting to its several judgments has held that a
compensation can only be given on damage or loss suffered and if
damage or loss is not suffered, the law does not provide for a windfall.
The statement of law declared by the Supreme Court on this issue in
paragraphs 43 and 44 of the said judgment read thus :-
“43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be
stated to be as follows:-

1. Where a sum is named in a contract as a liquidated

amount payable by way of damages, the party complaining
of a breach can receive as reasonable compensation such
liquidated amount only if it is a genuine pre-estimate of
ppn 42 arbp-819.11 & 908.11(j).doc

damages fixed by both parties and found to be such by the

Court. In other cases, where a sum is named in a contract as
a liquidated amount payable by way of damages, only
reasonable compensation can be awarded not exceeding the
amount so stated. Similarly, in cases where the amount fixed
is in the nature of penalty, only reasonable compensation
can be awarded not exceeding the penalty so stated. In both
cases, the liquidated amount or penalty is the upper limit
beyond which the Court cannot grant reasonable
compensation.

2. Reasonable compensation will be fixed on well known

principles that are applicable to the law of contract, which
are to be found inter alia in Section 73 of the Contract Act.
3. Since Section 74 awards reasonable compensation for
damage or loss caused by a breach of contract, damage or
loss caused is a sine qua non for the applicability of the
Section.
4. The Section applies whether a person is a plaintiff or a
defendant in a suit.
5. The sum spoken of may already be paid or be payable in
future.
6. The expression "whether or not actual damage or loss is
proved to have been caused thereby" means that where it is
possible to prove actual damage or loss, such proof is not
dispensed with. It is only in cases where damage or loss is
difficult or impossible to prove that the liquidated amount
named in the contract, if a genuine pre-estimate of damage
or loss, can be awarded.
7. Section 74 will apply to cases of forfeiture of earnest
money under a contract. Where, however, forfeiture takes
place under the terms and conditions of a public auction
before agreement is reached, Section 74 would have no
application.
44. The Division Bench has gone wrong in principle. As has
been pointed out above, there has been no breach of contract by
the appellant. Further, we cannot accept the view of the
Division Bench that the fact that the DDA made a profit from re-
ppn 43 arbp-819.11 & 908.11(j).doc

auction is irrelevant, as that would fly in the face of the most

basic principle on the award of damages - namely, that
compensation can only be given for damage or loss suffered. If
damage or loss is not suffered, the law does not provide for a
windfall.

87. Division Bench of this court in case of Maharasthra State

Electricity Board vs. Sterlite Industries (India) Ltd. 2000 (3) Bom.C.R.
347 has held that a party claiming compensation is under section 73 of
the Contract Act is under an obligation to prove the loss suffered on
account of breach of agreement by the respondent. It is held that when no
loss or damages is ensued, there would be no question of awarding
compensation. Paragraph 15 of the said judgment of the Division Bench
in case of Maharashtra State Electricity Board (supra) read thus :-
“15. In the light of the above view taken by us, it is really not
necessary to go into the second question as to whether
appellants proved the alleged loss suffered by them. However,
both the learned Counsel have advanced arguments on this
aspect as such we are dealing with the same. It is a well settled
law that where loss in terms of money is payed for, the party
claiming compensation must prove such loss suffered by it. The
concept of compensation is linked up with loss or damages that
result from breach of contract and where no loss or damage is
ensued, there would be no question of awarding compensation.
Section 73 of the Contract Act does not give any cause of
action unless and until damages are actually suffered,
otherwise section 73 will become nugatory and party would be
penalised though the other party suffered no loss. Thus, even
under section 73 of the Contract Act, party claiming
compensation is under an obligation to prove the loss suffered
on account of breach of agreement by the respondents. In the
present case, as found by the Arbitrators in the majority
awards the appellants have failed to prove quantum of loss
suffered by them. The appellants were, therefore, held not
entitled to any damages claimed in the respective statement of
claims. According to Mr. Bharucha, learned Counsel for the
ppn 44 arbp-819.11 & 908.11(j).doc

respondents approach of the Arbitrators cannot be faulted in

the proceeding under section 30 of the Arbitration Act as
categorical findings have been recorded by the majority
arbitrators in the respective awards. The appellants
(claimants) have failed to prove that they suffered any loss. It
is, therefore, not possible for this Court to examine findings of
fact in the present appellate jurisdiction. Consequently, no fault
can be found with the approach adopted by the learned Single
Judge is the last contention of the appellants.”

