Food Corporation Of India vs Shri S.K. Sasan And Anr.
2007 Latest Caselaw 13 Del

JUDGMENT

Gita Mittal, J.

Page 0246

1. By this judgment, I propose to dispose of the present petition which has been filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 seeking setting aside of an award dated 16th September, 2003 purportedly passed by the sole arbitrator Shri Suryakant Sasan (respondent no. 1 herein), ADR Arbitral Tribunal, ADR House, 2/3 West Patel Nagar, Main Road, New Delhi-110008.

2. Notice of the filing of the present petition was served on both the respondents. The respondent no. 2-Freedom Charities Fund entered appearance through counsel and even filed a reply. However, none appeared to support the reply before this Court on the several dates on which the matter was listed from 10th July, 2006. On 7th November, 2006, this Court deferred hearing and orders in the interest of justice to enable appearance on behalf of the respondents. As none appeared on behalf of the respondents on 12th of December, 2006, the arguments were heard in the matter and judgment reserved.

3. The facts giving rise to the present petition to the extent as are necessary for adjudication of the present case are briefly noticed hereinafter.

4. On the 12th of April, 1972, the Food Corporation of India, the petitioner herein, entered into an agreement with M/s Jalpaiguri Trading Corporation Ltd. for the delivery of resultant rice produced out of the paddy which was given by the petitioner to the miller. It would be useful to consider the arbitration agreement between the parties which was contained in clause 33 of the agreement dated 12th April, 1972 and reads thus:

33. All disputes and differences arising out of or in any way touching or concerning this agreement whatsoever (except as to any matter the decision of which is expressly provided for in the agreement) shall be Page 0247 referred to the sole arbitration of any person appointed by the Managing Director of Food Corporation of India. It will be no objection to any such appointment that the person appointed is or was an employee of the Corporation, that he had to deal with the matters to which the agreement relates and that in course of his duties as such employee of the corporation he had expressed views on all or any of the matters in dispute or difference. The award of such Arbitrator shall be final and binding on the parties to this agreement. It is a term of this agreement that in the event of such arbitrator to whom the matter is originally referred being transferred or vacating his office being unable to act for any reason the Managing Director of the Food Corporation of India at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator. Such person shall be entitled to proceed with the reference from the stage at which his predecessor left it. It is also a term of this agreement that no person other than a person appointed as aforesaid should act arbitrator and if for any reason that is not possible the matter is not to be referred to arbitration at all.

Provided further that any demand for arbitration in respect of claim(s) from the agent(s) under the agreement, shall be in writing and made with in one year of the date of termination or completion (expiry of the period) of the agreement and where such demand is not made within that period claim(s) of the agent shall be deemed to have been waived and absolutely barred and corporation shall be discharged and released of all liabilities under the agreement in respect of these claims. Subject as aforesaid, the Arbitration Act, 1940 shall apply to the arbitration proceedings under this clause. Work under the agreement shall if reasonably possible continue during the arbitration proceedings and no payment due to or payable by the corporation shall be withheld on account of such proceedings.?

5. It appears that by a letter dated 9th December, 1974, the petitioner terminated the agreement with M/s Jalpaiguri Trading Corporation Ltd. for the reason that it had failed to deliver the goods in terms of the contract. M/s Jalpaiguri Trading Corporation Ltd. accepted this termination and did not take any steps in the matter for almost 20 years. The petitioner has contended that it received a letter dated 5th October, 1994 from M/s Jalpaiguri Trading Corporation Ltd. informing the petitioner that the M/s Jalpaiguri Trading Corporation Ltd. had appointed one Shri D.S. Deo, an Advocate of the Supreme Court of India to act as an arbitrator regarding 'overall settlement of the disputes between Food Corporation of India and M/s Jalpaiguri Trading Corporation Ltd.' Shri D.S. Deo, who was appointed as a sole arbitrator by M/s Jalpaiguri Trading Corporation Ltd. passed an ex-parte award dated 10th December, 1994 in favor of M/s Jalpaiguri Trading Corporation Ltd. for a sum of Rs. 1,39,22,097.93/-. M/s Jalpaiguri Trading Corporation Ltd. filed this award before the court of Civil Judge (Senior Division), Sealdah, West Bengal for making the same as rule of the court.

