ARBITRATION AWARD

In the matter of arbitration under the Bye Laws, Rule and Regulations of the Singapore International
Arbitration Centre (“SIAC”)

SIAC Arbitration No. *****/***/***

Between

M/S Castle Mountains Pvt Ltd. (“Castle”)

Plot No 2G, Udyog Kender, Ecotech III, Greater

Noida, Uttar Pradesh 201308

..........................Applicant

AND

Luminos Design and Technology Pvt Ltd.

(“Luminos”)

C-56, Mayapuri Industrial Area Phase-II,

Mayapuri, New Delhi -110064.

.......................Respondent

Appearances:

1. For the Applicant : Mr Raghuram, Chief Executive Officer , the authorised representative on
behalf of Castle Mountains Pvt. Ltd. (“Castle”) and Mr Shakti , Legal Counsel appeared on the
behalf of the Castle in the hearing. For the Respondent: Ms Shivani , Chief Executive Officer
and authorised representative on behalf of Luminos Design and Technology Pvt. Ltd.
(“Luminos”) and Ms Nisha Legal Counsel appeared on the behalf of the Luminos in the
hearing.

Statement of case of the applicant:

2. The ‘Applicant’ Castle Mountains Pvt. Ltd. sent a notice of arbitration on 3.10.2015 to the
Registrar of SIAC and the’ Respondent’ Lunimos Design and Technology Pvt. Ltd., with a
claim of Rs 1.05 Crores and also appointed Mr. Steve Salvius as an arbitrator. From the facts
of the case narrated in the Statement of Claims it transpires that the Respondent has
breached Contract A by implementing a faulty Turnkey Tech and not providing efficient
services to cure the defects in Turnkey Tech.

2.1 The dispute between the applicant and respondent provides for the settlement through
the arbitration as per Clause 12 of the Contract A administered by the Singapore
International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the
 Singapore International Arbitration Centre (“SIAC Rule”) and hence the arbitrators have the
jurisdiction to entertain and try this reference

2.2 The Applicant finally has prayed for an award to be passed in favour of the applicant
directing the Respondent (i) to pay the Applicant a sum of Rs. 10.15 Crores (ii) to pay the
cost of arbitration, expenses for legal representation and other payments that the tribunal
shall deem to be fit.

2.3 The applicant sent additional Statement of Claim to the Tribunal dated 2.09.2016 and
took a stand against joinder of Stalwart as a party to the arbitration and also pointed out
that there was conflict of interest between Luminos’ legal representative ‘Balchand’ and the
presiding arbitrator, Mr. Yuhao Wu.

Statement of Defense of the Respondent.

3. Respondent replied through a letter dated 15th October, 2015 addressed to Castle and SIAC along
with the statement of defense, seeking dismissal of all of Castle’s claim and nominated Mr. Joseph
Dent as an arbitrator. The two arbitrators then appointed Mr. Yuhao Wu as the presiding arbitrator.
Procedural Order No. 1 was passed by the tribunal which stated that the date for the final
arguments was 4th May 2016. However, on 29th April 2016, Luminos made an application to the
tribunal to join Stalwart as a party to the arbitration.

3.1 Luminos also replied through an Additional Statement of Defense on 3rd January 2017 arguing
that Stalwart can be joined as a party to the arbitration and that the tribunal does not have the
power to remove ‘Balchand’ from the arbitration proceedings. As a result, Procedural Order No. 2
was passed by the tribunal revising the issues that were to be dealt by the parties in the arbitration.
Finally, after a conference call between the parties, the oral hearing was scheduled to be held on
23rd November 2017 at New Delhi.

Details of the Hearing

4. The two arbitrators nominated Mr Yuhao Wu, the head Legal Counsel of leading software
company in Malaysia,as the presiding arbitrator on25.10.2015. All the three arbitrators were cleared
of any potential conflict of interest. The tribunal issues Procedural Order No. 1 which state that
(i)parties have chosen not to let in oral evidence (ii) and the matter has been posted for final hearing
and Tribunal shall hear all the issues raised in Statement of Claim and Defense together.

4.1 On 29.04.2016 , the respondent made an application to the Tribunal to join Stalwart as a party
to the arbitration proceedings for effective adjudication of the dispute. Copy of the application was
sent to Castle and Stalwart. Later the oral hearing was postponed by the tribunal via letter dated
1.05.2016 and it stated that the tribunal will notify regarding the schedule for the hearing in due
course.

4.2 Stalwart replied through a letter dated 27.05.2016 stating that it has no objection in being
impleaded as a party to the arbitration proceedings and further asserted that it will sail along with
respondent submissions in the merits of the dispute. Applicant’s however raised objections to the
application for joinder through a letter dated 03 .07.2016 and requested tribunal two months time
for filing additional Statement of Claim stating that it is fundamental for Castle to make further
submissions in the light of recent events.

The request of the Castle was allowed by the Tribunal.

The oral hearing was scheduled on 23.11.2017 at New Delhi and the tribunal issued Procedural
Order No. 2 stating that the Revised issued to be dealth by the parties in the arbitration are

1. Can Stalwart be joined in the present arbitration proceedings?

2. Does the tribunal have the power to remove Luminos’ Counsel, Balchand from the arbitration
proceedings?

3. Has Luminos breached Contract A?

4. Is Luminos liable to pay the damages as claimed for by Castle?

Contentions by the Applicant

4.4 The oral hearing was fixed on 23.11.2017 at New Delhi and Mr Raghuram appeared on behalf of
the Castle. Applicant contended that Stalwart does not fall within the ambit of ‘party’ under the
arbitration agreement . As per Section 2(h) of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as ‘Act’) clearly defines a ‘party’ as a party to the arbitration agreement.1 Section 7(1) of
the same Act further defines arbitration agreement as an agreement between the parties to submit
to arbitration in case some disputes arise between them.2 Hence, the term ‘party’ under the
agreement clearly means only those between whom the arbitration agreement has been signed, and
therefore, in this case, does not include Stalwart within its ambit as only Castle and Luminos were
parties to the arbitration agreement. Contract A, which contained the arbitration clause was entered
into only by these two parties and so Stalwart was not a party to the arbitration agreement as
Stalwart was not a party to Contract A. The applicant replied on the case of Yogi Agarwal v.
Inspiration Clothes & U3, the Supreme Court of India held that one of the fundamental conditions of
a provision for arbitration, to constitute an arbitration agreement for the purposes of Section 7 of
the Act is that the agreement should be between parties to the dispute. However, in the present
case, Stalwart was not a party to the dispute that arose between Castle and Luminos as explained
above. Moreover, in S.N. Prasad v. Monnet Finance Ltd4, it was held that reference to arbitration can
only be made if there is an arbitration agreement between the parties, which means that if there is a
dispute, reference to arbitration can only be done with respect to the parties to the arbitration
agreement and not the non-parties. Hence the court in the above mentioned case did not allow the
impleading of the third party into the proceedings since there was no arbitration agreement for the
third party. Also, in the case of Deutsche Post Bank Home Finance Ltd v Taduri Sridhar5, the Supreme
Court, taking a strict view of the arbitration agreements held that only parties to an agreement could
be made party to arbitral proceedings under it and therefore, the Court in this case said that since
the bank was not a party to the arbitration agreement, no reference was permissible not could they

1
Section 2(h), The Arbitration and Conciliation Act, 1996.
2
Section 7(1), The Arbitration and Conciliation Act, 1996.
3
2009 (1) SCC 372.
4
4 (2011) 1 SCC 320.
5
AIR 2011 SC 1899.
be impleaded at a subsequent stageThe applicant stated the case of PT First Media TBK v Astro
Nusantara International BV and others6,6 the Singapore Court of Appeal ruled that only parties to an
arbitration agreement can be joined to an arbitration in respect of that agreement and said that the
SIAC Rules have been expressly amended to provide for this i.e. rule 24.b. of the SIAC rules 2013.
Therefore Stalwart is not a party to the arbitration agreement and as a result, should not be brought
into the arbitration proceedings.

