Delhi Cloth & General Mills ... vs Municipal Corporation Of Delhi
1989 Latest Caselaw 402 Del

JUDGMENT

D.P. Wadhwa, J.

(1) The plaintiff, a public, limited company, filed a suit for recovery of Rs. 3,88,184.l8 against the defendant- M.C.D. The plaintiff claimed this amount on the basis of a contract by which the plaintiff was to supply certain quantity of Alumina Ferric to the M.C.D. In fact M.CD had flouted tenders for supply of this commodity and the tender given by the plaintiff was accepted The supply of Alumina ferric was to be made during the period from 1-4-1967 to 31-8-1968. There was an escalation clause and the relevant clause can be extracted : "THE rate quoted above is based on the Sulphur cost of Rs. 605.00 per Metric Ton. The rates will be revised every quarter and for every variation of Rs 5.00 in Sulphur cost, there will be variation of Re. 1 .00 per Metric Ton in Alumina Ferric rate.' The variation in Alumina Ferric rates on account of Sulphur price will apply in both cases i.e. increase and will be fixed as stipulated in the escalation clause. The rates for the first quarter viz 1467 to 306.67 will remain unchanged and any variation in the prices will apply from 1.7 67 onwards The rates of sulphur will be as per the rates charged by the Indian Importers and other Sulphur sellers in the country. But it may be confirmed every quarterly."

(2) The plaintiff claimed the aforesaid amount on the basis of the escalation clause. A notice dated "8.7.1972 was served upon the defendant claiming interest as well on this amount at the rate of 12% per annum and it was also stated that the interest was due as per Interest Act and the Sale of Goods Act. The suit was filed on 4.3.1974. It was stated that the suit was within time as the period of limitation stood extended by letters dated 6-3-1971, 22-5-1971 and 11-8-1971 of the defendant. On the pleadings of the partics, the court framed the following issues : -

1. Whether the suit has been instituted and plaint signed and verified by a duly authorised person ? OPP.

2.Whether the suit is within limitation ? OPP.

3.Whether according to the escalation clause the increase in the cost of sulphur is to be worked out on the basis of the price in the previous quarter ? OPP.

4.Whether according to the escalation clause the increase in the price of Alumina Ferric on account of the increase in the cost of sulphur is to be worked out on the basis of the price in the current quarter ? OPD.

5.Whether the said increase is applicable from 1-7-1967 ? OPP.

6.What is the basis of working out the cost of sulphur in respect of the period and the source ? Onus on the parties.

7.To what amount is the plaintiff entitled on the basis of the escalation clause, interest and other expenditure? OPP.

8.Relief. -

(3) Thereafter the matter was being adjourned for recording of the evidence and then an application under section 21 of the Arbitration Act was filed by the parties it being LA. 6345/84. The parties agreed to refer disputes which were the subject matter of the suit to the sole arbitration of Mr. Justice V.S. Deshpande, a former Chief Justice of this Court. The disputes were set out in the application and these are as under ;-

(I)Interpretation of the escalation clause as contained in the letter No. WW/S/104A/7267 dated 7-8-1967, of the defendant Corporation for purposes of calculating the price of Alumina Ferric supplied to the defendant Corporation during the period 1-4-1967 1031-3-1968.

(II)Since the rates of the Alumina Ferric to be supplied during the aforementioned period, were to be revised every quarter based on the Sulphur cost, whether the price of the Sulphur prevailing in the previous quarter had to be taken into consideration or the price of the Sulphur prevailing in the current quarter ?

(III)Whether for calculating the price of Alumina Ferric in accordance with the Escalation Clause, the cost of Sulphur received from the traditional sources was also to be taken into account or only the cost of Sulphur which could be used for the manufacture of Alumina Ferric was to be taken into account ?

(IV)To what amount, if any, plaintiff is entitled to from the defendant Corporation for the price of the Alumina Ferric supplied during the period of the agreement ?

(V)Whether the plaintiffs are entitled to any interest, if so, to what amount ?

(4) It will at once be seen that the parties did not press the issue regarding claim of the plaintiff having been barred by limitation. By order dated 13-11-1984 the disputes were accordingly referred for arbitration. The learned Arbitrator gave his award on 6-1-1986. It is a reasoned award. The Arbitrator gave his award in favor of the plaintiff and against the M.C.D. and held that plaintiff was entitled to the amount of Rs. 3,87,404.37 plus interest at the rate of 12% per annum on this amount from 20-3-1974, the date when the suit was filed. The Arbitrator also held that the plaintiff was entitled to costs of the suit and the arbitration proceedings and further that the interest will run till the date on which, a decree on the award is passed by the court.

(5) Notice of the filing of the award was given to the parties. Defendant- Mcd .filed objections to the award and these were registered as I.A. 1527/86. The objections were that the Arbitrator failed to consider the question of limitation as the claim of the plaintiff was barred by limitation; the award was against the documents and there was no evidence on record to support the claim of the plaintiff; by relying merely on the sole affidavit of an official of the plaintiff the Arbitrator was guilty of legal mis-conduct; there was no evidence on record about the purchase of sulphur by the plaintiff from the conventional sources and also for use of sulphur in the manufacture of Alumina Ferric which sulphur bad been purchased at cheaper rates; and that the Arbitrator committed legal mis-conduct in allowing interest at the rate of 12% per annum from the date of the suit.

(6) The plaintiff controverter these objections of the M.C.D. Again on the pleas of the parties the court framed the following issues :-

1. Whether the award is liable to be set aside on any of the objections raised by the respondent ?

2.Relief.

(7) Parties were allowed to lead evidence by means of affidavits.

(8) Not much argument is needed to show that the objections of the M.C.D cannot be sustained The learned Arbitrator after going through the whole record gave his award on the basis of the points referred to him. No fault can be found with his reasoning The court while examining the objections under Section 30 of the Arbitration Act is even otherwise . not sitting in appeal over the award given by the Arbitrator. The question of limitation was not referred to the Arbitrator It is not a pure question of law which can be spelled out from ihe plaint The plaintiff, as noted above, referred to certain, tellers of the defendant as acknowledgement extending the period of limitation. When whole of the subject disputes were being referred to arbitration but not the question of limitation, it can well be presumed that the M.C.D. gave up the plea regarding bar of limitation. Parties can always agree not to press a particular issue. I do not find any substance in the objections of the M.C.D. which are on the merit of controversy in dispute over which the Arbitrator had complete sway. It cannot be said that there was no evidence on record for the Arbitrator to come to a particular conclusion. It is up to the Arbitrator to rely on the testimony of a sole witness or not. This court cannot substitute its own view on the subject. Since the reference is made in suit and one of the disputes referred was if the plaintiff was entitled to any interest, the Arbitrator was well within his right to award interest from the date of filing of the suit. (See Executive Engineer (Irrigation), Balimela and others v. Abhaduta Jena and others, , and Food Corporation of India v. Mis. Surendra, Devendra and Mohendra Transport Co., .

(9) Accordingly, the objections are dismissed. The award is made rule of the court and decree in terms thereof is passed. The plaintiff will also be entitled to future interest at the rate of 12% per annum on the principal amount from the passing of the decree .till payment. No interest will, however, be payable by the defendant in case the decretal amount is paid within two months from the passing of the decree.