6. In these proceedings, M/s Jalpaiguri Trading Corporation Ltd. filed an application under Order 22 Rule 10 of the Code of Civil Procedure, 1908 praying for permission to allow one Shri Raj Kumar Sinha to proceed with Page 0248 the matter on the ground that by a declaration dated 29th January, 1996, the award stood assigned in interest to Shri Raj Kumar Sinha. This application was dismissed by the learned Civil Judge, Sealdah by an order passed on 1st August, 1997. M/s Jalpaiguri Trading Corporation Ltd. assailed the order of learned Civil Judge before the High Court of Judicature at Calcutta by way of an appeal no. 3258/1997. This appeal was rejected by the High Court in limini.

7. So far as the award dated 10th December, 1994 was concerned, Food Corporation of India, the petitioner herein filed objections thereto which were accepted by the learned Civil Judge. By a detailed judgment dated 7th June, 2001, the learned Civil Judge held that the appointment of the arbitrator was not based on any agreement between the parties and that even the arbitration proceedings were conducted without service of notice to the present petitioner. After recording detailed findings, the court accepted the objections filed by the Food Corporation of India and held that the award was hit by the mischief of Section 30(c) of the Arbitration Act, 1940 and consequently set aside the same. M/s Jalpaiguri Trading Corporation Ltd. had vehemently contested the objections before the court of learned Civil Judge. However, the order dated 7th June, 2001 was not assailed by M/s Jalpaiguri Trading Corporation Ltd. before any forum and has attained finality.

8. The petitioner points out that it has been constrained to move this Court in view of a communication dated 28th July, 2003 received by its Chairman from the Freedom Charities Fund, claiming to be a charitable trust established by M/s Jalpaiguri Trading Corporation Ltd. By this communication, the Freedom Charities Fund arrayed as respondent no. 2 herein notified the petitioner that the award dated 10th December, 1994 was executable under the provisions of the Arbitration and Conciliation Act, 1996 and that the award money constitutes the trust property of the respondent no. 2. This communication contained a demand that the petitioner should make payment of dues in terms of the award dated 10th December, 1994 by 15th of August, 2003 or to refer disputes to the ADR Arbitral Tribunal of the Government of India failing which the respondent no. 2 would treat the same as a reference by ADR Arbitration at its instance. The petitioner has submitted that there was no privity of contract with the respondent no. 2 and no arbitration agreement with it and this communication wrongly mentioned the same as mutual agreement. It has been further contended that the award dated 10th December, 1994 stood set aside by the court of competent jurisdiction by a judgment dated 7th June, 2001.

9. There was no communication whatsoever either from the respondent no. 1 or from any arbitrator thereafter. The petitioner has submitted that it received only a photocopy of a document purporting to be an ex-parte award dated 16th September, 2003 passed by Shri S.K. Sasan, respondent no. 1 herein in favor of respondent no. 2. This award purportedly was passed under the provisions of Arbitration and Conciliation Act, 1996 at New Delhi. This award has been assailed by way of the present petition under Section 34 of the Statute of 1996 inter alia on the ground that the same was not only without jurisdiction, but was perverse and passed in violation of the law.

Page 0249

10. I have heard Mr. Yashobant Das, learned senior counsel for the petitioner who has carefully drawn my attention to the entire record. I find that the award dated 10th December, 1994 was set aside by the court of the learned Civil Judge, Sealdah by the judgment dated 7th June, 2001. There is no dispute to the position that only the benefit under an award would be transferrable with the consent of the other side and that obligations cannot be assigned. In the instant case, by an order dated 1st August, 1997, the assignment in interest of the award in favor of Shri Raj Kumar Sinha of the Freedom Charities Fund stood rejected by the Civil Judge. This order dated 1st August, 1997 was sustained by the High Court at Calcutta when it dismissed the appeal no. 3258/1997 filed by M/s Jalpaiguri Trading Corporation Ltd. which was the assignor.