The applicant contended that different contractual obligations arise out of different contracts The
two contracts, A and B were totally independent in their purpose as the work done under both the
contracts were independent in nature. While Contract A was made between Castle and Luminos for
the completion of the project, Contract B was made between Stalwart and Luminos as a result of the
suit filed by Stalwart over Luminos solely for the purpose of using Stalwart’s computer chip by
Luminos. Thus, the contractual obligation of one cannot be surpassed to another. Moreover, though
clauses of Contract A were referred to simplify Contract B, there is no specific mention of the fact
that reference was made to the arbitration clause contained in Contract A. Thus, if a reference is so
drawn, it will go beyond the scope of contract B as contract B does not contain any arbitration
clause. Hence, it will result in ultra vires interpretation of contract B. The Applicant stated that
Consent of all the parties is necessary for the joinder of a third party In the case of Titan Unity (No.
2)7, the Singapore Court dealt with the question of when a third party i.e. a non-party to the
arbitration agreement could be joined to an arbitration proceeding. The court in this case declined
the joinder of the third party and ruled that consent of all the parties concerned is an important
factor in deciding the joinder or the non-joinder and that the third party could only be joined to an
arbitration pursuant to an agreement to arbitrate formed amongst parties. Therefore, for a party to
be joined to an arbitration, it should either: (A) Be a contracting party to the arbitration agreement;
or (B) Consent to be bound by the arbitration agreement that it was not a party to, and the parties
to that arbitration agreement also consented to extend their agreement to it. However, in the
present case, albeit the fact that Stalwart has consented to join the arbitration proceeding, it is not a
party to contract A which contains the arbitration clause and moreover, Castle, who is an original
party to the arbitration agreement has also not given its consent to the joinder of Stalwart. Also,
Castle being a party to the arbitration agreement was not at all made aware of the formation of
Contract B between Stalwart and Luminos and the other new developments as the factual matrix is
completely silent in this regard. Hence, the joinder of Stalwart suddenly at the eleventh hour in the
arbitration proceedings should not be allowed. Hence, accordingly, Stalwart should not be allowed
to join the present arbitration proceeding.

With regard to the issue Applicant claimed that Tribunal has the power to remove Luminous
Counsel, Balchand from the arbitration proceedings. It was contended before this Tribunal that in
light of the existing conflict of interest between the presiding arbitrator and the legal representative

6
[2013] SGCA 57.

7
[2014] SGHCR 4 .
of the respondents, the Tribunal has the power to remove Balchand as the legal counsel of the
respondents. The submissions are made as under: The majority of legal rules encompass a general
procedural power of arbitrators to decide about the procedural issues in case that there is no
parties’ agreement.8 In consequence, no detailed procedural rules are provided9and it is up to
arbitrators to determine and resolve all procedural issues that arise in the course of the proceedings.

It was contended that when there is no agreement to a certain aspect of procedure, the arbitrators
have discretion to determine the procedure.10 Arbitrators’ discretion, similarly to party autonomy, is
also one of the hallmarks of the international arbitral process.11 Since “the tribunal’s procedural
authority is an implicit part of the parties‟ agreement to arbitrate and is an indispensable
precondition for an effective arbitral process.12” Wide discretionary power of arbitrators is
recognized expressly both by arbitration acts and arbitration statutes. In consequence, it could be
argued that an arbitrator can exclude a counsel on the basis of his discretionary power in respect to
the rules of procedure. The SIAC Rules 2013 mandates the conduct of the arbitral proceedings under
Rule 16. Rule 16.1 states, “The Tribunal shall conduct the arbitration in such manner as it considers
appropriate, after consulting with the parties, to ensure the fair, expeditious, economical and final
determination of the dispute.” Rule 16.3 of SIAC rules 2013 further stipulates that: A presiding
arbitrator may make procedural rulings alone, subject to revision by the Tribunal. 19. Determination
of rules of procedure is mentioned under Section 19 of the Arbitration and Conciliation Act, 1996.
Clause 3 of this section mandates that the arbitral tribunal may (...) conduct the proceedings in the
manner it considers appropriate. The words of the aforementioned provisions clearly attribute
discretionary powers to the arbitral tribunal with respect to any questions regarding the procedure
to be followed. Also, it is such discretionary and inherent power of the tribunal that allows them to
take decisions so as to maintain fairness in the arbitral proceedings and therefore, by virtue of these
implicit powers, the applicant stated that the tribunal has the power to remove Balchand as the legal
counsel for the opposite party. It is expedient to mention that UNCITRAL Model Law stipulates that
the “arbitral tribunal may (…) conduct the arbitration in such manner as it considers appropriate”13
Drafters of the UNCITRAL Model Law wanted to establish a liberal framework for the course of
arbitral proceedings because there is a great variety of needs and circumstances that arise in
international cases.14 They wanted to allow the arbitrators to tailor the conduct of the proceedings

888
REDFERN, Alan; HUNTER, Martin; BLACKABY, Nigel; PARTASIDES, Nigel. Redfern and Hunter on International
Arbitration. Oxford: Oxford University Press, 2009. 696 p. ISBN 9780199557189. P. 316.
9
KARRER, Pierre A. Freedom of an Arbitral Tribunal to Conduct Proceedings. ICC International Court
of Arbitration Bulletin. 1999, Vol. 10, No. 1; BORN, Gary. International Commercial Arbitration.
Volume II. Austin: Wolters Kluwer, 2009. P. 1740-3303. ISBN 9789041127594. P. 1758. P. 1758.

10
UNCITRAL Secretariat. Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on
International Commercial Arbitration as amended in 2006. P. 32. Available online at:
http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf.
11
BORN, Gary. International Commercial Arbitration. Volume II. Austin: Wolters Kluwer, 2009. P. 1740-303.
ISBN 9789041127594. P. 1758. 12 Supra, note 4. At pg. 1759. 13 Art. 19(2) UNCITRAL Model Law.
12
Supra, note 4. At pg. 1759.
13
Art. 19(2) UNCITRAL Model Law.
14
UNCITRAL. Analytical Commentary of Draft Text of a Model Law on International Commercial Arbitration.
A/CN. 9/264. P. 44. Available online at:
http://daccessddsny.un.org/doc/UNDOC/GEN/V85/244/18/PDF/V8524418.pdf
to the specific features of the case without being hindered by any restraint from traditional local
law.15 In consequence, discretion of arbitrators in the UNCITRAL Model Law is construed widely. The
UNCITRAL Rules also set forth that “arbitral tribunal may conduct the arbitration in such manner as it
considers appropriate.”16. Also, the Act No. 216/1994 Coll., on Arbitral Proceedings and Enforcement
of Arbitral Awards (The Arbitration Act) lays down that if there is no agreement between the parties,
“the arbitrators shall conduct the proceedings in an appropriate way”17.It is brought into knowledge
that when it comes to common law countries, almost identical approach to discretionary power is
adopted. For instance, English Arbitration Act prescribes “the tribunal shall adopt procedures
suitable to the circumstances of the particular case, avoiding unnecessary delay or expense”18

