Shri Narendra Kumar Jain And Anr. vs Swastic Trading Agency
2007 Latest Caselaw 1759 Del

JUDGMENT

Sanjay Kishan Kaul, J.

1. The petitioner and the respondent are engaged as wholesale merchants in the business of paper. It is during this business relationship that disputes arose between the parties. The case of the petitioner that four cheques of Rs. 5.00 lakh each were handed over by the petitioner to the respondent. The petitioner claims that on 20.7.1999 a letter was written to the respondent wherein on account of non-supply of goods by the respondent in time, the petitioner claimed losses. The order placed is stated to have been cancelled and a request was made for return of four cheques. The cheques were not returned despite the intimation of the petitioner that the bank account against which the cheques were issued has been closed. The petitioner claimed that an assurance was given by the respondent that the cheques were lost and would not be misused.

2. The respondent, however, filed a claim before the Paper Merchants Association, Chawri Bazar, Delhi arising from the aforesaid dispute. Initially, Shri Jagan Nath Gupta was appointed as the sole arbitrator with the consent of the parties but he subsequently resigned and Shri Ram Bhaj Mittal was appointed as the new arbitrator. Shri Ram Bhaj Mittal made and published an award dated 29.11.2004 awarding to the respondent a sum of Rs. 42,64,034.00 with interest @ 12 per cent per annum from 19.4.2001 till date of realisation against the petitioner.

3. The petitioner has challenged the award under Section 34(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) alleging that the award is in conflict with the public policy of India and the arbitrator has misconducted the proceedings.

4. In order to appreciate the pleas of the petitioner, it is appropriate to first refer to the reasons as contained in the award. It is stated in the award that the claim filed for realisation of Rs. 42,64,034.00 together with interest @ 24 per cent per annum till date of realisation was filed by the respondent on the basis of a transaction of supply of paper/goods to the petitioner from time to time. In acknowledgment of the liability four cheques of Rs. 5.00 lakh each towards payment of the liability were delivered to the respondent in the first and second week of April 2001, the details of which are set out in the award. These cheques were returned with the remark of 'account closed' on presentation. A legal notice was served on the petitioner on 23.4.2001 to which no reply was sent by the petitioner nor was any payment made. The respondent initiated criminal proceedings under Section 138 of the Negotiable Instrument Act, 1881 and has subsequently filed the claim in the arbitral proceedings.

5. The respondent sought to substantiate the claim for supply of goods in pursuance to the invoices admitted by the petitioner when three ST-1 certificates were issued on 20.2.2001 to claim exemption from payment of sales tax. The copies of invoices and delivery challans were filed on record and the claim of interest was based on the terms of the invoices. The statement of account was filed. The petitioner, however, in response stated that the outstanding was only of Rs. 1,87,605.00, which they were willing to settle. The four cheques were stated to be undated and issued in advance, which were to be presented for encashment, if the sum was due. The ST-1 certificates were not denied.

6. The petitioner contended that the supplies were defective. The petitioner also sought to produce certain letters sent to the respondent under UPC. These documents were filed only at the stage of evidence and not with the reply or additional reply filed by the petitioner. These letters were denied as fabrications by the respondent.

7. The arbitrator found that these letters were the only substantive defense put up by the petitioner which were sought to be proved alleging that an employee of the respondent, Shri Vinay Kumar Mishra, had received the same. These letters were analysed in the context of the undisputed position of supply of material, price quoted as per invoice and the ST-1 forms which together prove the delivery and price of the goods.

8. The arbitrator found that on appraisal of the evidence it could not be proved that the letter had been delivered to the respondent. This finding is inter alia based on the affidavit filed by the said Mr. Vinay Kumar Mishra on being summoned by the arbitrator. Mr. Mishra confirmed that he was working with the respondent as an employee till 2001 and was closing and opening the shop. He denied his signature on the endorsement of the letters and putting any stamp of the respondent on the said letters. In fact, Mr. Mishra did not even know English (the language in which the letters were written). No cross-examination was carried out by the petitioner. The material aspect is also the failure to make any allegation in the written statement about the defective supply and the reliance on the letters. The letters are denied by the respondent being in the teeth of the admitted issuance of three ST-1 certificates as late as 2001. The petitioner had sent no reply to the notice sent by the respondent. It is in view thereof that the arbitrator arrived at the findings.

9. In the petition under Section 34(2) of the said Act it is pleaded that the earlier arbitrator adopted the procedure by virtue of which the admission/denial of documents had to be carried out first, to be followed by the affidavits of evidence. Opportunity of cross-examination of witnesses had to be given. The new arbitrator is stated to have changed the procedure in spite of the objection by the petitioner.

10. The petitioner further pleads that there was genuine reason for non- appearance of the counsel on 22.11.2004 and thus an adjournment slip was sent to the arbitrator, the counsel being busy in the High Court. The adjournment was disallowed and the orders were reserved. Shri Vinay Kumar Mishra is stated to have refused to have deposed in the affidavit and even wrote to the arbitrator that he had not given any such affidavit. There are, in fact, four objections raised by the petitioner: (i) non-observance of agreed procedure by the sole arbitrator; (ii) doubt about the affidavit filed by Mr. Mishra relied upon to show the non-receipt of letters sent by the petitioner; (iii) non-grant of adjournment when the counsel for the petitioner was busy in the High Court; (iv) the letter of Mr. Mishra showing that a fraud had been played on the arbitrator. The original record has also been sent by the arbitrator. The same has been perused. Learned Counsels for the parties have been heard within the aforesaid parameters.

