Bright Food Industries vs New Delhi Municipal Corporation
2001 Latest Caselaw 1717 Del

JUDGMENT

Sharda Aggarwal, J.

1. This judgment shall dispose of objections filed by the respondents to the award dated 8th March, 1996 given by Shri Muni Lal Jain, Sole Arbitrator appointed by the Court on an application moved by the petitioner under Section 20 of Indian Arbitration Act, 1940 (in short the Act).

2. Briefly the facts are that the petitioner was in the business of manufacturing and sale of eatables and had been supplying the same since 1990 on tender basis to the respondents for their "Mid-day Meal Scheme for School Children". The petitioner submitted a tender dated 5th June, 1992 in response to respondent's notice inviting tenders (in short NIT) issued on 26th May, 1992 for supply of soyanuts (Sweetish) without skin (in short soyanuts) of the estimated value of Rs. 15 lakhs. The tender was accepted by the respondent. In pursuance thereof, an agreement dated 2nd September, 1992 was executed between the parties. The petitioner made delivery of its first supply of 32000 packets, of soyanuts on 9th September, 1992. On 10th September, 1992 these soyanuts Along with "Meghraj Biscuits" (product of some other party) were distributed to the children of schools including the children of primary school at Chankyapuri. After consuming the same, some of the school children of Chankyapuri School fell sick. They had stomach ache and vomiting and had to be taken to the hospital in Moti Bagh where they were given treatment and discharged. The Principal of the school lodged in FIR with the Police Station Chanakyapuri on which a case as registered. The report of the incident appeared in some newspapers on 11th September, 1992 and in pursuance thereto, the City Board, Ghaziabad cancelled the petitioner's/ claimant's license on 16th September, 1992. Two samples of soyanuts were taken for testing. One sample was sent to Food Laboratory, Delhi Administration for test by the Public Analyst and the other sample was sent to Shri Ram Institute of Industrial Research, Delhi, for "fungus" test. Their reports are dated 24th September, 1992 and 29th September, 1992 respectively. The report of the Public Analyst was found negative as the sample did not contain any micro-biological contamination and poisonous metal. Whereas the report of Shri Ram Institute of Industrial Research, Delhi was found positive for "fungus". Shelf life of soyanuts was 15 days. The report of Shri Ram Institute of Industrial Research, Delhi did not indicate as to whether the test was carried out within 15 days or beyond it.

3. The respondent, however, after the incident of 10th September, 1992 stopped taking further supplies from the petitioner. Disputes arose between the parties. The petitioner moved an application under Section 20 of the Act which was registered as Suit No. 1175/93 and was decided on 21st August, 1995 referring the disputes to the Sole Arbitration of Shri Muni Lal Jain. Before the Arbitrator statement of claim was filed by the petitioner to which a counter claim was filed by the respondent. Oral evidence as well as documentary evidence was adduced by the claimant before the Arbitrator. The respondents did not produce any oral evidence. The Arbitrator gave a reasoned speaking Award running into as many as 17 pages. It was filed in Court Along with the arbitration proceedings for making the Award rule of the Court which was registered as Suit No. 640-A/96. Notice of filing of the Award was issued to the parties. Respondents filed objections (IA No. 9885/96) under Section 30/33 of the Arbitration Act, 1940 Along with an application IA.No. 9886/96 under Section 5 of the Limitation Act for condoning the delay in filing the objections. Delay was condoned vide order dated 18th August, 1999. Petitioner filed reply to the objections filed by the respondents. Evidence was adduced by way of affidavits.

4. The respondents did not address any arguments on the objection regarding existence of contract/agreement between the parties. It appears from the record that this objection was earlier raised before the High Court in petition Under Section 20 of the Act but was rejected.