Thus they contended that the tribunal can remove Balchand following the principle of efficiency. It is
a task for every tribunal to observe efficiency in arbitration proceedings and to conduct the
proceedings in such manner which enables the rendition of an award in an expeditious and fair
way19. It is of high importance whether the counsel is added to a party’s legal team before or after
the constitution of the arbitral tribunal. If the arbitral tribunal is constituted and the legal counsel is
already a part of the party’s legal team, then there is indeed a standard, efficient and quick method
how to resolve the conflict of interest – the challenge of an arbitrator.20However, it must be noted
that removing an arbitrator instead of a counsel would cause severe delay and costs for both parties
since a new arbitrator would have to be appointed and all the evidence would have to be repeated.
Counsel exclusion, on the other hand, would be a quick solution. It is expedient to mention that the
above mentioned reasoning was the core of the Hrvatska case21, a landmark case in counsel
exclusion. In the end, the tribunal in the Hrvatska case excluded the legal counsel from the
proceedings. In its reasoning, the tribunal stressed out that “although the Respondent in this case
was free to select its legal team as it saw fit prior to the constitution of the Tribunal, it was not
entitled subsequently amend the composition of its legal team in such fashion as to imperil the
Tribunal’s status or legitimacy.” In the aforementioned case, in order to have proceedings with a
legitimate tribunal and to avoid costs and delay, Mr. Mildon, counsel for the respondents was
removed from the proceedings. It is pertinent to note that the time when the counsel is added is of
importance. It is true that if a counsel is present from the beginning, challenge towards an arbitrator
at the start of the proceedings is a more reasonable and efficient solution. However, different
scenario occurs if the tribunal is already constituted and a counsel causing the conflict of interest is

15
UNCITRAL. UNCITRAL Secretariat Explanatory Note by the UNCITRAL secretariat on the 1985 Model Law on
International Commercial Arbitration as amended in 2006. P. 32. Available online:
http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf.
16
Art. 17(1) UNCITRAL Rules.
17
Section 19(2) the Act No. 216/1994 Coll., on Arbitral Proceedings and Enforcement of Arbitral Awards (The
Arbitration Act). In PAULSSON, Jan. International Handbook on Commercial Arbitration.
18
Art. 33(1)(b) Arbitration Act 1996. Available online at:
http://www.legislation.gov.uk/ukpga/1996/23/contents
19
See Art. 17(1) CEAC. Similarly Art. 22(1) ICC Rules also Art. 14.2 LCIA Rules; Art. 19(2) SCC Rules
etc.

20
See procedures regarding the challenge of arbitrators in Art. 15 SCC Rules; Art. 14 ICC Rules; Art. 11 CEAC
Rules; Art. 30 CIETAC Rules; Rule 9 ICSID Rules; Art. 10 LCIA Rules; Art. 11 UNCITRAL Rules.
21
Hrvatska Elektroprivreda, d.d. v. the Republic of Slovenia. ICSID case No. ARB/05/24. International Centre for
Settlement of Investment Disputes, May 6, 2008. 22 Hrvatska case, para. 26.
added. If that is the case, then it is more efficient to exclude a legal counsel rather than an
arbitrator. In the instant case, Balchand was appointed to the team of legal representatives of the
respondents, only after the Presiding arbitrator was nominated and appointed by both the parties. It
is contended that the respondents have the intention to use the relation between the presiding
arbitrator and Balchand as leverage to get the decision in their favour. The tribunal in Hrvatska case
further stated, “The Tribunal disagrees with the contention of Respondent that it has no inherent
powers in this regard. It considers that as a judicial formation governed by public international law,
the Tribunal has an inherent power to take measures to preserve the integrity of its proceedings. In
part, that inherent power finds a textual foothold in Article 44 of the Convention, which authorizes
the Tribunal to decide “any question of procedure” not expressly dealt with in the Convention, the
ICSID Arbitration Rules or “any rule agreed by the parties‟. More broadly, there is an inherent power
of an international court to deal with any issues necessary for the conduct of matters falling within
its jurisdiction; that power exists independently of any statutory reference22”. 32. Further, the
principle of immutability must be considered by this Tribunal. This principle clearly lay down that
after the tribunal is constituted and proceedings begin, its composition shall remain unchanged.
Although, it may be argued that such a provision is not used in arbitration acts or rules within
commercial arbitration, there is another reason for the existence of inherent power and this one is
applicable to commercial arbitration - the need to preserve integrity of proceedings.

It was contended by the applicant that the appointment of Balchand as a legal counsel leads to
conflict of interest under the Arbitration and Conciliation (Amendment) Act, 2015. The Calcutta High
Court in the case of Electro Steel Casting Limited v. Reacon (India) Pvt. Ltd.23 while explaining the
application of Section 26 on arbitral proceedings, held that where arbitration proceedings
commences before the commencement of Amendment Act, the provisions of the Act would apply,
and enforcement of the award would be stayed automatically upon the filing of application for
setting aside an award. In a leading case of Raffles Design International India Private Limited and
Ors.Vs. Educomp Professional Education Limited and Ors.24, the Court held that there is a general
presumption that unless the statute expressly indicates, it would not be applied retrospectively to
impair a vested right or impose a fresh burden based on past transaction/events. However,
procedural laws are presumed to apply retrospectively; this is so because as explained by the
Supreme Court in Anant Gopal Sheorey v. State of Bombay2529, "no person has any right in any
course of procedure". In Amireddi Raja Gopala Rao v. Amireddi Sitharamamma and Ors.26, the
Supreme Court had observed that "It is a well-recognised rule that a statute should be interpreted, if
possible, so as to respect vested rights." The Court allowed the petition as maintainable, applying
the 2015 amendment on the proceedings initiated before 23-10-2015. Reliance was placed on the
doctrine of fairness and the intention of the legislatures, which for this Act, as stated in the object of
Arbitration Act has always been to provide for a speedy resolution of disputes and provide an
efficacious ADR mechanism. The view that a statutory provision can be applied retrospectively on
the doctrine of fairness was accepted by the Supreme Court in Vijay v. State of Maharashtra27.The
court observed: “It is now well-settled that when a literal reading of the provision giving

22
Hrvatska case, para. 32-33.
23
Application No. 1710 of 2015 decided on January 14, 2016.
24
2016(6)ARBLR426(Delhi), 234(2016)DLT349.
25
AIR 1958 SC 915.
26
(1965) 3 SCR 122.
27
2006 (6) SCC 289.
retrospective effect does not produce absurdity or anomaly, the same would not be construed to be
only prospective. The negation is not a rigid rule and varies with the intention and purport of the
legislature, but to apply it in such a case is a doctrine of fairness. When a law is enacted for the
benefit of the community as a whole, even in the absence of a provision, the statute may be held to
be retrospective in nature.” Therefore the applicant contended that that the respondents have
appointed Balchand to the team of legal representatives only to gain benefit in the present matter,
arising out of the personal relation between the presiding arbitrator and Balchand. Therefore, the
tribunal has the power to remove the legal counsel of the respondents so as to avoid any further
delay in the proceedings and ensure fairness to the claimants.

