Chaudhary Transport vs Hindustan Petroleum Corporation ...
2011 Latest Caselaw 96 Bom

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    dgm




                                                                                  
             IN THE  HIGH COURT OF JUDICATURE AT BOMBAY




                                                          
                  ORDINARY ORIGINAL CIVIL JURISDICTION

                   ARBITRATION PETITION NO. 364  OF 2009




                                                         
    Chaudhary Transport,
    a partnership firm, registered under the




                                            
    provisions of Indian Partnership Act 1932, having
    its office at Shop No.3, Margaret House,
                             
    S.M. Road, Antophill, Near Indian Oil. Corp.Wadala,
    Mumbai 400  032.                                   ....   Petitioner
           vs
                            
    Hindustan Petroleum Corporation Ltd.,
    a Public Limited company incorporated under
    Indian Companies Act, 1956, having its
    registered office at 17, Jamshedji Tata Road,
       


    Mumbai 400 020                                     ....    Respondent
    



    Mr. Kailas S. Dewal with Mr. S.R. Agarkar for the petitioner.

    Mr. Nilesh Modi with Ms. Deepali Thakore i/by Rustomji and Ginwala 





    for the respondent. 


                                     CORAM:   ANOOP V. MOHTA, J.

DATE : November 23, 2011

ORAL JUDGMENT:

The Petitioner has invoked Section 34 of the Arbitration and

Conciliation Act, 1996 (for short, the Arbitration Act) and challenged

Award dated 25 February 2009 whereby all his claims and the counter

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claims of the Respondent have been rejected.

2 The basic facts are as under :

On 19.05.2003, the Petitioner and Respondent entered into a

Transport Agreement for a period of two years from 1/9/2002 till

31/08/2004. On 30/12/2003, the Respondent received a notice

under Section 39 of the Bombay Sales Tax Act, 1959 to pay all the

amounts due to the Petitioner to Sales Tax Authorities. On

29/01/2004 the Respondent received a letter from Sales Tax Officer to

handover cheque to Sales Tax Inspector. On 03/02/2004 the

Respondent wrote to the Petitioner informing about the notice

received by them on 30/12/2003 and 29/01/2004. On 15/03/2004

the Respondent wrote to Sales Tax Authorities enclosing a cheque of

Rs.7,01,216/-. On 23/06/2004, the Deputy Commissioner of Sales

Tax wrote to the Respondent directing them to communicate exact

amount due from the Respondent to the Petitioner. On 21/07/2004,

the Respondent wrote to Deputy Commissioner of Sales Tax informing

them that amount of Rs.12,75,458/- was outstanding to the credit of

the Petitioner. On 21/07/2004, the Respondent wrote to the

Petitioner informing about the Notice dated 23rd June 2004 from the

Deputy Commissioner of Sales Tax. On 31/08/2004 the Contract

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came to an end by efflux of time. On 21/12/2004 a notice under

Section 39(1)(a) from Deputy Commissioner, Sales Tax directing

HPCL of provisional attachment and further not to pay any amount

due to the Petitioner unless the said notice is withdrawn. On

27/08/2007 a letter from Chartered Accountant of the Petitioner to

the Respondent requesting to release (a) Transport charges amounting

to Rs.12,75,458/-; (b) Security Deposit of Rs.50,000/- and (c) Bank

Guarantee of Rs.1,50,000/-. On 31/10/2007 the Bombay High

Court in Writ Petition No.5755 of 2007 set aside the demand notice

and the provisional attachment of the Sales Tax Authorities.

Therefore, Rs.19,67,976/- was paid to the Petitioner by the

Respondent. On 01/02/2008, the Petitioner requested for

appointment of a sole Arbitrator. The Petitioner filed claim before the

learned Arbitrator of Rs.1,90,00,000/- without any documentary

evidence. On 25/05/2009 the learned Arbitrator has passed the

Award.

3 It is relevant to note the clauses of Bulk Pol Road Transport

Agreement dated 19-05-2003 which are as under :

"Clause 4(b): In case any of the tank lorries is not made available by the Carrier on any day, Company would be free to use the services of any other tank lorry and

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recover the difference in transportation charges from the Carrier.