5. Before dealing with the contentions of the learned counsel for the respondent on the objections under Section 30 of the Act, it is necessary to bear in mind that the jurisdiction of the Court, hearing such objections is not that of an Appellate Court. It is well settled that an award can be set aside only for the reasons specified in Section 30 of the Act. One of the grounds on which an Award can be set aside, is if "an Arbitrator has mis-conduct himself or the proceedings". Legal mis-conduct, should also be apparent on the face of the award. There can be mis-conduct which is personal to the Arbitrator like the Arbitrator was related to one of the parties and, therefore, was based. The arbitration proceedings could be said to be misconducted, if the proceedings were held in violation of the principles of natural justice. For example, if the evidence is improperly shut out or evidence is taken behind the back of one of the parties or sufficient opportunity is not afforded to any of the parties to present its case or defend itself before the Arbitrator, then the award can be set aside for mis-conducting the proceedings. In the case of a non-speaking award, it is not open to a court to probe the thought process of the Arbitrator and speculate as to what impelled the arbitrator to arrive at a particular conclusion.

6. In the instant case there is a well reasoned and speaking award. What are the limits of judicial reviewability in the case of a reasoned award? The law is the same even in the case of a reasoned award. It is settled law that in a reasoned award reasonableness of the reasons given by the arbitrator cannot be challenged. The arbitrator being the sole judge of the quality as well as quantity of the evidence, it not open to a Court to reappraise and reappreciate the evidence led before the arbitrator under the garb of powers under Section 30 of the Act. The Court cannot go into the sufficiency or quality of evidence lead by the parties on a particular point. The Court is not permitted to re-appraise the evidence and sit as a Court of appeal over the Arbitrator's award. The Court has no power to set aside an award only because a different conclusion could be arrived at on the facts and evidence available on record. The Court can, however, set aside the award only if it is apparent there from that the findings therein are based on no evidence or on a patently erroneous proposition of law. Where the Arbitrator indicates his reasons for coming to a particular conclusion and the award is challenged on the basis of its not being supported by evidence, party so challenging the same must show that it is apparent on the face of the award/record that there was no evidence at all on which Arbitrator could have come to that conclusion.

7. The learned counsel for the petitioner/claimant has relied upon a number of Supreme Court and High Court decisions for the above settled position of law. Some of them, as detailed below can be referred with advantage :

(i). , Delhi Development Authority v. Alkaram

(ii) AIR 1988 Delhi 189, Virender Singh v. DDA

(iii) , Sudershan Construction Company v. Govt. of Kerala and Ors.

(iv) , State of Rajasthan v. Puri Construction Company Limited.

(v). AIR 1980 Delhi 204, Jagdish Chander v. Hindustan Vegetable Oil Company Ltd.

(vi). , DLF Universal Ltd. v. International Marketing Services.

Mr. Amit Bansal, learned counsel for the objector/NDMC in support of his contention that the award is liable to be set aside pressed the following objections :

1. The Arbitrator was wrong in deciding that the breach of contract was on the part of objector.

2. The Arbitrator failed to correctly appreciate the report dated 29th September, 1992 of Shri Ram Institute of Industrial Research and wrongly held that the supply of soyanuts was not defective.

3. The findings of the Award are contrary to the record.

4. The disputes decided by the Arbitrator in favor of the petitioner are based on no evidence, non-application of mind and wrong appreciation of document and evidence on record.

8. The legal position regarding powers of the Court to interfere with the arbitration award has already been discussed above. The scope of the powers of the Court is very limited. It is not for the court to go into the sufficiency or quality of the evidence but the existence of it. From the settled legal position, it appears to me that for the purpose of the present case, what I have to examine is whether there is any evidence to support the reasoned conclusions of the Arbitrator.

