Food Corporation Of India vs Subhash Chander Laxmi Narain And ...
2006 Latest Caselaw 620 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. The petitioner, Food Corporation of India, (FCI) has filed its objections against the award passed on 23.06.1997 by the sole arbitrator in arbitration case RNM-1/95(FCI) titled Food Corporation of India v. M/s Subhash Chander Laxmi Naraian. The objections have been preferred under Sections 30 and 33 of the Arbitration Act, 1940 (hereinafter referred to as the said Act).

2. Before I set out the objections raised by the petitioner/claimant, it would be necessary to point out as to what was the nature of the transaction between the petitioner and the respondent No.1. It appears that a Notice Inviting Tender had been published by the petitioner in respect of lifting of arhar (gram) whole by independent parties for the purposes of milling and converting the same into arhar dal. There is no dispute that in response to the said Notice Inviting Tender, the respondent had submitted its tender and the same had been accepted by the petitioner by virtue of a telegram (Exhibit P2) issued to the respondent No.1 by the petitioner. At this stage, it is pertinent to note that the acceptance was a conditional acceptance in the sense that it was 'subject to production of power of attorney, partnership deed, financial soundings from banker and income tax clearance certificate'. These particulars were furnished by the respondent No.1, as indicated in the award itself, on 21.8.1978. It so happened that despite the contract entered into between the petitioner and the respondent No.1, the latter did not lift any arhar (gram) whole from the petitioner's godowns. Ultimately, the petitioner cancelled the contract by a letter dated 25.9.1978. Upon the cancellation and termination of the contract, the respondent No.1 filed a suit bearing No.1020A/1978 in this Court and also filed an application for interim relief therein i.e., IA 3464/1978. On the said interim application which was under Section 41 of the said Act read with Order 39 Rules 1 and 2 and Section 151 CPC, this Court passed an order restraining the petitioner from inviting fresh tenders in respect of the contracted quantity for the milling of whole gram as detailed in the said tender submitted by the respondent No.1 and accepted by the petitioner till further orders. This order was passed on 6.10.1978. Subsequently, by another order dated 1.12.1978, this Court disposed of the said IA 3464/1978 by vacating the restraint which had been imposed on the petitioner from inviting fresh tenders. It was directed by the said order dated 1.12.1978 that the petitioner was free to invite fresh tenders and give the contract to any other contractor but that the same would not be at the risk and cost of the respondent No.1. It was further directed that as and when the petitioner is able to prove that the respondent No.1 had committed the breach which resulted in the termination of the contract, the petitioner may be held entitled to any relief against the respondent No.1 and the same would be the subject matter of arbitration.

3. Subsequently the matter was referred to arbitration and the same was concluded by the then Arbitrator Mr Shiv Prakash. That award was also the subject matter of challenge by both the parties and this Court by another order dated 27.10.1994 set aside the award made by Mr Shiv Prakash and directed the parties to fresh arbitration. This arbitration was conducted by Mr R.N. Mishra and it culminated in the impugned award dated 23.6.1997.

4. The objections raised by the petitioner/claimant against the impugned award are two in number. The first objection raised by the petitioner/claimant is that the arbitrator has awarded storing charges to the claimant only for a period of 34 days i.e., from 21.8.1978 to 25.9.1978 whereas the petitioner had claimed storage charges for 182 days w.e.f. 9.8.1978 to 7.2.1979. The learned Counsel appearing for the respondent No.1 contended that the arbitrator has rightly granted only 34 days storage charges to the petitioner. He supported the view taken by the arbitrator that the contract came into existence on 21.8.1978 and continued only till 25.9.1978 on which date it was terminated. Therefore, the liability of the respondent No.1 to lift the stocks of arhar (gram) whole subsisted only during the period of the contract i.e., 21.8.1978 to 25.9.1978 and for which period the arbitrator has made an award in the favor of the petitioner. He submitted that, beyond the period of the contract i.e., after 25.9.1978, there was no liability upon the respondent No.1 to lift the stocks inasmuch as the contract had been terminated. The learned Counsel for the petitioner, however, submitted that the arbitrator had gone wrong on two counts under this claim. The first count being that the date of the contract was 9.8.1978 and not 21.8.1978. The second count was that the arbitrator completely ignored the fact that even after the termination of the contract on 25.9.1978 the petitioner was not in a position to re-tender the amount in view of the stay order granted by this Court on 6.10.1978 at the instance of the respondent No.1 and the stay order continued till 1.12.1978 when it was vacated as indicated above. He further submitted that immediately thereafter, the petitioner was in a position to re-tender the said amount and the same had been resorted to which culminated in fresh tenders being awarded to three different parties on 7.2.1979. Therefore, according to the learned Counsel for the petitioner, the storage charges should be computed from 9.8.1978 to 7.2.1979.