With regard to the third issue, the applicant contended that Lumnious has breached Contract A. A
Breach of contract occurs where a party thereto renounces his liability under it, or by his own act
makes it impossible that he should perform his obligation under it totally or partially fails to perform
such obligations.28 In the instant case Luminos has breached the contract by:- ( A) Not Providing
efficient Services ( B)By Implementing faulty Turnkey Tech.I t was also contended by the Applicant
that Luminos did not provide efficient services. Section 39 of the Indian Contract Act states that:-
Effect of refusal of party to perform promise wholly.—When a party to a contract has refused to
perform, or disabled himself from performing, his promise in its entirety, the promisee may put an
end to the contract, unless he has signified, by words or conduct, his acquiescence in its
continuance. The party in default must have refused altogether to perform the contract and refusal
must go to the whole of the contract, otherwise the other party would not be justified in putting an
end to the contract. Whether a partial failure goes to the root or not is the question of fact of each
case.29 In the instant case the denial of services by Luminos is failure which goes to the root of the
contract. Castle was mandated to only use the services of Luminos and is bound by the terms of the
contract. Luminos has itself violated the contract by not performing the duty of remedying the
problems with turnkey tech. As per Contract A castle was under an obligation to mandatorily use the
services of Luminos with regards to the project. Luminos was responsible for resolving any problems
which may be present in the Turnkey Tech. It is important to note that there existed a direct
relationship between Luminos and Castle under Contract A and Mr Dhawani was not part of the
contract. Hence he was not under any obligation to exclusively use the services of Luminos. The
denial of any future services by Luminos on the ground of breach of the exclusivity clause is totally
unwarranted as it was Mr Dhawani who is not under any obligation of exclusivity who used third
party experts to resolve the issues regarding the turnkey tech and is simply an attempt on behalf of
Luminos to escape contractual liability.3 Plus it was the incapability of Luminos in resolving the
issues of turnkey tech which forced Mr Dhawani to use third party experts.

With Regard to the fourth Issue the Applicant stated that that Luminous is liable to pay the damages
as claimed for by the Castle. They placed reliance on Sec 73 of the Indian Contract Act States:
“Compensation for loss or damage caused by breach of contract.—When a contract has been broken,
the party who suffers by such breach is entitled to receive, from the party who has broken the

28
Food Corporation of India v J.P Kesharwani,1994 Supp(1) SCC 531.
29
Juggilal kamlapat v Pratapmal Rameshwar, (1978) 1 SCC 69.
contract, compensation for any loss or damage caused to him thereby, which naturally arose in the
usual course of things from such breach, or which the parties knew, when they made the contract, to
be likely to result from the breach of it.” Since Luminos has breached the contract A, Luminos is liable
for compensating all the losses suffered by castle due to the breach of Contract. Sections 73 deals
with actual damages following breach of contract and the injury resulting from such breach which
are in the nature of unliquidated damages since these damages are awarded by the courts on an
assessment of the loss or injury caused to the party against whom breach has taken place. The
applicant placed reliance on case of Union of India v. Raman Iron Foundry30 the Supreme Court held
that irrespective of stipulations in the form of liquidated damages, a plaintiff can recover damages to
the extent of the claim being reasonable compensation for the injury sustained by him, and not the
entire sum laid down as liquidated damages; thereby, erasing the differences between liquidated
damages and unliquidated damages . In the case of Malua Bux v Union of India31 the Supreme Court
made the following observation:" It is true that in every case of breach of contract the person
aggrieved by the breach is not required to prove loss or damage suffered by him before he can claim
a decree, and the court is competent to award reasonable compensation in case of breach even if no
actual damage is proved to have been suffered in consequence of the breach of contract. But the
expression “whether or not actual damage or loss is proved to have been caused there by” is
intended to cover different classes of contracts which come before the courts. In case of breach of
some contracts it may be impossible for the court to assess compensation arising from breach, while
in other cases compensation can be calculated in accordance with established Rules. Where the
court is unable to assess the compensation, the sum named by the parties if it be regarded as a
genuine pre-estimate may be taken into consideration as the measure of reasonable compensation,
but not if the sum named is in the nature of a penalty. Where loss in terms of money can be
determined, the party claiming compensation must prove the loss suffered by him." Hence in the
above lines it was submitted that that claim instituted by castle is reasonable in nature .

For a claim of damages and affixing liability, there has to be causal connection between the breach
committed and the loss or injury suffered. For establishing this causal link there are various tests
which have been applied by the court. One such test is the "but for" test which basically states that
whether damages would have accrued but for the acts of defendant. In Reg Glass Pty Ltd v. Rivers
Locking Systems Ltd32 the defendant failed to install the door as per the terms of the contract which
required a security door and locking system. When the plaintiff’s property was subsequently burgled
and a suit was filed for claiming damages, the Court came to a conclusion that the burglary would
not have taken place had the defendant installed the door and locking system ; thus ‘but for’ the
defendants breach, the loss would not have been suffered. By applying the "but for" test in the
present scenario we can understand that, had turnkey tech been properly implemented Castle
would not have had to suffer a loss of reputation and would not have to pay any good will payment
to Mr Dhawani. A common sensical approach should be adopted to establish a causal connection

30
AIR 1974 SC 1265.
31
( 1969)2 SCC 554.

32
(1968) 120 CLR 516.
between the breach of the contract and the loss or injury.33 It can be easily understood from the
factual matrix that while implementing the turnkey tech Luminos did not test the compatibility of
computer chip of Stalwart and hastily completed the project. This negligence on behalf of Luminos
resulted in the defects of turnkey tech there by breaching the contract.

It was also argued by the applicant that the Force Majeure Clause does not absolve liability of
Luminos. A force majeure event is defined as any event or circumstance or combination of events
and circumstances which materially and adversely affect the performance of the obligations of
either Party to a contract and is not within the reasonable control (directly or indirectly) of the Party
affected. The principle of Force Majeure is not expressly covered under the Indian contract act but
is covered sec 56 of the Indian Contract Act. Sec 56 of the act states that: Agreement to do
impossible act.—An agreement to do an act impossible in itself is void. Contract to do an act
afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is
made, becomes impossible, or, by reason of some event which the promisor could not prevent,
unlawful, becomes void when the act becomes impossible or unlawful. Compensation for loss
through non-performance of act known to be impossible or unlawful.— Where one person has
promised to do something which he knew, or, with reasonable diligence, might have known, and
which the promisee did not know, to be impossible or unlawful, such promisor must make
compensation to such promisee for any loss which such promisee sustains through the non-
performance of the promise . The Force Majeure clause cannot be used as excuse for the non-
performance of the contract. For invoking the force majeure clause it is necessary to show that there
exist certain circumstances which are beyond the control of the parties. In the case of Dhanrajamal
Gobindram v Shamji Kalidas and Co34 the court held that the main intention behind the insertion of
"force majeure" clause is to save the performing party from the consequences over which he has no
control. This is the widest meaning which can be given to "force majeure". The condition about
“force majeure” is something which is unforeseen, unexpected and which happens suddenly and
over which a person has no control. 35It is necessary to show that the circumstances were beyond
the control of the defaulting part so as to escape from the obligations of the contract. In the instant
case the mere fact that Luminos settled the suit with stalwart on behalf of Mr Srivastava who
worked as a consultant for Luminos is enough to prove that the circumstances not beyond the
control of Luminos. In chitty on contracts page 1309 it is stated that: "Determination of contracts.
The parties may expressly provide that the contract shall ipso facto determine upon happening of a
certain event. But such a provision is to be construed subject to the principle that no man can take
advantage of his own wrong , so that one party may not be allowed to rely on such a provision
where the occurrence of the event is attributable to his own act or default". In the instant case Mr
Srivastava worked as a third party consultant and was in a contract with the company which allowed
Luminos to use the super computer chip in turnkey tech. The delay in performance of Contract A
could have been easily avoided if Luminos would have been reasonable or diligent enough to check
for any IP infringement with regards to the chip before entering in a contract. It was their negligence
which led to the delay in performance of contract A and it is them who needs responsibility for it.
Delay on account of flood and earthquakes due to which the project was delayed. Once the
conditions for invocation of force majeure clause were shown to exist, the burden was on the other