11. I also find that there is no dispute that there is no arbitration agreement between the petitioner FCI and the respondent no. 2 herein. The award dated 10th December, 1994 was passed under the provisions of Arbitration Act, 1940 in favor of the Jalpaiguri Trading Corporation Ltd. The same stood set aside by the order dated 7th June, 2001 passed by the learned Civil Judge, Sealdah. The only remedy available to M/s Jalpaiguri Trading Corporation Ltd. was to assail such order by way of an appeal under Section 39 of the Arbitration Act, 1940. No such remedy was invoked by M/s Jalpaiguri Trading Corporation Ltd.

12. Perusal of the award dated 16th September, 2003 shows that the respondent no. 1, the sole arbitrator has assumed jurisdiction based on a letter dated 28th July, 2003 addressed by the Freedom Charities Fund to the Food Corporation of India. This unilateral communication noticed hereinabove does not amount to or create any arbitration agreement between the parties which would have given jurisdiction to the respondent no. 1. Furthermore, the claimed predecessor in interest of the respondent no. 2 namely M/s Jalpaiguri Trading Corporation Ltd. had taken recourse to arbitration under the Arbitration Act, 1940 which proceedings stood culminated in the order dated 7th June, 2001 setting aside the award dated 10th December, 1994 passed in its favor. Therefore, so far as arbitration is concerned, the award dated 10th December, 1994 was of no legal consequence or effect.

13. I find that Shri S.K. Sasan, respondent no. 1 herein has not only assumed jurisdiction which did not exist but has proceeded to act under the provisions of the Arbitration and Conciliation Act, 1996. There is no record of any notice or any proceedings being served on the petitioner hereinabove. Furthermore, the respondent no. 1 has held that the award dated 10th December, 1994 was executable under the provisions of the Arbitration and Conciliation Act, 1996 and that the parties had agreed to such executability. The award dated 16th September, 2003 further holds that the Freedom Charities Fund is the assignee in interest and that this trust acting through its sole trustee Shri Raj Kumar Sinha was at liberty to execute the award dated 10th December, 1994 to the High Court of Delhi where the award was being filed by the sole arbitrator.

Page 0250

14. This award has been passed in patent violation of the applicable principles of law. The same also ignores the orders and judgment which were binding in the matter. As noticed above, by the order dated 1st August, 1997, the court of competent jurisdiction had already held that the award or the interest in the award was not assignable which order was final and binding on all parties including the respondent no. 2. The objections of the petitioner to the award dated 10th December, 1994 had also been accepted by the learned Civil Judge (Senior Division), Sealdah and by the judgment dated 7th June, 2001, the award dated 10th December, 1994 stood set aside. As noticed above, the only remedy available to the beneficiaries under this award was by way of an appeal under Section 39 of the Arbitration Act, 1940.

15. The methodology adopted by M/s Jalpaiguri Trading Corporation Ltd. and the respondent no. 2 which is stated to be a trust of M/s Jalpaiguri Trading Corporation Ltd. to compel the petitioner to comply with the amount awarded by the award dated 10th December, 1994 is totally misconceived and illegal. Certainly, the finding by the respondent no. 1 to the effect that the award dated 10th December, 1994 is executable under the provisions of the Arbitration and Conciliation Act, 1996 has no basis in law. An award passed under the Arbitration Act, 1940 can be enforced only in the manner provided under the same statute. It is not open to a party to take recourse to the provisions of Arbitration and Conciliation Act, 1996 so as to enforce an award passed under the 1940 enactment which stood set aside there under.

16. Shri Raj Kumar Sinha was not an applicant in the application filed under Order 22 Rule 10 of the Code of Civil Procedure, 1908 in the proceedings before the learned Civil Judge, (Senior Division), Sealdah, which was rejected on 1st of August, 1997. Certainly, such a person cannot seek the benefit of the award dated 10th December, 1994 for this reason as well.

17. In the light of the above discussion, I have no hesitation in holding that the award dated 16th September, 2003 is without authority of law and contrary to the specific statutory provisions and hence, is liable to be set aside under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996.

I also find that there is no arbitration agreement between the petitioner and the respondent no. 2. The letter dated 28th July, 2003 does not amount to an arbitration agreement between the parties and that the proceedings conducted by the respondent no. 1 are without jurisdiction, illegal and not sustainable. Accordingly, the present petition is allowed. The award dated 16th September, 2003 is hereby set aside and quashed.

The petitioner shall be entitled to the costs of the present petition which are quantified at Rs. 25,000/-.