Delhi High Court
Prahlad Rai Murari Lal vs Food Corporation Of India on 12 March, 1997
Author: A D Singh
Bench: A D Singh
JUDGMENT
Anil Dev Singh, J.
1. The parties entered into a contract by virtue of which the petitioner was to purchase a quantity of 1,184.8 M.T. of sugar from the respondent for a total consideration of Rs. 32,04,626.24. As per the terms of the agreement the petitioner was required to deposit the cost of the total quantity of sugar within seven working days from the date of acceptance of tender and also to remove the stocks within the specified period as stipulated in the contract. It is not disputed on both sides that the petitioner deposited the earnest money. It is also not disputed that the petitioner did not deposit the cost of the total quantity of sugar in one go. The petitioner deposited a sum of Rs. 10,32,000/- on different dates between September 13, 1979 and September 27, 1997. The respondent, in response to the deposit, issued release orders for sugar for a total value of Rs. 19,96,032.48 between September 18, 1979 and September 27, 1979, thus leaving an excess amount of Rs. 35,967.52 in deposit. Between October 6, 1979 and October 9, 1979, the petitioner deposited a further sum of Rs. 3,30,000/-. The respondent again released sugar of the value of Rs. 2,79,727.10. Subsequently, on October 22, 1979, the petitioner deposited a further sum of Rs. 90,000/- against which the respondent released further quantity of sugar.
2. By telegram dated November 21, 1979, the respondent cancelled the contract of the petitioner on the ground that it failed to deposit the full cost of sugar in terms of agreement.
3. The claimant moved a petition under Section 20 of the Arbitration Act for reference of the disputes to the arbitrator. By order of this Court dated May 1, 1986 the disputes were referred to Mr. Justice H. L. Anand, a retired Judge of this Court. On August 26, 1989 the learned Arbitrator made and published his award which is subject matter of the instant applications under Sections 30 & 33 of the Arbitration Act, 1940 filed by the petitioner as well as the respondent whereby they have challenged the award of the arbitrator to the extent the same went against them.
4. Learned Counsel for the respondent submitted that the arbitrator was not right in concluding that that time was not essence of the contract. He submitted that as per the stipulation made in the agreement the petitioner was required to make the entire payment of Rs. 32,04,626.24 within seven days of the acceptance of tender and since the petitioner failed to make the payment the respondent was justified in terminating the contract as time was of the essence of the contract.
5 . I have considered the submission of the learned Counsel for the petitioner. I do not find any error apparent on the face of the award in regard to the determination of the arbitrator on this aspect of the matter. The arbitrator while coming to the conclusion that the time was not essence of the contract noticed that the respondent accepted the payments made by the petitioner from time to time and released the various quantities of sugar on different dates. He also noticed that the contract itself provided that in the event of default in making the entire payment of Rs. 32,04,626.24 within seven days of the acceptance of the tender of the petitioner, the respondent was entitled to claim interest on the balance amount and there was provision for other prejudicial consequences of default. The learned arbitrator also found that even though there was default in making the deposit within the prescribed period, the respondent did not exercise the option of cancelling the contract but on the contrary continued to make release of different quantities of sugar. At this stage, it will be advantageous to set out the reasoning of the arbitrator :
"As for question at (i) above, the contract, no doubt, stipulates a time schedule for the deposit of the balance amount on account of price of the contracted quantity of sugar and visualises that the claimant would lift the quantity but the time for the deposit and for lifting the stocks could not be said to be of the essence of the contract, for a variety of reasons. In the for instance, there is no express provision to that effect event though such an express provision is not always necessary or determinative. Secondly, the contract itself contemplates that in the event of default, the respondent would be entitled to claim interest on the balance amount and there is a provision for other prejudicial consequences of default. Thirdly, even though there was default in making the deposit within the requisite time, the respondent did not exercise the option before having any further dealing with the claimant, and continued to make releases of different quantities of sugar from time to time on deposit of different amounts. Lastly, the respondent availed of the default Clause and admitted to having charged interest on the entire balance amount for the period of default, in terms of the contract. Having regard to all the circumstances, the time stipulated in the contract for the deposit was not of the essence of the contract Question at (i) is answered accordingly."