Clause 6(g): The Company has not guaranteed

any minimum billings/mileage or loads for any period whatsoever. Hence, Company will not be responsible for their inability in offering any load on any day or during any particular period and no idle charges etc would be

payable.

Clause 13(b): The Carrier shall not cause or allow any change in the constitution of its firm without

obtaining the previous written consent of the Company.

Clause 15: This Agreement would be valid for period of tow years w.e.f. 1.9.2002 with option of Company to extend the same by one year on same terms

and conditions. However, Company reserves the right to terminate this Agreement by giving two months advance notice without being liable to give any reason or pay any compensation."

4 Admittedly, there is an arbitration clause based upon which by

consent of the parties, the sole Arbitrator was appointed on

1.02.2008. Both the parties have filed their claims as well as counter

claims along with their supporting documents. The Petitioner/original

claimant did not lead any evidence before the Arbitrator. There was

no even procedure of admission of documents followed. There was no

specific procedure of proceedings in the arbitration was agreed. The

Arbitrator therefore is bound to follow the basic principle of law and

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as contemplated under Section 19 of the Arbitration Act.

5 I have in Sahyadri Earthmovers vs. L & T Finance Limited &

anr.1 observed as under :

"6 Section 19 of the Arbitration Act, which is reproduced contemplates when the parties agree on a particular procedure to be followed by the Arbitral Tribunal, all are bound to follow the same, but in its

absence, the Arbitral Tribunal is bound to conduct the proceeding in the manner it considers appropriate. It also

means that the Arbitrator has power to determine the admissibility, relevance, materiality and weight in evidence though the provisions of the Code of Civil Procedure

and/or Indian Evidence Act, are not binding upon the Tribunal."

The same view has been expressed in Radha Krshna Films Ltd. vs.

Jyoti Film Distributors Pvt.Ltd.2.

6 I have already observed in Oil and Natural Gas Corporation

Limited vs. Oil Country Tubular Limited3 the principles which the

Arbitrator needs to follow while granting the compensation, if any.

Those are as under :

" The observations that other side to prove that the claimant has not suffered any loss or damage itself contemplates necessity of leading evidence by both the 1 2011 (4) Mh.L.J. 200 2 2011 (5) Bom. C. R. 391 3 2011 (5) Bom. C.R. 198

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parties. The burden is always on the parties who claimed compensation to prove actual loss, even for the reasonable

compensation. The other doctrines; "Mitigation of loss", "Burden of proof", "Onus of proof" and "Shift of burden"

just cannot be overlooked by the Court or the Arbitrator, while determining the reasonable compensation.

(h) The Court's power and the scope under Section

34 is quite limited. Therefore, the view expressed through the reasoned award, based upon the possible and plausible interpretation of the clause and after due scrutiny of the evidence and the documents and in accordance with law,

cannot be stated to be contrary to law or the record, or perverse and/or against the public policy."

7 Admittedly, the contract in question between the parties was for

a period of two years from 1.09.2002 to 31.08.2004, which was

extendable at the discretion of the Respondent for one year.

Admittedly, there was no such extension granted by the Respondent.

8 Upto February 2004, as per the Agreement, the Respondent

made the payment in the account of the Petitioner, but to the Sales

Tax Department, as the Respondent received notice dated

30/12/2003 under Section 39 of the Bombay Sales Tax Act, 1959, to

pay all the amount payable to the Petitioner, to the Sales Tax

Department. In view of mandate of the provisions and the

directions, the Respondent from time to time, made the payment

upto February 2004, to the Sales Tax Department.

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    9      It appears that the Respondent, in view of various reasons apart 




                                                            

from the above, not provided the work/load to the Petitioner

regularly. It is relevant to note here that as per clause 7 there was no

liability upon the Respondent to provide the work even during this

period. The aspect of not providing the details of change of

partnership by the Petitioner is also relevant.