9. As regards the first objection, learned counsel for the objector contends that by virtue of Clause 4 of the agreement, right was reserved with the objector not to accept the defective supply or sub-standard supply of fried soyanuts (sweetish) (without skin and reserved right to return the same. In fact, the Arbitrator after considering the entire evidence laid before him returned the finding that soyanuts supplied by the petitioner were not defective. As the soyanuts supplied to the objector were not defective, there was no occasion for invoking this clause. The objector admitted that the first supply of 32000 packets was received on 9th September, 1992 and the signatures of the objector's officials appears on the challan. There was nothing on the challan to show that the said supply was received under protest/ Admittedly, further supply was stopped by the objector and no payment for the first supply was made even though soyanuts were not found defective. The Arbitrator after considering the evidence returned the finding that the breach was no the part of the objector. The further contention of the learned counsel for the objector is that in view of Clause 7 of the agreement, the first party i.e. the objector had reserved the right to cancel or modify the indent, supply time or supply place with pre-notice of at lease 24 hours to the second party. The argument of the learned counsel is devoid of any merits as the option to cancel the contract in view of Clause 7 of the agreement was never opted for by the objector. The respondent's refusal to take further supplies thus constituted a breach of contract by NDMC. In fact, it was for the Arbitrator to interpret the contract and this Court is in fact not sitting as a Court of appeal over the award of the Arbitrator and as such cannot go into the question of reasonableness of the reasons given by the Arbitrator. There is no error apparent on the face of the award, as such no fault can be found with the award to this extent, Objection to this effect is rejected having no merits.

10. On the second objection, much stress is laid by the learned counsel for the objector that the Arbitrator went wrong inn not placing reliance on the report dated 29th September, 1992 of Shri Ram Institute of Industrial Research. It is submitted that on the other hand, the Arbitrator wrongly relied on the report dated 16th September, 1992 of the Public Analyst. Delhi Administration and the contemporaneous report dated 10th September, 1992 of the Deputy Education Officer. In this regard, it is pertinent to note that the incident took place on 10th September, 1992 when admittedly the soyanuts supplied by the petitioner Along with Megraj Biscuits (supplied by some other party) were served to the children of schools run by NDMC all over Delhi, but only the children of one school had some problem like stomach ache or vomiting etc. In that connection, the Deputy Education Officer Shri Prem Singh had immediately conducted a survey and gave report which was placed on record before the Arbitrator by the petitioner. It was reported that the children were only psychologically effected and nothing was wrong with the soyanuts. Samples of soyanuts alone were picked up by the objectors and had sent them for examination to the Food Laboratory, Delhi Administration and Shri Ram Institute of Industrial Research, New Delhi., The report of the Food Analyst is dated 16th September, 1992 whereas the report of Shri Ram Institute is dated 29th September, 1992. These two reports were considered by the Arbitrator. The petitioner in evidence before the Arbitrator proved that Soyanuts were manufactured on 7/8th September, 1992 which was supplied to the objectors on 9th September, 1992 and their shelf life was 15 days. The report of the Food Analyst,Delhi Administration dated 16th September, 1992 was found negative and the opinion was that the sample did not contain any microbiological contamination and poisonous metal. This report indicated that the sample was sent on 14th September, 1992 and obviously it must have been tested latest by 16th September, 1992 which was within 15 days of the shelf life of the product. Regarding the report of Shri Ram Institute of Industrial Research, the test was found positive for "fungus". The report is dated 29th September, 1992 and positively beyond 15 days from the date of manufacture of soyanuts. This report does not indicate as to when the test was carried out, whether it was within 15 days or beyond it. The learned counsel for the petitioner submits that "fungus" is being used for fermentation of many products like bread, idli, soya sauces etc. and the test finding for "fungus" has no meaning unless the report mentions the type and number of yeasts and molds present in the sample. Another report of Food Analyst dated 24th September, 1992 has also been referred to which mentions that yeasts and molds contained in the sample is nil. This report has also been considered by the Arbitrator. These two reports show that two samples were sent to Food Analyst, one on 14th September, 1992 and the second on 16th September, 1992. It is pertinent to note that the objector failed to lead any evidence before the Arbitrator despite full opportunity having been given to them. There is also no evidence as to in whose presence samples were taken, when they were taken, how they were sealed as specially in the case of food article the same is likely to get fermented or go bad if it is kept in moisture and heat. The record would show that the petitioner gave oral evidence but the objector did not examine any witness and closed his evidence. In fact before the Arbitrator, there was no rebuttal to the evidence lead by the petitioner. As regards the report dated 29th September, 1992 of Shri Ram Institute of Industrial Research, the same was rightly not relied upon as on the face of it, it does not disclose as to when the test was carried out. Even otherwise this report only gives positive result of "fungus". Only formation of "fungus" does not give rise to an inference that eatable is not fit for human consumption. It is not disputed that "fungus" is being used for fermentation of many eatable products such as bread, idli, soya sauce etc. It all depends upon the total number of yeasts and molds which have not been reported in the report of Shri Ram Institute of Industrial Research. Counsel for the objector did not in any event give any reason as to why the report of the public analyst should have been rejected and only the report of Sh. Ram Institute ought to have been relied upon. After all report of the public analyst was from the Government. No evidence was also lead from the hospital about the sickness of the children. No medical reports were placed on record. The findings of the Arbitrator that "it could not be inferred that the soyanuts were not fresh or not fit for human consumption" is reasoned, correct and based on the evidence and material placed before him. Certainly it is not a case of no evidence.

