National Fertilizers Ltd. vs Chemicals & Allied Industries ...
1998 Latest Caselaw 698 Del

JUDGMENT

Dr. M.K. Sharma, J.

1. In respect of a contract entered into between the petitioner and respondent No. 1 disputes arose between the parties. The aforesaid contract contained an arbitration. clause and in pursuance thereof the disputes were referred to the sole arbitration of Mr. Justice Shiv Narain Shankar, retired Chief Justice of the Orissa High Court. The learned Arbitrator entered into the reference and after allowing the parties of lead their evidence, heard the parties at length. The Arbitrator made and published his award on 24th May, 1989.

2. A petition was filed in this Court under Sections 14 and 17 of the Arbitration Act praying for filing of the award in this Court Notice was issued to the parties, on receipt of which the respondent No. 1 has filed an objection in this Court under Sections 30 and 33 of the Indian Arbitration Act against the award which is registered as I.A. No. 7939/89. The petitioner, on the other hand, has sought for making the award a Rule of the Court.

3. I have heard the learned Counsel appearing for the respondent No. 1/objector as also the learned Counsel appearing for the petitioner.

4. By the order dated 23rd January 1992, following issues were framed and the parties were allowed to lead their evidence by filling the affidavits.

1. Whether the award is liable to be set aside as per the objections contained in I.A. No. 7939/89?

2. Relief?

In pursuance of the aforesaid order passed by this Court, the parties have filed affidavits by way of evidence which are on record.

5. The first and foremost submission of the learned Counsel appearing for the respondent No. 1/objector is that the award is liable to be set aside as the Arbitrator has exceeded his jurisdiction in entertaining the counter-claim of the petitioner which was not a part of the reference and was not referred to him for its adjudication. According to the learned Counsel the only dispute that arose between the parties is as to whether the petitioner could make deductions from the dues of respondent No. 1 without their being any basis for it. Accordingly, he submitted that the only dispute that was referred and was available for adjudication by the Arbitrator was towards claim of the respondent No. 1 for sum of Rs. 7,79,432.60 with interest. It is submitted that under the aforesaid circumstances the Arbitrator should not have framed an issue for his decision as to whether the petitioner was entitled to Rs. 76,586 on account of counter-claim as claimed in Annexure-R4. Counsel submitted that by entertaining the counter-claim as claimed the learned Arbitrator has exceeded his jurisdiction. In support of this contention the learned Counsel relied upon a few passages from "Commercial Arbitration" by Mustill & Body and also on the decisions in The Indian Minerals Co. Vs. The Northern India Lime Marketing Association and The Chief Administrator Dandakaranya Project, Koraput, Orissa & Anr. Vs. M/s. Prabartak Commercial Corporation Ltd. .

6. The learned Counsel appearing for the petitioner, however contested all the aforesaid submissions and submitted that when the parties to the disputes participated in the arbitration proceedings and led evidence raising no objection to the counter-claim of the petitioner, the respondent No. 1 cannot take up the plea that the learned Arbitrator has exceeded his jurisdiction and it should be stopped from raising such contention. In support of his contention the learned Counsel relied upon the ratio of the decisions in Prasun Roy Vs. The Calcutta Metropolitan Development Authority and Another and State of Orissa and Another Vs. M/s. Consolidated Construction Company (Engineers & Contractors) and Another, .

7. In light of the aforesaid submissions of the learned Counsel appearing for the parties let me proceed to decided the aforesaid objection raised by respondent No. 1.

8. Mr. Justice Shiv Narain Shankar was appointed as sole Arbitrator to adjudicate upon the disputes in accordance with the arbitration clause. On perusal of the records of the arbitration proceedings, I find that on the basis of the pleadings of the parties, the learned Arbitrator framed as many as 10 issues one of which was as to whether the respondent is entitled to Rs. 76,586/- on account of counter-claim as claimed in Annexure R-4 filed with the written statement. On the basis of the aforesaid issue framed by the learned Arbitrator the parties were also to lead evidence and the parties led evidence on the aforesaid issue as well. The Arbitrator in his award has discussed the aforesaid issue No. 10 elaborately and after such discussion held that the counter-claim is proved to the extent of Rs. 70,356/-.

9. From the above discussion, it is crystal that the parties to the arbitration proceedings went to trial and went ahead with the knowing fully well that the counter-claim of the petitioner for an amount of Rs. 76,586/- is also a part of the disputes being adjudicated by the Arbitrator. It does not appear from the records that any objection was raised by the respondent No. 1 in respect of framing of the aforesaid issue by the learned Arbitrator nor there is anything on record to show that the respondent raised any objection regarding leading evidence in respect of the aforesaid issue. Rather the respondent No. 1 participated in the arbitration proceedings without any objection or protest. Counsel appearing for the respondent No. 1 however submitted that an objection with regard to the counter-claim was raised by the respondent No.1 in its reply to the counter-claim. But the fact remains that although an objections was raised in the reply respondent No. 1 also made statements in the reply with regard to merits of the said counter-claim of the petitioner and allowed an issue to be framed in respect of the said counter-claim and also participated in the proceedings by leading evidence without protest in respect of the counter-claim.

