Rifle Factory vs M/S. Tal Manufacturing & ...
2022 Latest Caselaw 662 Cal/2

                                        1



                  IN THE HIGH COURT AT CALCUTTA
                ORDINARY ORIGINAL CIVIL JURISDICTION
                           ORIGINAL SIDE
                        (Via Video Conference)

BEFORE:
The Hon'bleMr. Justice Ravi Krishan Kapur

                             A.P No. 1073 of 2013

                         Rifle Factory, Ishapur & Others
                                      -vs-
                   M/s. Tal Manufacturing & Solutions Ltd.


For the petitioners             : Mr. Pramod Kumar Drolia,

For the Respondent              : Mr. Sidhartha Mitra,

Ms. U.S. Menon,

Heard on : 03.01.2022, 27.01.2022, 03.02.2022

Judgment on : 24.02.2022

Ravi Krishan Kapur, J.:

1. This is an application under Section 34 of the Arbitration and

Conciliation Act, 1996 ('the Act').

The facts:

2. In May 2000, the petitioners published a tender inviting bids for 9

tooled up CNC VERT Machines Centre Mounted TALV 505 (the

machines) and the connected spare-parts required for running of the

machines. In response to the tender, the respondent submitted its bid

which was duly accepted by the petitioners. The aggregate value of the

machines was Rs.9,15,82,046/-. The petitioner also issued a Letter of

Intent dated 3 December, 2002. Thereafter, the machines were

supplied by the respondent to the petitioners and also installed at the

factory of the petitioners. The respondent also furnished a bank

guarantee which was valid till the expiry of the warranty period. The

machines had also been duly inspected and approved by both the

parties.

3. Admittedly, the petitioners made payment of 90% of the value of the

machines after retaining 10% of the total purchase value in terms of

Clauses 26.03 and 27 of the purchase order. It is the balance 10% of

the purchase price which remains due and payable by petitioners to

the respondent and inter-alia forms the subject matter of the disputes

between the parties. After continuous and uninterrupted use of the

machines, the petitioners raised a dispute in respect of the

measurement of the cycle time as recorded in the Minutes between the

parties held on 11 May, 2004. Ultimately, it was decided that, the

petitioners would achieve the agreed cycle time within a span of 3

months i.e. by August 15, 2004, whereupon the balance payment for

the machines would be released. Subsequently, the parties agreed

that the cycle time as modified had been achieved. This fact was also

recorded in the Minutes of the Meeting held on 11 May, 2004.

Thereafter, notwithstanding the fact that the machines had been duly

installed and have been continuously and uninterruptedly in running

condition, the petitioner has refused to pay the balance 10% of the

purchase value of the machines.

The submissions:

4. It is submitted on behalf of the petitioners that, in passing the

impugned award the Arbitrator did not record the oral evidence of the

witnesses nor consider the documents furnished by the parties. It is

also alleged that the Arbitrator did not consider the correspondence

exchanged between the parties and ignored the letters dated June 27,

2005 and July 26, 2006 registering the complaints of the petitioners

against failure of commissioning of 7 of 9 machines. It is also alleged

that the Arbitrator did not take into consideration the letter dated 3

June, 2011 wherein the respondents had allowed the petitioners to

make deductions as per the supply order from the outstanding

amount due to the respondents. In support of their contentions, the

petitioners relies on the decisions reported in ONGC vs. SAW Pipes AIR

2003 SC 2629 and Associate Developers vs. Delhi Development

Authority AIR 2015 SC 620. It is also submitted that the impugned

award directs the petitioners to pay interest of 18% from the date of

the award which is contrary to the decision Vedanta Limited vs.

Shenzhen Shandong Nuclear Power Construction Company Limited (AIR

2018 SC 4773). Accordingly, the petitioners pray for setting aside of

the award.

5. On behalf of the respondent, it is submitted that, there are no

grounds which warrant interference with the impugned award. The

award is a reasoned award and has been passed after taking into

consideration all the facts and circumstances of the case. The

Arbitrator has dealt with each of the issues raised by the parties.

Moreover, no grounds contemplated under Section 34 or under any

other section of the Act has been made out which warrant any

interference with the award. In support of their contentions, the

respondent has relied on the decisions of P R Shah Shares and Stock

Brokers Private Limited vs. BHH Securities Private Limited & Others

(2012) 1 SCC 594 and Associate Builders vs. Delhi Development

Authority (2015) 3 SCC 49.

My findings:

6. The grounds taken by the petitioners in this application can be inter-

alia summarized in the following manner:

a) Ground Nos. I, II, III, IV, X, XI, XIII - 'Interpretation of terms of the contract by the Arbitrator'.

               b)    Ground Nos. V, VI, VIII and XII - 'Limitation'.
               c)    Ground Nos. VII, IX and XIV - 'Possible view taken

by the Arbitrator after considering the material evidence'.

7. The scope of challenge against an award passed under the Arbitration

and Conciliation Act, 1996 is confined and limited. The grounds of

challenge are primarily enumerated in section 34 of the Act. Under the

provisions of the Code of Civil Procedure 1908, a full-fledged appeal

inter alia permits a Court to re-appreciate the entire evidence, permits

production of additional evidence and ultimately also empowers the

Court to pass any decree or make any order which the Court may

deem fit and proper. To this extent, an appeal is in someways, a

rehearing of the original proceeding with all the powers of the Trial

Court.

8. On the other hand, in a challenge under Section 34 of the Act, the

scope of interference is limited to a restricted review of the award on

certain specified grounds enumerated under the Act. Thus, it is of

utmost importance that in order to succeed, any petitioner must fall

within one of those limited grounds of challenge available under the

Act. Additionally, this is a summary proceeding where a Court ought

not to sit in appeal over the award or reassess or reappreciate the

evidence. If the view of the Arbitrator is a "possible" view it passes

muster and there is not much that a Court ought to do. It is true that

on given facts and circumstances, I may have taken a different view of

the matter. But, this is certainly not the test to be applied when

hearing such applications. This approach, in my view, is integral to

the success of an alternative dispute resolution mechanism.