10 If contract expires by efflux of time and if it is not extended,

there is no question of existence of the binding terms and conditions

for either of the parties. In the present case, the last date of the

contract was 31.08.2004. In my view, therefore, if there was no

extension and as noted, which was within the discretion of the

Respondent, there was no question of waiting for anything for any

purpose and basically even for the so-called NOC as contained therein.

11 There was no reason for the Petitioner to even wait for any no

objection certificate from the Respondent for doing similar work of

others. Whatever unpaid due if any for the work done ought to have

been claimed within a period of three years, if not paid by the

petitioner. This aspect of the limitation, in my view, goes to the root

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of the matter.

12 Considering the mandate of Section 3 of the Limitation Act, I

have noted in Sealand Shipping & Export Pvt.Ltd. vs. Kin-ship

Services (India) Pvt. Ltd.4 as under :

"25 The Apex Court, while dealing with Section 3 of the Limitation Act, in Kamlesh Babu and ors. v. Lajpat

Rai Sharma and ors.,5 observed as under :

"16. Having considered the submissions made on behalf of

the respective parties, the decisions cited by them and the relevant law on the subject, we are unable to accept Ms Srivastava's submissions mainly on two counts. Firstly, the facts disclosed clearly indicate that neither the first appellate

court nor the High Court took notice of Section 3(1) of the Limitation Act, 1963, which reads as follows:

"3. Bar of limitation.- (1) subject to the provisions contained in Sections 4 to 24 (inclusive), every suit

instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence."

Even in the decision of this Court in Darshan Singh

Case (2004) 1 SCC 328, the said provision does not appear to have been brought to the notice of the Hon'ble Judges who decided the matter.

17. It is well settled that Section 3(1) of the Limitation Act casts a duty upon the court to dismiss a suit or an appeal application, if made after the prescribed period, although,

4 2011 (5) Bom. C.R. 572 5 (2008) 12 SCC 577

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limitation is not set up a defence.

18. In the instant case, such a defence has been set up in the written statement though no issue was framed in that

regard. However, when the trial court had in terms of the mandate of Section 3(1) come to a finding that the suit was barred by limitation, it was the duty of the first appellate court and also of the High Court to go into the said question

and to decide the same before reversing the judgment of the trial court on the various issues framed in the suit. Even though the various issues were decided in favour of the plaintiff, both by the first appellate court and the High

Court, the same were of no avail since the suit continued to remain barred under Article 59 of the Limitation Act, 1963."

27 It is settled that the plea of limitation, prevent

claiming the party from recovering the amount/claim though he has a right to claim the same. It debars the remedy and not the claim. Therefore, the Arbitrator under the Arbitration Act also bound to consider this aspect of

limitation at least at the time of awarding the claim so raised by either of the parties, but within the limit of

Limitation Act. In my view, there is no question of invoking doctrine of "waiver" and/or "no interference by the Court" as contemplated under Section 4 and/or 5 of

the Arbitration Act, specially at the time of awarding/granting/passing the final Award. The arbitration proceedings and the power of Arbitrator with this regard, are not exceptional to that. The Arbitrator is bound to pass award within the framework of substantive

as well as procedural laws.

THE CONDUCT OF THE PARTIES BEFORE THE ARBITRATOR OF NOT PRESSING THE ISSUE, AT THE RELEVANT TIME, BUT AGITATE THE SAME IN THE COURT UNDER SECTION 34 OR ANY OTHER TIME.

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29 Strikingly, in the present case, though plea was raised and as events reflect the claim as well as counter

claim so raised was not considered from the point of view of limitation. Even the issue was not framed though plea

was raised. The arbitration proceedings based upon the other issues on merit proceeded and the parties led evidence accordingly. The claimants, however in Section 34 Petition, has raised specific plea of limitation, based

upon the events as well as the documents available on the record. Both the Counsel made their respective submissions; supporting as well as opposing the plea of limitation. Even the respective authorities were cited to

support their claim/counter claim. As per the settled law, if Court is under obligation, to consider the plea of

limitation in view of Section 3 of the Act read with decisions of the Supreme Court as well as various other High Courts and as, if the limitation issue goes to the root

of the claim/matter, there is no reason that the Court even in the Petition under Section 34, should not consider the same merely because the parties, for whatever may be the reason, had chosen not to press the point before the

Arbitrator, but now agitating the issue in Section 34 Petition by raising specific ground to that effect. I am of

the view that in view of the Supreme Court judgments, the Court is under obligation, to consider the plea of limitation so raised, though not pressed before the Arbitrator in a Petition under Section 34 and need to pass

appropriate order accordingly in accordance with law.