11. The learned counsel for the objector submits that even samples of Megh Raj Biscuits was sent for analysis. The learned counsel has now placed before Court some documents in order to show that the samples of Megh Raj Biscuits were also sent for analysis to Shri Ram Institute of Industrial Research. The learned counsel wants the said report to be considered now at the stage of objections. The argument of the counsel is totally mis-conceived. This report was neither placed on record nor proved before the Arbitrator. The documents now can not be taken into consideration. Apart from this to my mind, even if the said report is taken into consideration the conclusion would not change. It is not for the Court to go into the sufficiency or weight of the evidence. There is also no error apparent on the face of the award with regard to this objection. I do not find any merits in the same. This objection is also rejected.

12. Coming to the third objection, the contention of learned counsel for the objector is that the findings of the Arbitrator are contrary to record. The learned counsel, however, has not pointed out as to how the findings are contrary to record. In any case on the face of its the objection appears to be devoid of any merits. The Arbitrator has given a well reasoned speaking award after considering the entire evidence and the material placed before him. The petitioner lead oral evidence and proved the documents on which reliance was placed. On the other hand, the objector produced only a few files for inspection of the Arbitrator and did not lead any evidence to prove their contentions. The Arbitrator has considered the entire claim step by step and the counter claim of the objector and gave a reasoned award. The petitioner had in fact claimed damages by way of loss suffered by him on account of the breach of contract, categorised under various heads to the tune of Rs. 24,52,761/-. The Arbitrator after considering the evidence lead by the petitioner on each head awarded the claim of damages under the head for loss of profit only at the rate of 10% of the value of the material to be supplied to the tune of Rs. 1,47,600/- only. The loss of profit/damages claimed under other heads were rejected. The Arbitrator also allowed the claim of Rs. 23,680/- being the value of the material actually supplied and a sum of Rs. 20,000/- being the earnest money. The interest was also awarded at a reasonable rate of 12% per annum instead of 24% per annum as claimed by the petitioner. Since their counter claim, same was rejected. This objection is also rejected being devoid of merits.

13. Finally the respondent/objector wanted the award to be set aside on the plea that the disputes decided by the Arbitrator in favor of the petitioner were based on no evidence and were without application of mind and there was no appreciation of documents and evidence on record. Even this objection is devoid of any merits. The plea is general in nature. No particular finding of the Arbitrator has been challenged being without evidence. It appears that the ground has been taken generally to bring the case within the scope of Court's power to interfere with the arbitration award. In any case, I have gone through the award and the record closely and I find that the Arbitrator has carefully examined, analysed the pleadings and evidence and has given a well reasoned award supported by the material on record.

14. The result of the above discussion is that the objections (IA. No. 9885/96) are dismissed. The award is made rule of the Court and decree is passed in accordance with the award.The petitioner shall also be entitled to interest at the rate of 12% per annum on the sums of Rs. 23,680/-, Rs. 20,000/- and Rs. 1,47,600/- from the date of decree till realisation. A decree be drawn up accordingly. Any payment if made already be adjusted.

15. In the facts and circumstances of the case the parties are left to bear their own costs.