10. In view of the aforesaid position, in my considered opinion, principles of waiver and acquiesces become fully applicable and therefore the respondent No. 1 should be held estopped from raising such a contention.

11. I have carefully considered the objections filed by respondent No. 1 in the present case. Respondent No. 1 has not raised any specific issue about entertaining of the counter-claim by the learned Arbitrator, in the objections filed before this Court. In Prasum Roy Vs. The Calcutta Metropolitan Development and Another (supra) the Supreme Court held that where though a party is aware from the beginning that by reason of some disability the matter is legally incapable of being submitted to arbitration, participates in arbitration proceedings without protest and fully avails of the entire arbitration proceedings and then when he sees that the award has gone against him comes forward to challenge the whole of the arbitration proceedings as without jurisdiction on the ground of a known disability, the same cannot be allowed. It is further held that the principle is that a party shall not be allowed to blow hot and cold simultaneously and long participation and acquiescence in the proceedings preclude such a party from contending that the proceedings were without jurisdiction.

In the State of Orissa and Another Vs. The Consolidate Construction Company (Engineers & Contractors) and Another (supra) Hon'ble Mr. Justice R.N. Mishra (as his Lordship then was) held that since no objection at all was raised until the appeal was heard in the High Court about want of jurisdiction by the Arbitrator it would not all be appropriate to entertain the contention of want of Arbitrator's jurisdiction. It was also held that the party raising such plea of want of jurisdiction should be held estopped from raising such a contention.

In my considered opinion, the ratio laid down by the aforesaid decisions squarely applies to the facts and circumstances of the present case. The respondent No. 1 was fully aware from the beginning that counter-claim of the petitioner was being adjudicated upon by the Arbitrator. In spite of that, respondent No. 1 made statement in the reply with regard to merit of the counter-claim, allowed an issue to be framed in respect of the same, allowed evidence to be led in respect of the aforesaid and also received an award in respect of the said counter-claim, passed by the learned Arbitrator. No objection has been raised in the present case on the aforesaid plea of want of jurisdiction of the Arbitration in respect of counter-claim and therefore the respondent No. 1 is estopped from raising such a plea at this stage. Long participation in the proceedings in respect of the counter-claim by the respondent No. 1 also precluded it from contending that the proceedings, so far the said issue is concerned, were without jurisdiction. Even in 'Commercial Arbitration' of Mustill & Body (2nd Edition) it is stated that the conduct of the parties combines to give Arbitrator jurisdiction when the claimant brings a claim before him and the respondent by raising a defense to it in the arbitration proceedings. The records also do not specifically indicate as to what specific claims/disputes were referred to the Arbitrator by the appointing authority of the Arbitrator (P.125). Thus, the aforesaid objection raised by the respondent No. 1 is found to be without merit and stands rejected.

12. Next contention of the learned Counsel appearing for respondent No. 1 was that the learned Arbitrator exceeded his jurisdiction and acted illegally when he allowed adjustment of Rs. 7,79,432.63 made by the respondent No.1 against penalty holding that the deductions made on the basis of the formula are perfectly just and legal, although the learned Arbitration was fully aware that the formula was not the part of the contract. Learned Counsel also submitted that the learned Arbitrator also misconducted and committed an error apparent on the face of the record in giving interpretation of Section 59 of the Sale of Goods Act, which interpretation is contrary to the provisions of the said Act.

13. In order to appreciate the contention of the learned Counsel appearing for respondent No. 1 on the aforesaid plea and to give my decision thereon, I have carefully pressed the award passed by the learned Arbitrator in respect of the same. The aforesaid objection to the award is against the discussion and findings of the learned Arbitrator in relation to issue Nos. 3, 4, 5, and 7. The learned Arbitrator in his findings has stated that evidence has been led by the respondent to show that deductions had been made on the basis of inspection reports and such reports have also been proved on the record. The learned Arbitrator has considered the objection raised by the Respondent No. 1 that it was objecting to the deductions made on the ground that the heads under which the deductions were made are not incorporated in the terms of the conduct. He has considered the evidence adduced by the parties in respect of the same and thereupon gave his finding that although the formula was not a part of the contract in pursuance and that the circumstances in which this formula came into existence was stated by Sh. K.B. Sachdeva, Dy. Manager (MTLS) of the Corporate Office of the petitioner in his statement dated 29.10.1988. The learned Arbitrator extracted portion of the said statement and held that the aforesaid decision of the petitioner to make deduction is also supported by law. The learned Arbitrator also looked into the provisions of Section 59 of the Sale of Goods Act and the evidence on record and on appreciation thereof came to the conclusion that a uniform and objective formula was evolved to calculate the diminution in price and the same was done obviously to avoid the possibility of discrimination between one supplier and the other so that the diminution is made objectively and uniformly.