33
Alexander v. Cambridge Credit Corp Ltd, (1987) 9 NSWLR 310.
34
AIR 1961 SC 1285.
35
Esjay International (P) Ltd. v. Union of India (2011) 6 Mah LJ 750.
party to show when such conditions ceased to exist.36 Performance under force majeure clause is
only excused during the time of supervening impossibility. After such circumstances cease to exist
the contract has to be duly performed. In the instant case Castle keeping in view of the suit between
Luminos and Stalwart gave extra time to Luminos for installing Turnkey Tech and suffered the loss. It
was only after the contract was breached by Luminos by improper implementation of turnkey tech
that castle seeks damages suffered due to the delay as during the time of performance the
supervening circumstances were no longer present. Thus the force majeure clause does not absolve
the defaulter of his obligation for the entirety of the contract and if a breach has been committed
then he is liable for damages. Thus from the above arguments Luminos is liable to pay castle 7 crore
Rupees along with the 15 Lakh rupees for delayed delivery of posession and for the breach of
contract along with the goodwill amount he paid to Mr Dhawani for the failure of turnkey tech.
Moreover Castle is also entitled to claim compensation for the loss of its reputation.

Thus the applicant explained the contents of their arbitration application with reference to
supporting case laws and documents. However, it transpired that certain important documents were
wanting for a comprehensive decision making in the matter. The representative of the applicant was
directed to furnish the following documents:

a. Contract A between Castle and Luminos,

b. Construction Agreement between Castle and Mr. Mittal Dhawani dated 17.04.2014,
c. Contract B signed between Castle and Satwart dated 2.03.2015 to utilise computer chip in
the project,
d. Copy of the email dated 15.08.2015 sent from Castle to Luminos demanding its service team
to periodically visit the home of Mr Dhawani with necessary experts ,
e. Copy of the email dated 17.08.2015 from Luminos refusing to comply stating that it has
fulfilled its obligation,
f. Copy of the Newspaper report dated 1.10.2015 , which has caused huge loss to reputation
to Castle.

The Respondent were also given the opportunity to further justify their defense. Ms Shivani with
her Legal Counsel appeared on the behalf of the Luminous . The respondent contended with regard
to the first issue that Rule 24.b. of the Arbitration Rules of the Singapore International Arbitration
Centre, 2013 (SIAC Rules) clearly states that one of the additional powers of the tribunal is that it
can, “upon the application of a party, allow one or more third parties to be joined in the arbitration,
provided that such person is a party to the arbitration agreement, with the written consent of such
third party, and thereafter make a single final award or separate awards in respect of all parties”37.

36
General Electric Inc. Canada v. National Hydroelectric Power Corporation Limited, 2010 SCC OnLine Del
2015.
37
Rule 24.b. of the Arbitration Rules of the Singapore International Arbitration Center, 2013.
It was stated by the respondent that in the present dispute, through an application dated 29.4.2016,
Luminos, which is a party to the original arbitration agreement made a request to the Tribunal to
add Stalwart as a party to the arbitration proceedings. Even Stalwart, as the third party, was ready to
be impleaded as a party to the arbitration proceedings and gave its written consent for the same to
the Tribunal vide letter dated 27.5.2016. Thus, in the present case, all the conditions of Rule 24.b. of
the SIAC Rules have been complied with, and therefore, Stalwart can be joined in the present
arbitration proceedings. 3. Section 7(5) of the Arbitration and Conciliation Act, 1996 states that “the
reference in a contract to a document containing an arbitration clause constitutes an arbitration
agreement if the contract is in writing and the reference is such as to make that arbitration clause
part of the contract.”38 In the present case at hand, Contract B was signed between Luminos and
Stalwart specifically for the use of Stalwart’s computer chip solely in the project. Moreover, due to
the paucity of time, many references were made to Contract A in order to simplify Contract B.
Hence, there is no doubt regarding the fact that Contract B was a part and parcel of Contract A since
it entailed the same business purpose i.e. completion of the project. They stated that it can further
be substantiated through the fact that Contract A was only between Castle and Luminos, and that
under the contract only Luminos was liable to correct the defaults that were reported within the
default liability period. However, when the glitch was reported by Mr. Dhawani, Stalwart also went
along with Luminos to rectify the defects. This shows Stalwart’s inclusion in providing services in
furtherance of Contract A which therefore makes Stalwart eligible to be made a part of this arbitral
proceedings. Also, there was no separate dispute resolution clause in Contract B as the parties
intended to be bound under the arbitration agreement as given in Contract A and hence to simplify
Contract B, such references were made to Contract A. It is pertinent to mention the judgment of the
Supreme Court in the case of Olympus Superstructure Pvt. Limited v. Meena Vijay Khetan and Ors.39,
where the parties had entered into a purchase agreement for the purchase of flats. The main
agreement contained the arbitration clause (Clause 39).The parties also entered into three different
Interior Design Agreements, which also contained arbitration clauses. The main agreement was
terminated due to disputes about payment and non-grant of possession. These disputes were
referred to arbitration. Inter alia, the question was raised as to whether the disputes under the
Interior Design Agreements were subject to their independent arbitration clauses or whether one
and the same reference was permissible under the main agreement. It was argued that the
reference under Clause 39 of the main agreement could not permit the arbitrator to deal with the
disputes relating to Interior Design Agreements and the award was void. The Court, however, took
the view that parties had entered into multiple agreements for a common object and the expression
'other matters...connected with' appearing in Clause 39 would permit such a reference. 8. In a same
way the arbitration clause of Contract A states that “Any dispute arising out of or in connection with
this contract... shall be referred to and finally resolved by arbitration… incorporated by reference in
this clause”. This arbitration clause of Contract A does not mention the parties, however, clearly
mentions that any dispute in connection with this contract will be resolved by arbitration. The words
“in connection with” stipulates that any issues with respect to Contract A is subjected to arbitration
and any party performing towards fulfillment of objective of Contract A is deemed to be a party to
the arbitration proceedings; in the instant case, Stalwart. It is to be understood that the two

38
Section 7(5) of the Arbitration and Conciliation Act, 1996.
39
(1999) 5 SCC 651
contracts were interdependent contracts as the work under Contract A could not have been
completed without Contract B being executed and vice versa.

It was stated that Clear reference was made in Contract B to Contract A for the execution of work. It
can be said that Contract B was taking aid form Contract A, as a third party’s product (Stalwart’s
chip), was being used for the completion of Contract A. It is humbly submitted that in the case of
Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc. and Ors.40 the Supreme Court of
India said that “where origin and end of all is with the Mother or the Principal Agreement, the fact
that a party was non-signatory to one or other agreement may not be of much significance…where
the parties execute different agreements but all with one primary object in mind, the Court would
normally hold the parties to the bargain of arbitration and not encourage its avoidance. In cases
involving execution of such multiple agreements, two essential features exist; firstly, all ancillary
agreements are relatable to the mother agreement and secondly, performance of one is so
intrinsically inter-linked with the other agreements that they are incapable of being beneficially
performed without performance of the others or severed from the rest.”41 In the instant case, both
the two essential features have been satisfied, as Contract B is very much relatable to Contract A
owing to the fact that there were many cross references made to Contract A while forming Contract
B and with regard to the second feature, as established above that Contract B was taking aid from
Contract A and that the mother contract (Contract A) could not have been executed without
Contract B. Hence these two contracts are intrinsically inter-linked and are incapable of being
beneficially performed without performance of the other. Therefore, it was contended by the
respondent since these two essentials are being complied with, Stalwart should not be encouraged
to avoid, but rather should be included within the arbitration proceedings.

