N.K. Textile Mills vs Union Of India And Anr.
1994 Latest Caselaw 717 Del

JUDGMENT

P.K. Bahri, J.

(1) In a petition filed under Sections 14, 17 & 29 of the Arbitration Act, 194U, by the petitioner, notice was served on Respondent No.2, the sole arbitrator. The Arbitrator tiled the award dated May 20, 1985, in this Court by which she disallowed the claim of Rs.8,75,330.00 of the Union of India. Notice of the filing of the award was given to the parties. Union of India had filed objections to the said award which are contested by the petitioner. Following issues were framed:

1. Whether the award is liable to be set aside on the grounds mentioned in the objection petition?

2.Relief.

(2) Issue No.1The petitioner had put up the claim before the arbitrator in the following manner that the contract was made between the parties in 1967 by virtue of which the petitioner was to supply 1000 pieces of Tent Private MK.3 Flies Inner @ Rs.423.00 each and 20,000 pieces of lent Private MK.3 Walls without poles @ Rs.l08.00 each and the delivery was to be completed by December 31, 1967. According to the claimant- petitioner, the supplies were made but price of some of the items detailed out in the claim petition in para 3 to the tune of Rs.59,567.00 was not paid. The claim of the petitioner was contested by the Union of India.

(3) COUNTER-CLAIM was filed by the Union of India in which it was pleaded that value of the total contract was to the tune of Rs.25,83,000.00 and the stores were to be supplied of the value of Rs.8 to 10 lakhs per month. The delivery which was to be completed on December 31,1967, having been not completed, the time was extended by the Union of India up to September 15, 1968 and then up to April 30, 1969 and thereafter up to December 20, 1969 and lastly, up to May 16, 1970. It was pleaded that the petitioner had supplied 992 pieces in respect of first item and then 6,426 pieces in respect of the second item and as the delivery was not made in respect of the remaining items, the contract was cancelled and the delivery of the goods offered after the after expiry of the extended delivery period was extended was not accepted and the entire lot was rejected and the purchases were made at the risk and cost of the petitioner and thus, the Union of India suffered loss of Rs.8,75,330.00 which the Union of India is entitled to recover from the petitioner.

(4) This counter-claim was contested by the petitioner and it was pleaded that the quantity of 2,000 pieces offered on May 16, 1970 was malafidely rejected on September 28, 1970 after an inordinate delay of more than four months and it was the Union of India which has committed the breach of the contract. It was further mentioned that quantity of 1474 pieces were offered during the extended delivery period and the same Were accepted by the consignee on October 8, 1970 even after the extended period of delivery i.e. September 5, 1970. It was pleaded that no notice has been given to the contractor that delivery was to be effected now positively before any particular date and the contract was arbitrarily cancelled on December 10, 1970. So, it was pleaded that the petitioner is not liable to pay any damages to. the Union of India and in fact the petitioner is entitled to recover the amount from the Union of India which has been withheld by the Union of India. The arbitrator after taking the evidence and hearing the parties gave the following award:

"I find that the Union of India kept the contract alive by accepting stores after the expiry of the delivery period and, therefore, the cancellation of the contract was not in accordance with the terms and was ineffective. I would thus hold that the contractor is not responsible for the extra expense incurred by Union of India in purchasing the balance quantity of stores under the contract. Therefore, I dismiss the claim of the Union of India for Rs.8,75;330.00 (Rupees eight lakh seventy five thousand three hundred thirty only) and direct Union of India to release the amount, if any, withheld, to the contractor.

ALL other claims of the parties are hereby dismissed.

THE parties shall bear their respective cost of the proceedings before me."

(5) The learned counsel for the Objector has argued that despite the delivery period being extended from time to time the petitioner had failed to make the delivery of large quantities of the contracted goods and thus, Union of India was right in cancelling the contract and making the risk purchase. He has argued that the arbitrator has not considered the material documents on the record and thus, has committed grave misconduct in giving the-finding that contract of the petitioner has been cancelled illegally. He has placed reliance on a number of judgments to which I would presently refer.

(6) Counsel for the respondent, on the other hand, has argued that the finding given by the arbitrator that the contract was cancelled illegally by the Union of India is not open to challenge by filing objections because the arbitrator was the sole authority to give this finding with regard to merits of the case. He has also argued that even if no detailed reasons have been given by the arbitrator even then the award cannot be set aside on that ground.

(7) He has pointed out that delivery period was extended by the Union of India from time to time and the Union of India had accepted certain supplies even after the last delivery period fixed by the Union of India and thus, there was no reason for Union of India to have cancelled the contract. It was also pointed out that at no point of time the Union of India had made the time essence of the contract so that delivery of the goods could be made only within the stipulated period. It is also urged that before cancelling the contract no such communication had been given by the Union of India making the time as the essence of the contract. He has also pointed out that in the present case it was proved before the arbitrator that certain supplies had been booked with the Railways and those supplies were accepted by the Union of India even after the expiry of the extended period of delivery fixed by the Union of India and thus, there was no occasion to differ with the finding of the arbitrator on this point that the Union of India having accepted the supplies even after the last date fixed for delivery by the Union of India, thus there was no valid reason for Union of India to have cancelled the contract.

