Arbitration Act| Double Payment For Same Claim Is In Direct Conflict With Public Policy; Violates Basic Principles Of Morality & Justice: Karnataka HC
The Karnataka High Court was hearing a batch of Commercial Appeals arising from the Arbitral Tribunal's Award and the Commercial Court's Judgment.

The Karnataka High Court held that the double payment for the same claim is in direct conflict with the Public Policy of India and violates the basic principles of morality and justice.
The Court held thus in a batch of Commercial Appeals arising from a common Award passed by the Arbitral Tribunal and a common Judgment of the Commercial Court.
A Division Bench comprising Chief Justice N.V. Anjaria and Justice K.V. Aravind observed, “The issue of double payment for the same claim would undoubtedly be in direct conflict with the Public Policy of India and would violate the Fundamental Policy of Indian Law, as well as the basic principles of morality and justice. The Arbitral Tribunal has addressed the Committee’s report, which determined the liability to be Rs. 6,01,42,502/-, and examined the correctness of the same. However, when the payment of Rs. 3,50,00,000/- is asserted to have been made in accordance with the Committee’s recommendation, the Arbitral Tribunal ought to have carefully examined and recorded a finding on the purpose of the payment of Rs. 3,50,00,000/-.”
Advocate B.S. Satyanand appeared for the Appellant while Advocates Kamlesh Ghumre and A.L. Parashuram appeared for the Respondents.
Brief Facts
The dispute between the parties was common but arose from different contracts. In the lead case, the Respondent was the Claimant and the Appellant was the Respondent before the Arbitral Tribunal. The claimant company was involved in developing, operating, and maintaining a biomethanization plant for solid waste management. The Appellant invited tenders for 12 projects to set up and operate biomethanization plants for the generation of energy from biodegradable waste of 5MTPD in various wards. The claimant was a successive bidder and was awarded contract. The dispute arose between the parties regarding the non-availability of land, delay in the issue of work orders, handing over possession of plots, and the claimant incurring expenses while keeping its men and machinery idle, thereby incurring loss and the interest incurred on the borrowings. Further dispute was also regarding non-availability of roads to the project sites and the imposition of fine for delay in the work execution. The claimants invoked the arbitration clause and filed a Petition before the High Court for appointment of an Arbitrator.
The Court appointed the Arbitrator and the claim was towards shortage in waste material supply, compensation for non-production of slurry, towards idling of manpower, planted machinery, reimbursement of expenditure incurred on security, deduction of fine, charges for obtaining power and water and interest. The heads of claims in all the claim Petitions were substantially similar except for the difference in project sites and the amounts. An Expert Committee was appointed to examine the claims and it recommended to pay Rs. 6 crores as against the claim of Rs. 27.04 crores, whereas the Executive Engineer was of the view that the claimant was entitled to Rs. 3 crores only. The Arbitral Tribunal passed an Award holding that the claimant was entitled to compensation, interest @ 18%, and other charges. The Appellant preferred a Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) and the Commercial Court dismissed the same. Hence, an Appeal was preferred before the High Court under Section 37 A&C Act.
Reasoning
The High Court in the above context of the case, said, “If the facts of the present case are evaluated in light of Section 34 of the Arbitration and Conciliation Act, the issue at hand pertains to a double payment for the same claim. It is well established in law that double payment for the settlement of a single claim is impermissible. In the event that part of the claim is settled before the Arbitral Tribunal’s award, such payment must be duly adjusted in the final award.”
The Court took note of the fact that the Appellant furnished bank statements and vouchers which clearly substantiate the payments made towards the same job work and the Respondent, on the other hand, contended that the payment of Rs. 3,50,00,000/- was made for a different work unrelated to the claim, however, no supporting evidence was presented.
“It is undisputed that the payment of Rs. 3,50,00,000/- is linked to the same job work that forms the basis of the claim. … The error committed by the Arbitral Tribunal and subsequently upheld by the Commercial Court, if not rectified, would amount to an arbitrary decision”, it added.
The Court observed that the Commercial Court, while exercising jurisdiction under Section 34 of A&C Act, committed an error by failing to record any finding regarding the payment of Rs. 3,50,00,000/-.
“A bare perusal of the statement of payments placed before the Court would clearly indicate that the payment of Rs. 3,50,00,000/- was made in relation to the same job work for which the claim petition has been filed”, it concluded.
Accordingly, the High Court partly allowed the Appeals, set aside the impugned Judgment, and remitted the matter for a fresh consideration.
Cause Title- Bruhat Bengaluru Mahanagara Palike v. M/s. Ashoka Biogreen Pvt. Ltd.