Tinna Overseas Ltd. And Anr. vs Projects & Equipments ...
2001 Latest Caselaw 1934 Del

JUDGMENT

V.S. Aggarwal, J.

1. This is a petition filed under Section 34 of the Arbitration and conciliation Act for setting aside of the award dated 16th June, 2000 passed by the arbitrator.

2. The facts alleged are that respondent No. 1 entered into an agreement with the Government Trading Corporation of Iran of 23rd November, 1995 for supply of one lakh MTs of Indian wheat to the foreign buyer. The petitioners offered their services in exporting of the said wheat from India. The offer was accepted by the respondent No. 1 Petitioner No. 1 and respondent No. 1 entered into an association agreement on 29th December, 1995 detailing the terms and conditions between the parties. As per the agenda No. 1 dated 16th May, 1996 to the Associationhip agreement of 29th December, 1995 petitioner No. 2 was also made a party to the agreement. Amongst other terms and conditions it had been agreed between the parties :

"PEC will negotiate documents against the L/C to be opened by Foreign Buyer for which Tinna shall provide clean documents as per terms and conditions of the L/C to PEC for prompt negotiation. In the event PEC receives payment under reserve from the negotiating bank due to discrepancy in the documents. PEC shall release the payment to Tinna after the reserve has been lifted. PEC, shall, within 15 days of realisation of export proceeds, transfer the amount after retaining PEC's service charges to Tinna. All cost incurred by PEC towards bank charges against this Contract/L/C including confirmation and negotiation charges, transit period overdue, interest etc., shall be to Tinna's account.

If any claim is preferred by the Foreign Buyer on account of quality, quantity and/or late/delayed delivery or non-delivery or on any other ground whatsoever due to Tinna's failure to perform any of its obligations, the same shall be to the account of Tinna. PEC shall not be responsible or liable for any claim made or preferred by the Foreign Buyer. In case any money is paid by PEC to the Foreign Buyer, the same shall be reimbursed to PEC by Tinna within 7 days of the demand by PEC, failing which PEC shall be entitled to claim interest at 20% per annum from Tinna. Tinna shall always keep PEC fully indemnified against any or all such claims."

3. Under the Associationship Agreement the petitioners were to arrange the goods being one lakh MTs of Indian wheat for supply to the foreign buyer. Out of the total quantity agreed to be supplied by the petitioner 75000 MT were to be supplied by petitioner No. 1 and remaining by petitioner No. 2 as per agenda No. 1 dated 16th May, 1996.

4. The petitioner alleges that they duly arranged for the supplied all the wheat undertaken to be supplied. The payments for the same were to be released by respondent No. 1 from foreign buyer. However, the said respondent failed to transfer money to the petitioner within time and illegally deprived the petitioner of the use of the money. Respondent No. 1 is alleged to have released the amount of US$ 46 lakh each in respect of the consignment exported by petitioner No. 1 and 2. As per Clause 4 of the Association Agreement respondent No. 1 was bound to transfer the amount received from the foreign buyer within 15 days. Respondent No. 1 released the amount referred to above but failed to transfer the amount to the petitioners. US $ 1,30,000 were retained by respondent No. 1 from the bills of the shipment made by petitioner No. 1 and US $ 1 lakh retained from the bill of the shipment made by petitioner No. 2 Respondent No. 1 is stated to be under a contractual obligation to transfer the said amount to the petitioners within 15 days of the realisation. In this process the petitioner were deprived of the use of the said amount and retained US $ 2,30,000 from 17th July, 1996 being the date from which the same became due.

5. It is contended that respondent No. 1 transferred US $ 1,30,000 to petitioners on 5-3-1997 but failed to transfer the benefit which accrued to the strengthening of the dollar and consequential benefits. Respondent No. 1 is also stated to have been charging interest from the petitioners at the rate of 25.75% p.a. Thus the said rate of interest is liable to be paid by the respondent to thee petitioners. The contention therefore raised is that US $ 230000 was liable to be paid by respondent No. 1 within 15 days of the realisation. It is a case of unjust enrichment. The arbitration had been appointed but it is alleged that the amount claimed by the petitioner has been disallowed. Hence the present petition.

6. At the threshold it was put to learned counsel for the petitioner as to if on the facts alleged the award of the arbitrator is liable to be set aside or not. The answer provided was that since it was a case of undue enrichment therefore the award would be contrary to public policy of India and consequently is liable to be set aside.

7. The said argument of the learned counsel must be held to be totally devoid of any merit. Sub-section (2) to Section 34 provides the grounds on which an award under the Arbitration and Conciliation Act, 1996 can be set aside. The same reads:

Application for setting aside arbitral award-(1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3).

(2) An arbitral award may be set aside by the court only if-

(a) the party making the application furnishes proof that-

(i) a party was under some incapacity; or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to preset his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decision on matters beyond the scope of the submission to arbitration;

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provisions of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part ; or

(b) the courts finds that-

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

8. For purposes of the present order one has simply to refer to the alleged grounds raised at the bar that if respondent No. 1 had unduly enriched itself whether when the award is to the contrary can be taken that it was in conflict with the public policy of India.

9. It has to be conceded that there was an agreement between the parties. The doctrine of undue enrichment is a part of the contract and flows from the contract between the parties. Once there is a contract between the parties then it must be taken to be a finding of fact arrived at by the arbitrator as to whether it is a case of undue enrichment or not. Such a finding of fact cannot be set aside under Section 34 of the Arbitration and Conciliation Act, nor can therefore be termed to be in conflict with public policy of India. It is not something immoral, illegal or any other fact which may prompt the curt to conclude that the award is in conflict with public policy of India. In face of these facts it must flow that what is being urged at the bar must fail. The application is liable to fail at the threshold.

10. For these reasons the OMP No. 249/2000 is dismissed in liming.