(8) It is settled law that an award given by the arbitrator can be set aside only if any illegality is pointed out which is apparent on the face of the record. It is evident from the pleadings of the parties before the arbitrator and from the evidence led before the arbitrator that in short the question to be decided by the arbitrator was whether the Union of India was right in cancelling the contract of the petitioner. The arbitrator had given a finding of fact that Union of India was not right in cancelling, the contract inasmuch as the Union of India had accepted the delivery of the goods even after the time fixed for delivery of the goods. This finding of the arbitrator, in my opinion, can not be challenged, unless it is shown that the finding is arrived at by ignoring any material document or material evidence or the same is against any settled legal principle of law. The contract although had fixed a particular period for making the supplies of the goods yet the Union of India did not treat the time as the essence of the contract inasmuch as the Union of India had from time to time extended the period of delivery. If the Union of India was keen that the delivery must be effected by a particular date the Union of India ought to have made it clear to the contractor by sending some notice that by a particular date now the delivery must be made otherwise the Union of India would proceed to cancel the contract. .Without making aware this fact to the contractor that now the time is the essence of the contract, the Union of India was not right in cancelling the contract of the petitioner and more over when certain supplies of the goods had been accepted by the Union of India even after the extended date fixed by the Union of India for delivery of the goods.

(9) In M/s.Marwar Tent Factory Vs Union of India & Others, , it has been laid down that if the term for delivery of goods is F.O.R. place of dispatch then the property in goods passes to the consignee on the goods being loaded at the place of dispatch. It may be that it is question of terms of the contract between the parties as to when the property in goods is to pass to the purchaser. Here, a finding of fact has been given. by the arbitrator that the Union of India had accepted the supplies even after the expiry of the period of delivery then obviously it cannot be said that the Union of India was right in cancelling the contract for non-supply of balance goods unless the Union of India had made it specifically clear by giving any notice to the contractor that the time would be now essence of the contract for supply of goods by a particular date.

(10) Counsel for the Objector has referred to The Fertilizer Corporation of India Ltd. Vs M/s.Bharat Painters, , in which it has been laid down that the scope of interference by a Court in case of a non reasoned award is rather very limited and a Court has no jurisdiction to investigate into the merits of a case and to examine the evidence on record for the purpose of finding out whether or not the arbitrator has committed an error of law. But yet in facts and circumstances of a case, a Court of law would be justified to interfere with the award even with the limited power of interference a Court possesses in case it is shown that the award has been given without there being any material on the record. There is. no dispute about this proposition of law. In the present case it is not shown that any finding has been given by the arbitrator ignoring any material on the record.

(11) Counsel for the Objector has also made reference to K.P.Poulose Vs State of Kerala & Another, . This judgment also lays down that in case the arbitrator has ignored any material document on the record then it would amount to judicial misconduct by the arbitrator and the award is liable to be set aside on that ground. For parity of reasoning this judgment is also not applicable to the facts of the present case.

(12) Lastly, he has referred to Zodiac Electricals Pvt.Ltd. Vs Union of India & Others, . In the said case the correspondence exchanged between the parties disclosed that there has not come about any concluded contract between the parties and thus, the Supreme Court held that the court could interfere with the award when such correspondence clearly indicated that no contract between the parties has come into existence. I do not think that anything said in this judgment is of any help in deciding the point in controversy arising before me.

(13) In Sudarsan Trading Co. Vs The Govt. of Kerala & Another, , the Supreme Court has held that interpretation of a contract is a matter for the arbitrator and in case the arbitrator has taken a particular view about the contract the court cannot substitute its own decision. It was held that it is not open to the court to probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator, as to what impelled to him arrive at his conclusion.

(14) In the case of Gujarat Water Supply & Sewerage Board Vs Unique Erectors ( Gujarat) (P) Ltd. & Another, , the Supreme Court has held that the arbitrator is not obliged to give reasons for his decision and even if giving of reason is held to be obligatory, it is not obligatory for arbitrator to give detailed judgment. In the present case, the arbitrator has indicated his mind as to why he has held that the contract has been wrongly rescinded by the Union of India. This decision has been given by the arbitrator on the basis of the evidence led before the arbitrator and the arbitrator has not ignored any material documents in coming to the conclusion that the contract in this case has been wrongly rescinded by the Union of India. So, this court, in my opinion, has no jurisdiction to interfere with the finding of the arbitrator given in this case. The objections are liable to be dismissed. This issue is decided against the Objector.

(15) Relief The objections are liable to be dismissed and the award is liable to be made made a rule of the court.

(16) I dismiss the objections and make the award a rule of the court. Decree be prepared accordingly.