88. Division Bench of this Court in case of Edifice Developers

and Projects Engineers Ltd. vs. M/s.Essar Projects (India) Limited
delivered on 3rd January 2013 in Appeal No.11 of 20112 has after
adverting to some of the judgments of the Supreme Court has held that
the claim for loss of profit and under utilisation of plant and equipment is
required to be proved and if not proved cannot be awarded by the learned
arbitrator. Paragraphs 7 to 12 of the said judgment of Division Bench in
case of Edifice Developers and Projects Engineers Ltd.(supra) read
thus :-
“7. The arbitral award, ex facie, demonstrates that the
Arbitrator proceeded on the basis that the Appellant had not
produced either the basis of the account or any oral evidence
to prove the overhead losses caused to or suffered by it.
Despite that finding the Arbitrator held that in the
construction industry a contractor becomes entitled to
overhead losses on the basis of Hudson's Formula, even in the
absence of direct evidence to prove such losses when
resources are mobilized and delay is caused in the execution
of the work not attributable to the contractor. In holding this
the Arbitrator relied upon the judgment of the Supreme Court
in Brij Paul Singh's case (supra).

8. The Learned Single Judge, in our view, was justified in

coming to the conclusion that the Arbitrator was manifestly in
error in awarding the claim for overhead losses in spite of the
fact that no oral evidence was adduced on behalf of the
ppn 45 arbp-819.11 & 908.11(j).doc

Appellant. In Brij Paul Singh's case the Supreme Court noted

that it was not disputed that where in a works contract a party
entrusted with the work commits a breach of the contract, the
contractor would be entitled to claim damages for loss of
profit which he expected to earn by undertaking the contract.
The Supreme Court, however, noted that what must be the
measure of the profit and what evidence should be tendered to
sustain the claim are different matters. The judgment of the
Supreme Court adverts to the fact that in that case the High
Court had referred to Hudson's treatise on Building and
Engineering Contracts. Hudson states there that in major
contracts subject to competitive tender on a national basis, the
evidence given in litigation on many occasions suggests that
head office overheads and profits are between 3 to 7% of the
total price of cost which is added to the tender. The High
Court in that case had rejected the claim of the contractor.
The Supreme Court noted that in an identical contract with
regard to another portion of the same road and for the same
type of work the High Court had accepted loss of profit at
15% of the price of the balance of work as a reasonable
measure of damages if the State is guilty of a breach of
contract. It was on this basis that the Supreme Court came to
the conclusion that since for the same type of work, between
the same parties involving a nearby portion of the same road
a certain measure of damages had been adopted by the High
Court, the same measure ought to have been adopted in that
case as well.

9. Brij Paul Singh's case therefore does not stipulate as a

doctrine of law that the formula which has been prescribed in
Hudson's treatise must invariably be accepted in all cases as a
measure of damages sustained on account of loss of
overheads. On the other hand in the subsequent decision of
the Supreme Court in McDermott International (supra), the
Supreme Court has relied upon the following observations
contained in the earlier decision in M.N.Gangappa v Atmakur
Nagabhushanam Setty & Co. - (1973) 3 SCC 406.
"In the assessment of damages, the court must consider
only strict legal obligations, and not the expectations,
however reasonable, of one contractor that the other
ppn 46 arbp-819.11 & 908.11(j).doc

will do something that he has assumed no legal

obligation to do."