With regard to the second issue it was stated by the respondent that the tribunal does not have the
power to remove Balchand as the legal representative of the respondents.

It was contended that no power conferred on tribunals to remove a counsel under any Arbitration
Acts and Rules. It was contended before this Tribunal that in light of the alleged conflict of interest
raised by the claimants, between the presiding arbitrator and the legal representative of the
respondents, the Tribunal does not have the power to remove Balchand as the legal counsel of the
respondents. The submissions were made as under: There is no statutory power conferred on the
tribunal with respect to removal of a legal counsel, in any situation, whatsoever, under any
Arbitration Act or rule prevalent across the world. In the instant case, neither the SIAC Rules, 2013
nor the Arbitration and Conciliation Act, 2015 provide any such power to the arbitral tribunal. 16.
Rule 16 of SIAC Rules, 2013, which determines the conduct of proceedings for an arbitration, clearly
states in the 4th clause with respect to the discretionary power of the tribunal that: The Tribunal
may in its discretion direct the order of proceedings, bifurcate proceedings, exclude cumulative or
irrelevant testimony or other evidence and direct the parties to focus their presentations on issues
the decision of which could dispose of all or part of the case. The words of this provision clearly limit
the discretionary power of the tribunal to the aforementioned issues only. Discretionary

40
2013 (1) ARB 563
41
Para 69; Chloro Controls (I) P. Ltd. v. Severn Trent Water Purification Inc. and Ors; 2013 (1) ARB
563
competence is limited by arbitration rules chosen by parties and mandatory provisions of arbitration
acts.42 Section 19(2) of the Arbitration and Conciliation Act states that the parties are free to agree
on the procedure to be followed by the arbitral tribunal in conducting its proceedings. This means
that any procedure that is followed must not be against the will of either party. And, therefore, it is
only on failure of this clause that section 19(3) can be applied, which states: Failing any agreement
referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings
in the manner it considers appropriate. The discretionary power of the tribunal is confined under
section 19(4) of the Arbitration and Conciliation Act, 1996, to determine the admissibility, relevance,
materiality and weight of any evidence. Therefore, the authority to remove a legal counsel is beyond
the statutory power conferred on the Tribunal and cannot be exercised as it would lead to abuse of
power of the Tribunal. The respondent relied on the judgement of In Rompetrol Group N.V. and
Romania43, with regards to the powers of arbitrators, the tribunal noted, similarly as in the Hrvatska
case, that there is no explicit provision granting the tribunal with the power to exclude legal counsel.
“It is common ground between the Parties that the rules governing the present arbitration
proceedings, i.e. the ICSID Convention and Arbitration Rules, contain no provision allowing in terms
for a challenge to the appointment by a Party of counsel to represent it in an ICSID arbitration. Some
other source for such a challenge must therefore be found.44” In the end, the Rompetrol tribunal did
not see the situation at hand, a membership of an arbitrator and a counsel to a same law firm, as
raising any concerns to the conflict of interest. Therefore the counsel was not excluded.

It was also contended by the respondent that every party has a right to counsel for any legal
proceedings. Right to counsel is a widely recognized right and indeed fundamental to a party of any
legal proceeding.45 This right is widely recognized both by international and by regional conventions
on human rights. For instance, the International Covenant on Civil and Political Rights stipulates that
“everyone shall be entitled (…) to defend himself through legal assistance of his own choosing”46.
Similarly, the African Charter on Human and People’s Rights lay down that everyone may “be
defended by counsel of his choice.”47 Also, the revised UNCITRAL Rules adopted a provision that
“each party may be represented or assisted by persons chosen by it”48. Also, it is put forth before
this tribunal that it has been held by the New York Supreme Court in the Bidermann v. Avmar N.V.49,
that matters of counsel exclusion cannot be decided by arbitrators since these matters are a part of

42
WAINCYMER, Jeff. Reconciling Conflicting Rights in International Arbitration: The Right to Choice of Counsel
and the Right to an Independent and Impartial Tribunal. Arbitration International. 2010, Vol. 26, pp. 597-623.
ISSN 0957-0411. P. 613.
43
The Rompetrol Group N.V. and Romania. ISCID case No. ARB/06/03. International Centre for Settlement of
Investment Disputes, January 14, 2010.
44
Rompetrol case, para. 14.
45
BORN, Gary. International Commercial Arbitration. Volume II. Austin: Wolters Kluwer, 2009. P. 1740-3303.
ISBN 9789041127594, p. 2289.
46
Art. 14 International Covenant on Civil and Political Rights, 1966.
47
Art. 7 African Charter on Human and People’s Rights, 1981
48
Art. 5 UNCITRAL Rules
49
Bidermann Indus. Licencing, Inc. and Bidermann Industries U.S.A., Inc. v. Avmar N.V., Leit Motif,
Inc. and Karl Lagerfeld. 173 A.D.2d 401,402. United States: Supreme Court of New York, Appellate
Division, First Department, May 28, 1991.
public policy. It further said, “the regulation of attorneys, and determination as to whether clients
should be deprived of counsel of their choice as a result of professional responsibilities and ethical
obligations, implicate fundamental public interests and policies which should be reserved for the
courts and should not be subject to arbitration.” The respondents further object to the removal of
Balchand from the legal representatives and contend that they can fully present their case only with
a particular specialized counsel and that if the tribunal excludes the counsel, they can no longer
present its case in a way they wishes to. The Arbitration and Conciliation (Amendment) Act, 2015 is
not applicable in this case. It is humbly put forth before this Tribunal that the claimants have relied
upon the 2015 amendments to Arbitration and Conciliation Act, 1996, in their Additional Statement
of Claim vide letter dated 02-09-2016, to allege a conflict of interest between the legal counsel of
the Respondent viz. Balchand and the presiding Arbitrator. However, the said amended Act does not
apply in the given case. Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 clearly
stipulates the prospective applicability of the provisions to the arbitral proceedings. It states:
“Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance
with the provisions of section 21 of the principal Act, before the commencement of this Act unless
the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on
or after the date of commencement of this Act”. In light of the aforementioned section, it is
pertinent to mention that the arbitral proceedings in the instant case commenced as soon as the
respondents received the notice of arbitration from the claimant vide letter dated 03-10-2015 and
sent a reply vide letter dated 15-10-2015. Therefore, the commencement of the proceedings is in
any way, before 23rd October, 2015, the date from which the amendment Act shall apply. . In
Jumbo Bags v New India Assurance Ltd.50, the question was whether procedure for appointment of
arbitrators should be followed as per the unamended Act or the amended Act when the notice of
arbitration was issued in July 2015. The Chief Justice held that since arbitration commenced under
the unamended Act, the procedure to be followed is as per the unamended Act.