11. A perusal of the order sheet before the earlier arbitrator as well as the new arbitrator shows the callous manner in which the petitioner sought to defend the proceedings. The order of 22.12.2001 shows that the petitioner absented himself without cause and the date was fixed for ex parte evidence. On the next date the counsel for the petitioner appeared and requested for time to file the written statement. Thus in pursuance to the earlier proceedings no such written statement was filed. Once again on 8.2.2002 since none was present for the petitioner, the petitioner was proceeded ex parte. The position was no different on 14.2.2002. In the subsequent date ex parte evidence could not be recorded and thereafter an application was filed on behalf of the petitioner to set aside the ex parte order, which was so set aside on 15.3.2002 giving time to the petitioner to file the written statement positively by the next date. On the next date on 19.4.2002 again further time was sought to file the written statement and the position was identical on 13.4.2002. The written statement was finally filed on 15.7.2002. Thereafter some adjournments were sought by the respondent. Once again another saga of adjournments on behalf of the petitioner started on 8.3.2003, 24.3.2003 and 18.4.2003. The petitioner thereafter sought amendment of the written statement which was allowed along with time to file the written statement. Further time was sought on 6.6.2003. The petitioner continued to default in filing the amended pleadings and documents as noticed on 16.7.2003. The additional reply was filed on 30.7.2003 by the petitioner and thereafter the adjournment was sought on 5.9.2003 and 22.9.2003. On the said date, in view of the continuing request for adjournment and ill health of the arbitrator, the arbitrator reclused himself and thereafter the new arbitrator was appointed.

12. In view of the proceedings before Shri Ram Bhaj Mittal, the arbitrator in question, an adjournment was requested by the petitioner for cross-examination. The arbitrator noticed that the first date for cross-examination had been fixed as 5.9.2003 and since then the petitioner had taken a number of adjournments. The right of cross-examination was closed on the said date.

13. In the next proceedings on 16.3.2004 the issues/matters in question were noticed and both the parties were directed to file any further affidavits without any right of cross-examination. The defendant again requested for adjournment on 20.4.2004, 8.5.2004, 9.6.2004 and 16.6.2004 The affidavits were finally filed on 14.7.2004 In the next proceedings fixed on 18.8.2004 again at the request of the counsel for the petitioner for adjournment, the matter was adjourned and the matter was renotified on 23.8.2004 as last opportunity. A similar request was again accepted. A request of the petitioner was acceded to on 18.9.2004 In between, the respondent also requested for adjournment.

14. The matter came up on 19.10.2004 when the respondent was directed to produce Shri Vinay Kumar Mishra on 22.11.2004, when the affidavit was filed by Mr. Mishra. On 22.11.2004 again the petitioner sought time and filed an application, which was rejected. The case was closed.

15. I have deemed it appropriate to go into all these proceedings to only show that there is no denial of adequate opportunity to the petitioner to put forth the case but the petitioner kept on misusing the indulgence shown by the two arbitrators and seeking to prolong the matter as much as possible. The petitioner cannot be permitted to make a grievance in this behalf. I am unable to accept the plea of the learned Counsel for the petitioner that the procedure agreed to by the parties was not followed. The procedure was followed but the petitioner failed to avail of the opportunities granted to him. Similarly it cannot be doubted that the arbitrator can take an affidavit on record before himself or can even record the deposition. The arbitrator is not constrained by the procedure of Code of Civil Procedure, 1908 and can devise his own procedure. There is nothing wrong with declining the 'nth application of petitioner seeking adjournment.

16. In view of the aforesaid, the allegations of either violation of procedure or misconduct of the arbitrators are misplaced.

17. Learned Counsel for the petitioner sought to emphasise that though the petitioner was convicted in respect of the proceedings under Section 138 of the Negotiable Instrument Act, 1881 on 8.7.2005 and was thereafter sentenced, the learned Additional District Judge acquitted the petitioner on 11.7.2006. In this behalf it has to be noticed that the parameters required for conviction in criminal case are quite different and the civil court is not bound by the decision of the criminal court where a lesser standard of proof than in the civil proceedings is adopted apart from the fact that a civil revision in respect of the said acquittal is pending before this Court.

18. The arbitrator has analysed the evidence on record to come to the conclusion and it is not the function of this Court to sit as a court of appeal. The scope and ambit of Section 34(2) of the said Act has been enunciated by the Supreme Court in ONGC v. Saw Pipes . The Supreme Court has only expanded the definition of the expression 'public policy of India' so as to give leeway to the Court to interfere where there is violation of the fundamental policy of Indian law, interest of public, justice or morality or if the award is patently illegal.

19. Learned Counsel for the petitioner sought to refer some of the judgments under the Arbitration Act, 1940 on the ground of mis-conduct alleging that where material documents are ignored (K.P. Poulose v. State of Kerala and Anr. ); or there is erroneous legal proposition (Alopi Parshad and Sons Ltd. v. Union of India ); or the right of cross-examination has been denied (Dharmu Sabote and Anr. v. Krushna Saboto and Ors. AIR 1956 Orissa 24); or reasons are contrary to law (Bungo Steel Furniture (Pvt.) Ltd. v. Union of India ; or the arbitrator has ignored the terms of the agreement (Government of Kerala and Anr. v. V.P. Jolly ) the court is required to interfere. In respect of these principles there is no dispute. It may, however, be noticed that these are all judgments under Arbitration Act 1940 where the scope was wider and different. Be that as it may, there has to be a misconduct of the arbitrator or violation of these principles for these judgments to apply. That is not the case in the present case.

20. I find no merit in the petition and the same is dismissed leaving the parties to bear their own costs.