10. The judgment in McDermott International (supra)

considers various formulae including Hudson's Formula,
Emden Formula and Eichleay Formula. As regards Hudson's
Formula the Supreme Court has noted, in the following
extract, that although it has received judicial support in many
cases, it has been the subject matter of criticism :
"(a) Hudson Formula : In Hudson's Building and Engineering
Contracts, Hudson formula is stated in the following terms :

"Contract head office overhead & contract sum period of delay”

profit percentage x -------------- x
contract period

In the Hudson formula, the head office overhead

percentage is taken from the contract. Although the Hudson
formula has received judicial support in many cases, it has
been criticized principally because it adopts the head office
overhead percentage from the contract as the factor for
calculating the costs, and this may bear little or no relation to
the actual head office costs of the contractor." (emphasis
supplied)

11. In McDermott International (supra) the Supreme Court

has held that it is an accepted position that different formulae
can be applied in different circumstances and the question as
to whether damages should be computed by taking recourse to
one or other formula, having regard to the facts and
circumstances of a particular case, would fall within the
domain of the Arbitrator. In the present case no other formula
other than Hudson's formula has been considered in the
arbitral award. In the present case the Arbitrator proceeded
on the basis that it was only Hudson's Formula which was to
be applied and that even though no direct evidence had been
adduced on behalf of the Appellant, nonetheless the Appellant
would be entitled to damages measured with reference to the
aforesaid formula. This approach of the Arbitrator is
manifestly in the teeth of the law laid down by the Supreme
Court in McDermott International. Section 28(1)(a) requires
ppn 47 arbp-819.11 & 908.11(j).doc

that the Arbitral Tribunal shall decide a dispute submitted to

arbitration in accordance with the substantive law for the time
being in force in India. Section 28(3) requires the Arbitral
Tribunal to decide in accordance with the terms of the
contract and take into account the usages of the trade
applicable to the transaction. The Arbitral Tribunal under
Section 28(2) can act as amiable compositeur and can decide
ex aequo et bono only if parties have expressly authorized it to
do so. In the present case, the Learned Single Judge was
correct in coming to the conclusion that the award of the
Arbitrator proceeds on the manifestly misconceived notion
that a contractor is entitled to claim overhead losses even in
the absence of evidence on the basis of Hudson's Formula.
Similarly, the Arbitral Tribunal proceeded on a misconceived
premise that this formula is invariably adopted for
quantification of claims for overhead losses in India. In the
present case the Appellant produced no evidence in support of
its claim; this has been so stated in the Award. The award of
the claim is on the misconceived basis that the Hudson's
Formula must be applied despite the absence of evidence.
Since the fundamental basis that has permeated the award is
contrary to law, the judgment of the Single Judge cannot be
faulted in setting aside the arbitral award on that aspect.

12. The Arbitrator, as noted earlier, also awarded claims in

respect of loss of profit, for under utilized plant and equipment
and for reimbursement of infrastructure expenses. In respect
of loss of profits, the Arbitrator merely held that a measure of
10% on the value of the remaining part of the works contract
cannot be said to be unreasonable. The Arbitrator observed
that a percentage representing 10% of the rate of profit is
invariably accepted in the construction industry. Evidently
save and except for an priori assumption, no evidence
whatsoever was led before the Arbitrator in that regard. In
P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H.
Securities Private Limited - (2012) 1 SCC 594 the Supreme
Court has held that while an Arbitral Tribunal cannot make
use of its personal knowledge of the facts of the dispute, which
is not a part of the record, the Tribunal can certainly use its
expert or technical knowledge or the general knowledge about
ppn 48 arbp-819.11 & 908.11(j).doc