The Madras High Court in its recent judgment of New Tirupur Area Development Corporation Ltd.
(“NTADCL”) v. M/s Hindustan Construction Co. Ltd. (“HCC”)51 has dealt with the interpretation and
applicability of Section 26 of the Amendment Act. The Madras HC held that Section 26 of the
Amendment Act is not applicable to post arbitral proceedings. However, it must be noted that the
application of the amendment to court proceedings was the issue in hand with no ambiguity with
respect to an arbitral proceeding. It is expedient to mention for the kind perusal of this Tribunal that
the various High Courts of India in a catena of judgements have discussed upon the prospective and
retrospective applicability of the amendments. In conclusion, it has been well settled that the
amendments cannot be applied on an arbitral proceeding commenced before the said Act was made
effective owing to the prospective applicability in such arbitral proceedings. The issue in the courts
pertains only to the applicability of the amendments in the court proceedings and therefore, find no
relevance in the present case.

The Calcutta High Court in the case of Electro Steel Casting Limited v. Reacon (India) Pvt. Ltd52. while
explaining the application of Section 26 on arbitral proceedings, held that where arbitration
proceedings commences before the commencement of Amendment Act, the provisions of the Act

50
10.03.2016, Single Judge- Madras High Court.
51
Application No. 7674 of 2015 in O.P. No. 931 of 2015.
52
Application No. 1710 of 2015 decided on January 14, 2016.
would apply, and enforcement of the award would be stayed automatically upon the filing of
application for setting aside an award. This judgment deals only with the scenario of post arbitral
proceedings however and keeps arbitral proceedings beyond its ambit. In the case of Raffles Design
International India Private Limited and Ors.Vs. Educomp Professional Education Limited and Ors.53,
the Court held that there is a general presumption that unless the statute expressly indicates, it
would not be applied retrospectively to impair a vested right or impose a fresh burden based on past
transaction/events. With respect to the ambiguity in application of the amendments, it is important
to rely on settled legal principles on retrospective applicability of statutes54, which are given as:

a) Every statute is prima facie prospective unless it is expressly or by necessary implication made
retrospective. b) Unless there are words in the statute which show the intent to affect existing/
vested rights, the statutes are deemed to be prospective. c) Statutes dealing with merely matters of
procedure are presumed to be retrospective unless such a construction is textually admissible. d)
While the law relating to forum are matters of procedure, the law relating to right of action and right
to appeal are considered substantive rights even though they are remedial in nature. Hence, a
procedural statute should not be applied retrospectively when it would create new disabilities or
obligations or impose new duties in respect of transactions already accomplished.

The nature of arbitration law is essentially procedural but it also includes provisions with regard to
matters that cannot be classified as mere procedural matters. This would include the question as to
whether the disputes are arbitral; the question as to jurisdiction; the scope of challenge to the
awards; and, to some extent even the supportive and supervisory roles of Courts in relation to
arbitrations. Thus, the Amending Act does to certain extent affect the substantive rights of parties.
In light of the aforementioned settled principles and cases, it is put forth that the Arbitration and
Conciliation Act, 1996 is not merely procedural in nature, therefore, ruling out any possibility of
retrospective applicability of the Act.

With regard to the third issue Respondent contended that Luminous has not breached the Contract.
Luminos has not breached the contract A as it has successfully discharged all the obligations under
Contract A. Luminos provided services for the time stipulated in the contracts which was three
months. Once Mr Dhawani took absolute possession of the house Luminos was discharged of all the
liabilities under Contract A. The delay in implementing the turnkey tech was caused due to
happening of a force majeure event which was beyond the control of Luminos.

As per contract A, Luminos was only liable to provide services for the default liability period. All the
defects which were pointed out by Mr Dhawani during that period had effectively been resolved in
the first week itself. The total failure occured only when the third party experts were involved and
due to the result of tampering by third party it collapsed all together. Castle was mandated to
exclusively use the services of Luminos with regards to turnkey tech which it should have conveyed
to Mr Dhawani as Luminos will always be in a better position to remedy the defects present in their
own technology rather than any other third party. As per Section 55 and 63 Of the Indian Contract
Act:- 55. Effect of failure to perform at fixed time, in contract in which time is essential.— When a
party to a contract promises to do a certain thing at or before a specified time, or certain things at or
before specified times, and fails to do any such thing at or before the specified time, the contract, or

53
2016(6)ARBLR426(Delhi), 234(2016)DLT349.
54
GP Singh, Principles of Statutory Interpretation, 2012, p. 532.
so much of it as has not been performed, becomes voidable at the option of the promisee, if the
intention of the parties was that time should be of the essence of the contract.

It was contended that effect of such failure when time is not essential.—If it was not the intention of
the parties that time should be of the essence of the contract, the contract does not become
voidable by the failure to do such thing at or before the specified time; but the promisee is entitled
to compensation from the promisor for any loss occasioned to him by such failure. Effect of
acceptance of performance at time other than that agreed upon.—If, in case of a contract voidable
on account of the promisor‟s failure to perform his promise at the time agreed, the promisee
accepts performance of such promise at any time other than that agreed, the promisee cannot claim
compensation for any loss occasioned by the non-performance of the promise at the time agreed,
unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so.

With regard to the fourth Issue it was stated by the respondent that Luminos has successfully
discharged the terms of the contract and hence is not liable for any damages incurred by castle.
Delay in the delivery was caused due to reasons which were beyond the control of Luminos hence
the force Majeure clause exempted Luminos of its obligation for that duration. Moreover the
contractual agreement entered between Mr. Dhawani and Castle was an independent contract un
related to Luminos. There was no need to pay any good will amount to Mr Dhawani. There is no
proof which could say that there was a loss of reputation. “Breach of contract” constitutes the pre-
condition for a claim of damages, be it liquidated, unliquidated or otherwise. Thus, irrespective of
the extent to which the defendant profits from the contractual arrangement, there can be no claim
for damages unless there is a breach of the contract. Further, the party committing the breach is
liable to compensate by way of damages. To establish a breach, it has to be adjudicated upon and be
proved, and not merely decided by the parties.55For a claim of damages and affixing liability, there
has to be causal connection between the breach committed and the loss or injury suffered. In the
instant case there was no breach in the first place and hence causation cannot be established.
Luminos performed its obligations under Contract A as it implemented the turnkey tech. The
damage sought for reimbursement of goodwill money to Mr Dhawani cannot be granted to Castle as
Castle gave the payment of its own accord. The collapse of turnkey tech was due to the actions of
Mr Dhawani himself and castle should not have made any sort of payment. As stated in the
provisions relating to damages under the Indian Contract Act 1872, one of the vital requirements for
an award of damages is that the loss or damage “arose in the usual course of things from such
breach; or parties knew that such a loss or damage could subsequently arise at the end of the time
of entering into the contract.”56

If the plaintiffs can establish that the defendants were aware of the particular losses suffered by the
plaintiffs due to the actions or inactions of the defendants, the latter shall be liable for such losses, if