6. A perusal of the above reasoning clearly shows that the arbitrator has considered the matter after taking into account the conduct of the respondent and also considering that the respondent availed of the default Clause and also admitted to have charged interest on the entire balance about for the period of default. No fault can be found with the conclusion arrived at by the learned arbitrator. In any case the reasonableness of the reason is not a matter for this Court to consider. Accordingly, the submission of the learned Counsel for the respondent is rejected.
7. Learned Counsel for the respondent then submitted that there are certain errors in the sum awarded to the petitioner, which are apparent on the face of the award. He invited my attention to page 14 of the award. He pointed out that the arbitrator adjudged a sum of Rs. 69,694.10 in favour of the respondent, but on this amount he awarded interest in favour of the petitioner. He also pointed out that the arbitrator noticed that a sum of Rs. 2,34,414.14 was deposited in Court by the respondent and the same was withdrawn by the petitioner but did not deduct this amount from the sum of Rs. 3,04,108.22 which was adjudged in favour of the petitioner on account of refund of the excess amount deposited by the claimant. At this stag it will be convenient to set out the details of the sums awarded by the learned Arbitrator to the respective parties :
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Rs.
(a) Refund of Earnest money 1.72,952.00
(b) Refund of excess amount
deposited by the claimant 3,04,108.22
(c) Compensation on account
of damages 60,825.00
(d) Cost of the proceedings
on account of fees paid to
the Arbitrator 27,000.00
(e) Interest on Rs. 1,70,000 from
24-8-1979 to 11-9-1979 @ 15% P.A. 1,187.67
(f) Interest on Rs. 1,72,952/-
from 12-9-1979 to 31-5-1989
@ 15% P.A. 2,51,538.54
(g) Interest on excess amount
deposited (Rs. 3,04,108.24) from
5-11-1979 to 27-3-1985 @ 15 % P.A 2,45,827.77
(h) Interest on Rs. 69,694.10
from 28-3-1985 to 31-5-1989
@ 15% P.M. 43,448.43
Grand Total 11,06,887.63
Less :
(a) Received through Court 2,34,414.14
(b) Adjusted against interest
storage and Octroi by the
respondent 69,694.10
3,04,108.24
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Balance 8,02,779.39
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8. I have considered the submission of the learned Counsel for the respondent. Learned Counsel for the petitioner agrees that there has been a typographical error in the award and the interest awarded on Rs. 69,694.10 in favour of the petitioner can be corrected. He also submitted that this sum of Rs. 69,694.10 and a sum of Rs. 2,34,414.14 deposited in Court and withdrawn by the petitioner can be adjusted against the sum of Rs. 3,04,108.22 mentioned at item (b) at page 5. He, however, submitted that against item (f) above the Arbitrator has calculated interest upto May 31, 1989 while award was rendered by the arbitrator upto May 26, 1989. Therefore, the interest ought to have been awarded upto August 26, 1989.
9. In view of the submission of the learned Counsel for the parties, the award of the arbitrator has to be modified in respect of items (b), (f), (g) and (h) above. The modified award after correcting the errors would be as follows :
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Rs.
(a) Refund of Earnest Money 1,72,952.00
(b) Refund of excess amount
deposited by the claimant Nil
(Since an excess amount of Rs. 2,34,414.14
already deposited in the Court on 12-12-1984)
(c) Compensation on account of damages 69,825.00
(d) Cost of the proceedings on account
of fees paid to the Arbitrator 27,000.00
(e) Interest on Rs. 1,70,000 from
24-8-1979 to 11-9-1979 15 % P.A. 1,187.67
(f) Interest on Rs. 1,72,952/- from
12-9-1979 to 26-8-1989
(2,51,538.54 + 6,183.62) 2,57,722.16
(g) Interest on excess amount 3,04,108.24
from 5-11-1979 to 11-12-1984
(-for 5 years 37 days) 1,79,374.98
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Total 6,92,878.19
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10. The above calculations are not disputed by the learned Counsel for the respondent. His only contention was that the arbitrator has wrongly come to the conclusion that the time stipulated in the contract for the deposit was not of the essence of the contract. Since I have already rejected that submission, no other point has been argued by the parties in this matter.
11. Accordingly, the award is made a rule of the Court to the extent indicated above, and a decree is hereby passed. The award as modified shall form part of the decree. In case the respondent fails to make the payment within a period of four weeks, the petitioner will be entitled to interest at the rate of 14% per annum from the date of the decree till realisation. Award made rule of the Court.