5. Insofar as the first grievance of the petitioner is concerned, that is with regard to the date on which the contract was entered into, I am unable to agree with his submissions. This is so because the telegram that was sent by the petitioner indicating its acceptance of the tender submitted by the respondent No.1 was a conditional one. The conditions, as indicated above, were complied with only on 21.8.1978 and, therefore, the arbitrator's conclusion that the contract came into being on 21.8.1978 cannot be faulted. Insofar as the second submission is concerned, there is some merit in that. This is so because immediately upon the termination of the contract on 25.9.1978, the respondent No.1 approached this Court and got an ex parte stay against the re-tendering of the same on 6.10.1978. This order was vacated on 1.12.1978 and immediately thereafter the tendering process was initiated which ultimately culminated on 7.2.1979 as mentioned above. It is, therefore, clear that subsequent to the termination of the contract on 25.9.1978, the respondent No.1 approached the court and kept the question of termination in limbo which prevented the petitioner from re-tendering the said stock. Therefore, by virtue of this, the petitioner was constrained to continue to store the said quantity of arhar (gram) whole by virtue of the action initiated by the respondent No.1. This fact has not been considered at all by the learned arbitrator and it is clear that an act of court should not be to the prejudice of any party. Therefore, the restraint that was put on the petitioner from re-tendering the said stock of arhar (gram) whole should not be to the disadvantage of the petitioner. Since the said order was obtained at the behest of the respondent No.1 and ultimately vacated by the order dated 1.12.1978, I am of the view that the award requires to be modified to this extent that the petitioner would be entitled to storage charges commencing on 21.8.1978 but continuing beyond 25.9.1978 but up to 1.12.1978. I am limiting the duration of the period for stocking charges to 1.12.1978 and am not extending it to 7.2.1979 because, on 1.12.1978 the position as obtaining on the termination of the contract on 25.9.1978 was restored by the passing of the said order dated 1.12.1978. On and from 1.12.1978 the petitioner was no longer obliged to retain the stock of arhar (gram) whole. That it took time to re-tender the same up to 7.2.1979, is of no consequence. Had the respondent No.1 not rushed to court and obtained the interim order dated 6.10.1978, the petitioner would not have been entitled to any stocking charges beyond 25.9.1978, the date when the contract was terminated by it. The petitioner is entitled to stocking charges beyond 25.9.1978 only because the termination was kept in limbo till the interim order was ultimately vacated by the subsequent order dated 1.12.1978.

6. The second objection is with regard to interest charges. The same has been claimed by the petitioner under Clause XIII(b) of the contract. The arbitrator has awarded this interest amount as indicated in the said clause but, up to 25.9.1978 that is the date on which the contract was terminated. The learned Counsel for the petitioner states that the interest ought to continue till 7.2.1979 the date when the said stock was re-tendered. I am unable to agree with the submission of the learned Counsel for the petitioner inasmuch as I am of the view that the arbitrator was correct in holding that the interest would terminate on 25.9.1978 that is the date on which the contract terminated and / or was cancelled. This condition of interest is independent to the charging of stocking charges and, therefore, the two cannot be related. Insofar as this objection is concerned, the same is rejected and is not tenable. There is no other objection to the award. The award as modified above is made a rule of the court. The decree shall be drawn up accordingly.