30 I may add that not pressing the point of limitation which goes to the root of the matter, at the first given

opportunity, can cause serious prejudice to the proceedings and the litigant. The party and the counsel are under obligation to get such plea decided at the earliest stage of the case. A waiver of such plea is unjust, unfair and cause hardship to all and, therefore, must be avoided."

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    13     Importantly,   without   raising   any   issue   with   regard   to   the 




                                                              
    limitation, both the parties proceeded  and so also the Arbitrator.    By 

consent of the parties, the issue with regard to the limitation just

cannot be overlooked even by the Arbitrator. It is not question of fact

and/or law but in a situation like this where admittedly the contract

was terminated by efflux of time on 31.08.2005 and it was never

extended at any point of time, the reference of dispute so raised and

basically with regard to the claim of Rs.1.90 crores without supporting

evidence/documents and/or no oral evidence even to support those

documents on record, in my view, is totally contrary to the provisions

of law, as well as, the basic principles of grant of compensation or

damages if any. The Arbitrator, therefore, has rejected the demand

of business loss of Rs.1.90 crores from February 2004 as claimed. The

Arbitrator has rightly observed that such claims in absence of receipts

of bills, invoices, bank statements, cash memos and other supporting

documents, just cannot be granted. This also follows the rejection

of claim of interest on such amount.

14 The Respondent, in view of above undisputed position on record

was under no obligation to provide or grant any no objection

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certificate, after lapse of more than three years. The claim was

untenable.

15 The party one who entered into an agreement, based upon any

partnership deed needs to submit any change in the same. The

Respondent/other side cannot be stated to be under obligation to

collect the details of such changed partnership. The Arbitrator, even

otherwise, as the contract was terminated automatically and as

claimant failed to produce the reconstituted deed of partnership, has

rightly rejected the said issue.

16 The Petitioner, as recorded, has filed a writ petition in the High

Court against the Sales Tax Department. By an order dated

31.10.2007, the High Court directed the Respondent to refund the

amount of the Bank Guarantee and security deposit. The Respondent,

as recorded above, were under obligation to follow the Sales Tax

Department's notices as well as directions issued from time to time.

Even otherwise, they could not have released this amount without the

proper permission or direction from the Sales Tax Department.

Therefore, pursuant to order dated 31.10.2007 the Respondent made

the payment, though after six months. This fact is also not in dispute.

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In the result, the Petitioner got the amount of security deposit and the

bank guarantee, which were also part of the claim.

17 It is necessary to observe that merely because Sales Tax

Department issued directions from time to time and the Respondent

followed the same and made the payment accordingly and the

Petition was allowed as referred above, that itself cannot be the

ground to re-consider the beyond time claims of the Petitioner.

Therefore the total dismissal of claims cannot be stated to be perverse

and/or contrary to law.

18 The Arbitrator ultimately even rejected the counter claims of

the Respondent as the same were also not supported by any

documents.

19 Lastly, the submission was also made in the Court referring to

document dated 7.7.2007, whereby the Petitioner instructed the

Respondent not to remit any outstanding amount of Rs. 21 lacs as the

validity of the notice dated 21.12.2004 issued under Section 39(1)(a)

had expired. There were no such claims and counter claims raised

along with material on record at the relevant time, even before the

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Arbitrator. I see there is no reason to entertain or accept such

contention now in Section 34 Petition for the first time as the same is

impermissible and also for the above reasons.

20 Resultantly, as the reasoning are well within the frame work of

law and the record and there is no perversity and/or illegality of any

kind, the Arbitration Petition is dismissed. There shall be no order as

to costs.

(ANOOP V. MOHTA, J.)