55
P Radhakrishna Murthy v. NBCC Ltd. (2013) 3 SCC 747; J.G. Engineers (P) Ltd., v. Union of India (2011) 5 SCC
758
56
Indian Contract Act 1872, s 73
such losses do not occur in the normal course of events. They also relied on the landmark case of
Hadley v. Baxendale (“Hadley v. Baxendale”)57, the principle governing remoteness of damages was
elaborated. The rules enunciated in this case were that a party injured by a breach of contract can
recover only those damages that either should “reasonably be considered...as arising naturally, i.e.,
according to the usual course of things” from the breach, or might “reasonably be supposed to have
been in the contemplation of both parties, at the time they made the contract, as the probable
result of the breach of it.” Hence the damages being claimed by castle did not occur in the normal
course of events. The loss suffered by Castle was due to certain unforeseeable circumstances and
hence the damages cannot be sought from Luminos. It is noteworthy that for a claim of liquidated
damages, the clause “whether or not actual damage or loss is proved to have been caused thereby”
would not be dispensing with the establishment of proof in toto. This emanates from the
understanding that the reasonable compensation agreed upon as liquidated damages in case of
breach of contract is in respect of some loss or injury; thus, existence of loss or injury is
indispensable for such claim of liquidated damages.58 In Claims where non-pecuniary losses are
suffered. Lahoti J. on the basis of a reference made to Chitty on Contracts59 observes that,
“Normally, no damages in contract will be awarded for injury to the plaintiffs feelings, or for his
mental distress, anguish, annoyance, loss of reputation or social discredit caused by the breach of
contract. The exception is limited to contract whose performance is to provide peace of mind or
freedom from distress. Damages may also be awarded for nervous shock or an anxiety state (an
actual breakdown in health) suffered by the plaintiff, if that was, at the time the contract was made,
within the contemplation of the parties as a not unlikely consequence of the breach of contract.
…however… refused to award damages for injured feelings to a wrongfully dismissed employee, and
confirmed that damages for anguish and vexation caused by breach of contract cannot be awarded
in an ordinary commercial contract."28 Hence all the claims for alleged loss of reputation cannot be
accepted. Moreover there is no proof that Castle suffered any loss of reputation because of which
he incurred any type of loss.

It was also contended during the hearing that Force Majeure clause exempted luminos of its
obligation and reliance was placed on the case of Dhanrajamal Gobindram v Shamji Kalidas and Co
60
the court held that the main intention behind the insertion of "force majeure" clause is to save the
performing party from the consequences over which he has no control. This is the widest meaning
which can be given to "force majeure". The condition about “force majeure” is something which is
unforeseen, unexpected and which happens suddenly and over which a person has no control. 30It
is necessary to show that the circumstances were beyond the control of the defaulting part so as to
escape from the obligations of the contract. Hon’ble Supreme Court in Industrial Finance
Corporation of India Ltd. Vs. The Cannanore Spinning & Weaving Mills Ltd. and Ors.61 held that “It
may be noticed here that the Statute itself has recognised the doctrine of frustration and

57
Hadley v. Baxendale (1854) 9 EX 341
58
ONGC v. Saw Pipes (2003) 5 SCC 705
59
A. G. Guest (ed.), Chitty on Contracts (27th edn, Sweet & Maxwell Ltd 1994) vol 1, para 26.041.

60
AIR 1961 SC 1285
61
(2002) 5 SCC 54. 32 1916 2 AC 397.
encompassed within its ambit an exhaustive arena of force majeure under which non-performance
stands excused by reason of an impediment beyond its control which could neither be foreseen at
the time of entering into the contract nor can the effect of the supervening event could be avoided
or overcome. The decision of the Court of Appeal in F.A. Tamplin Steamship Co. Ltd. v. Anglo
Maxican Petroleum Products Co. Ltd.62 (which stands quoted (with approval by this Court) in Naihati
Jute Mills v. Khyaliram, seems to have settled the law on the same. on a true perspective of Section
56 of the Contract Act, three essential conditions appear to be the realistic interpretation of the
Statute. The conditions being (i.) a valid and subsisting contract between the parties; (ii) there must
be some part of the contract yet to be performed; and (iii) the contract after it is entered into
becomes impossible of performance.” Whether the contract has become impossible of performance
can be determined with reference to the terms of the contract and the supervening circumstances. If
the supervening circumstances are such which were within the contemplation of the parties at the
time of the contract or which could reasonably be within their contemplation, it could take the case
out of the purview.63 Luminos had no control over the circumstance which led to the delay of
delivery. The reason for the delay in delivery of the possession was the suit filed by Castle against Mr
Srivastava for an IP infringement. This suit could not have been reasonably foreseen and hence
Luminos hands were tied. Until and unless the suit was settled Luminos could not have implemented
the turnkey tech. In the case of Markfed Vanaspati & Allied Industries V Union of India64 the
Supreme Court held that the impossibility based on which the force majeure clause was being
invoked must pertain to the contractual obligation that has purportedly become impossible to
perform. The Super Computer chip developed by Mr Srivastava was an integral part of turnkey tech
without which it could not function. The suit by stalwart was with regards to this super computer
chip, hence debarring its use in the turnkey tech as long as the suit was active. Due to this suit the
contractual obligation of implementing turnkey tech became impossible invoking the force Majeure
clause. Moreover under the principle enshrined under Sec 55 of the Indian Contract Act, No
damages can be claimed by castle as Sec 55 says:- 55. Effect of failure to perform at fixed time, in
contract in which time is essential.— When a party to a contract promises to do a certain thing at or
before a specified time, or certain things at or before specified times, and fails to do any such thing
at or before the specified time, the contract, or so much of it as has not been performed, becomes
voidable at the option of the promisee, if the intention of the parties was that time should be of the
essence of the contract. Effect of such failure when time is not essential.—If it was not the intention
of the parties that time should be of the essence of the contract, the contract does not become
voidable by the failure to do such thing at or before the specified time; but the promisee is entitled
to compensation from the promisor for any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than that agreed upon.—If, in case of a contract
voidable on account of the promisor’s failure to perform his promise at the time agreed, the
promisee accepts performance of such promise at any time other than that agreed, the promisee
cannot claim compensation for any loss occasioned by the non-performance of the promise at the
time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention
to do so. From the bare reading of above section it can easily be understood if a person agrees for a

62
1916 2 AC 397.
63
Man Singh Vs Khazan Singh, AIR 1961 Raj 277.
64
(2007) 7 SCC 679.
performance of the contract at any time other than the stipulated time then he is not liable to claim
any loss suffered because of the non-performance of the contract.

Documents Submitted

By the Applicant

5. Contract A between Castle and Luminos, Construction Agreement between Castle and Mr. Mittal
Dhawani dated 17.04.2014, Contract B signed between Castle and Satwart dated 2.03.2015 to utilise
computerchip in the project, Copy of the email dated 15.08.2015 sent from Castle to Luminos
demanding its service team to periodically visit the home of Mr Dhawani with necessary experts ,
Copy of the email dated 17.08.2015 from Luminos refusing to comply stating that it has fulfilled its
obligation, Copy of the Newspaper report dated 1.0.2015 , which has caused huge loss to reputation
to Castle.

By the Respondent

Nil

Findings and Conclusions with Reasons

6. I have carefully gone through the statements, documents, submissions and arguments made by
both the applicant and the respondent.

Thus, in view of what has been discussed and found hereinabove and after careful consideration of
the circumstances of the case and relevant facts, documents and provisions of law/ bye-laws/
regulation, my award is as under:-

AWARD

The claim of the Applicant is admitted and a sum of Rs 10.15 Crores ( Rupees Ten Crore and Fifteen
Lakhs only ) is payable by Ms Shivani , the Respondent to the Applicant Castle Mountains Pvt Ltd,
with interest at the rate of 12% p.a. from 3.10.2015 till payment.

The cost of the arbitration will be borne by the Respondent against whom this award is passed.

The Award is duly prepared, printed and signed in three originals and one original each will be sent ti
the Applicant and Respondent and the stamped original award shall be retained by the Singapore
International Arbitration Centre (“SIAC”)

Dated: 23rd November 2017

Place : New Delhi

Mr Steve Salvius Mr Joseph Dent Mr Yuhao Wu

(Arbitrator) (Arbitrator) (Presiding Arbitrator)