14. The learned Arbitrator has also, as a matter of fact, found that the formula was nothing more than a general rule or principle to be worked upon by the respondent in case of deficient supplies for calculating the diminution in price. He has also held that it was not shown to him either in evidence or during the arguments that the rates for calculating this diminution in this formula were in any manner unfair or unjust or secured to the petitioner any undue advantage. The learned Arbitrator also found that the aforesaid formula was just a measure for the said calculation and the same is conclusively borne out by the fact that the respondent himself has accepted the aforesaid formula for the calculations of diminution in price in the case of his purchase order Ex. P-50 and therefore, he held that the deductions made on the basis of the aforesaid formula are perfectly just and legal and the fact that the formula was not specifically mentioned in the earlier contract entered into by the petitioner did not make any difference. The learned Arbitrator also held that according to the provisions of Section 59 of the Sale of Goods Act, it is the option of the purchaser to elect to treat any breach of a condition of the contract on the part of the seller as a breach of warranty with full justification to set up against the seller the breach of warranty in diminution of the price of the goods supplied. It is, therefore crystal clear that the points raised before me by the respondent were also raised before the learned Arbitrator and no consideration of the evidence on record and also the relevant provisions of the Sale of Goods Act, the learned Arbitrator gave his findings and conclusions.

15. It is repeatedly held by the Supreme Court is various judgments that this Court while deciding the objections filed by a party against the award cannot re-appreciate the evidence and sit over the award of the Arbitrator as an Appellate Court. In M/s. Sudarshan Trading Co. Vs. The Govt. of Kerala and Another it was held by the Supreme Court that reasonableness of the reasons given by the Arbitrator is never a matter which the Court questions and considers and that if the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. It was further held that the Arbitrator is the sole judge of a quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a judge on the evidence before the Arbitrator. In the said decision the Supreme Court also held that once there is no dispute as to the contract, what is the interpretation of that contract, is a manner for the Arbitrator on which Court cannot substitute its own decision. It is also a settled principle of law that the Court has no jurisdiction to substitute its own evaluation of the conclusion that the Arbitrator had acted contrary to the bargain between the parties. It is also settled law that whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the Arbitrator.

16. In Food Corporation of India Vs. Joginderpal Mohinderpal and Another the Supreme Court held that it is not misconduct on the part of an Arbitrator to come to an erroneous decision whether his error is one of fact or law, and whether or not his findings of fact are supported by evidence. In the said decision, it was further held that the Court cannot sit in appeal over views of Arbitrator by re-examining and reassessing the materials.

17. Thus, the plea raised by the respondent before me that the learned Arbitrator misconducted himself in allowing the petitioner to adjust the sum of Rs. 7,79,432.63 against the penalty is misconceived and the same, therefore stands rejected.

18. Counsel for the respondent also submitted that the learned Arbitrator was in error while relying on the pre-receipts, namely Exs. R-88 and R-89 in view of the fact that the same were obtained by coercion. The aforesaid plea was also raised before the learned Arbitrator and he came to the conclusion that it is proved on the record that the payments against the two receipts were made on 14th August, 1986 which the respondent No. 1 towards full and final payment of all its claims under the contract and that at no time thereafter till the dispute started, the respondent ever said that these two receipt had been issued thereat, coercion, duress or undue influence and that they were not in full and final settlement of his claims in respect of supplies of Bhatinda unit. In that view of the matter, the learned Arbitrator held that the plea of coercion or undue influences etc. is wholly unsustainable. The aforesaid findings of the learned Arbitrator was arrived at on the basis of the evidence on record and thus findings on facts and I do not find any reasonable ground to interfere with the same.

19. In this connection, reference may also be made to a decision of Supreme Court in M/s. P.K. Ramaiah & Co. Vs. Chairman & Managing Director, National Thermal Power Corporation reported in 1994 (1) SCALE 1. In the said case it was held that admitted full and final satisfaction was acknowledged by a receipt in writing and the amount was received unconditionally and thus there is accord and satisfaction by final settlement of the claims and the subsequent allegation of coercion is an after thought and a devise to get over settlement of the dispute, acceptance of the payment and receipt voluntarily given. The Supreme Court while coming to the aforesaid ratio also considered a passage of Russel on Arbitration, 19th Ed. P. 396 wherein it is stated that "an accord and satisfaction may be pleaded in an action on award and will constitute a good defense." In the present case also the respondents have acknowledged receipt of the amount in full and final statement of the claim through Ex. R-88 and R-89. There is accord and satisfaction and therefore the plea of coercion or undue influence was unsustainable in the aforesaid plea raised by the respondent and has also no merit and is accordingly rejected.

20. No other ground or plea was raised by the Counsel appearing for the respondent against the award. The objection, as a whole therefore, has no merit and is accordingly dismissed.

21. I have carefully perused the findings recorded by the learned Arbitrator under the various issues and I find no ground at all to interfere with any of the aforesaid findings. Thus, the award made by the learned Arbitrator is made a Rule of the Court. The petitioner shall be entitled to interest @ 12% p.a. on the awarded amount from the date of the decree till the date of payment in terms of Section 24 of the Arbitration Act. Let a decree be drawn up in terms of the award. The suit as also the objection accordingly stand disposed of in terms of this order but there shall be no order as to costs.