the particular trade in deciding a matter. That is why in many

arbitrations, persons with technical knowledge are appointed
since they may be well-versed with the practices and customs
in the respective fields. The Arbitrator in the present case was
not an arbitrator drawn from the trade. No basis whatsoever
has been indicated in the award for accepting 10% as a
measure representing loss of profits. No material was
produced before the Arbitrator on the nature of the practice in
the trade. During the course of the hearing no basis has been
indicated to the Court from the record to suggest that any
practice of that nature in the construction industry was
brought to the notice of the Arbitral Tribunal. In the
circumstances, the arbitral award to the extent that it allows
the claim for loss of profits is based on pure conjecture and in
the absence of any evidence whatsoever was correctly set
aside. Similarly, in regard to the claim for underutilized plant
and equipment and for reimbursement of expenses of
infrastructure, it is evident that the Arbitrator has merely
awarded a sum which he considered to be reasonable. No
evidence whatsoever was led before the Arbitral Tribunal.
In the circumstances, we do not find any reason to
interfere with the judgment of the Learned Single Judge. The
Appeal shall accordingly stand dismissed.
There shall be no order as to costs.”

89. In my view if a party has not suffered any losses, even if the
respondent has committed breaches, such party cannot be awarded any
compensation under Section 73. When loss in terms of money is prayed,
the party claiming compensation has to prove such loss or damages
suffered by him. The division bench of this court in case of Maharashtra
State Electricity Board (supra) has held that section 73 of Contract Act
does not give any cause of action unless and until any damages or loss
was actually suffered otherwise section 73 would become nugatory and
party would be penalised though the other party suffered no loss. In my
view, if the party who has not suffered any loss is awarded any
ppn 49 arbp-819.11 & 908.11(j).doc

compensation under section 73 it would amount to unjust enrichment to

such party.

90. I am respectfully bound by the judgment of the Supreme

Court in case of M/s.Kailash Nath and Associates (supra) and the
judgment of division bench of this court referred to aforesaid. Each of
the judgment referred to aforesaid on the claim for loss of profit and
compensation are squarely applicable to the facts of this case. I am
respectfully bound by the law laid down by the Supreme Court and this
court.

91. Insofar as judgments of English courts relied upon by the

learned counsel for the claimant in support of his submission that the
learned arbitrator ought to have awarded reasonable compensation on
guess work basis is concerned, in my view the law on this issue laid down
by the supreme court and the division bench of this court as summarized
aforesaid would be binding on this court which squally applies to the
facts of this case. The judgments relied upon by the learned counsel for
the respondent which are referred aforesaid in paragraph 25 of this
judgment are clearly distinguishable in the facts of this case and do not
assist the claimant.

92. Insofar as claim of arbitration cost of Rs.12 lacs awarded by

the learned arbitrator in favour of the claimant is concerned, the said
claim is opposed by the respondent on the ground that the learned
arbitrator having rejected the claims made by the claimant could not have
allowed the said claim for cost. A perusal of the award clearly indicates
ppn 50 arbp-819.11 & 908.11(j).doc

that the learned arbitrator has rendered most of the findings in favour of
the claimant while holding that the respondent had committed breaches of
the agreement and had since inception had no intention to comply with
his part of the obligation under the agreement. The learned arbitrator
however has rejected the claim for loss of profit on the ground that the
claimant had failed to prove such loss of profit. In my view though the
claimant had incurred arbitration cost much more, the learned arbitrator
has only awarded the cost at Rs.12 lacs. In the facts and circumstances of
this case the learned arbitrator was thus justified in awarding cost of
Rs.12 lacs in favour of the claimant. In my view there is thus no merit in
this submission of the learned senior counsel for the respondent and thus
that part of the award is upheld. In my view both the arbitration petitions
are devoid of merits.

93. I, therefore, pass the following order :-

a) Arbitration Petition No. 819 of 2011 and Arbitration Petition No.908
of 2011 are dismissed.
b) There shall be no order as to cost.

R.D. DHANUKA, J.

Mr.Joshi, learned senior counsel appearing for the

respondent prays for stay of the execution of the award granting the
arbitration cost by the learned arbitrator. Prayer for stay is refused.

R.D. DHANUKA, J.