9. The petitioner alleges that the Arbitrator had failed to acknowledge

certain clauses of the agreement which relate to the performance of

the machines and their maintenance work. It is also alleged that the

Arbitrator has misinterpreted the warranty time frame based on the

communication dated 27 July 2005. The petitioner states that the

warranty period could not have commenced from 27 July 2005 since

it was admitted by the respondents that the installation of 5 out of

the 9 machines were not completed until 2009 as per the requirement

of clause 22.01. I find that the Arbitrator has inter-alia held that,

based on the Minutes of the Meeting dated 27 July 2005, the warranty

expired on 26 July 2006 and that the petitioner had raised no

disputes with regard to the cycle time within the stipulated period.

Hence, the petitioners were not entitled to any penalty or liquidated

damages after the expiry of the warranty period pertaining to the cycle

time of the machines. Ordinarily, an Arbitrator is the final authority of

the facts and unless the appraisal is perverse or manifestly

unreasonable, award ought not to be interfered with. Additionally, a

Court ought not to sit in appeal over an award and reassess or

reappreciate the evidence. (P.R Shah, Shares and Stock Brokers Private

Limited Vs B.H.H. Securities Private Limited and Others (2012) 1 SCC

594 @ para 21). Accordingly, I find that the view taken by the

Arbitrator is a plausible view and there is nothing in the award which

is perverse or illegal or capricious.

10. Insofar as the aspect of limitation is concerned, I am of the view that

this point has been duly considered by the Arbitrator. In fact, an issue

had also been framed by the Arbitrator on this aspect. The Arbitrator

has also dealt with this issue in the award and held as follows:

"On the basis of the discussions above, I hold that the claim of the claimant is maintainable and considering the diverse correspondence exchanged by and between the parties and the subsisting and various orders passed by the Learned District Court at Barasat as also the Hon'ble High Court at Calcutta, there is no question of the claimant's claim being barred by limitation. The warranty period of the machines supplied and commissioned by the

claimant commenced from the July 27, 2005 which is evident from the minutes of the meetings held on the said date and stood expired after a period of one year on July 26, 2006. The respondents were definitely duty bound to release the balance payment of 10% of the purchase price and discharge and release the bank guarantee immediately thereafter. The Respondents' claim for liquidated damages or replacement of the machines was an afterthought and resorted to for the sole purpose of avoiding payment to the claimant."

11. I find nothing perverse nor unreasonable in the findings of the

Arbitrator. I find that, the Arbitrator has taken a possible and

plausible view of the matter and this does not, in my view, warrant

any interference whatsoever.

12. Insofar as the evidence is concerned, the petitioners allege the

Arbitrator has failed to consider the letter dated 3 June 2011 issued

by the respondents whereby the respondents had allowed the

petitioners to make deductions as per the supply order terms from the

amount payable to respondents. It is further alleged that the

Arbitrator failed to consider the Minutes dated 25 March 2009

wherein the parties had recorded that 5 out of 9 machines were not

commissioned. I find that, the Arbitrator has held that the petitioners

had stated in their letter dated 20 August 2011 that all the machines

were being used for production activities since 18 July 2005.

Moreover, the Arbitrator has held that there was no correspondence

from the petitioners to the respondent complaining of any failure in

achieving the desired cycle time in terms of supply order dated 9

February 2003 or raising any claims or objection pertaining to the

same within the warranty period. It has also been held by the

Arbitrator that, the claims raised by the petitioners after the expiry of

the warranty period were an afterthought had been raised only to

avoid paying the respondent their legitimate dues. Accordingly, I find

that there is nothing erroneous or perverse which justifies any

interference with the award. In National Highways Authority of India

vs. ITD. Cementation India Limited (2015) 14SCC 21 it has been held

that "It is thus well settled that construction of the terms of a contract

is primarily for an Arbitrator to decide. He is entitled to take the view

which he holds to be the correct one after considering the material

before him and after interpreting the provisions of the contract". I am

of the view that the Court while considering challenge to an arbitral

award does not sit in appeal over the findings or decision of the

Arbitrator unless the arbitrator construes the contract in such a way

that no fair-minded or reasonable person could do. In, Dyna

Technologies Private Limited vs. Crompton Greaves Limited 2019 (20)

SCC1 it has been held that "....Courts should not interfere with an

award because an alternative view on facts and interpretation of

contract exists. The Court needs to be cautious and should defer to the

view taken by the Arbitral Tribunal even if the reasoning provided in the

award is implied unless such award portrays perversity unpardonable

under Section 34 of the Arbitration Act.".

13. For the forgoing reasons, I am of the view that there are no grounds

which justify any interference with the impugned award. At the

conclusion of the hearing, Advocates appearing on behalf of the

petitioners prayed for reduction of interest which had been awarded

by the Arbitrator. It was submitted that though the principal amount

was admittedly payable, the interest component granted under the

award be reduced. Mr. Mitra, Senior Advocate appearing on behalf of

the respondent fairly conceded to a reduction of the amount of

interest being 18% which has been awarded to the respondent. In view

of the aforesaid, the award dated 16 May, 2013 is modified, by

consent of the parties, to the limited extent that, further interest

awarded under the award @ 18% from the date of the award till the

date of the payment be reduced to 6% from the date of the award till

the date of the payment.

14. With the aforesaid directions, AP 1073 of 2013 stands dismissed.

(Ravi Krishan Kapur, J.)