Beat All Sports vs State Trading Corp Of India (Stc)
2008 Latest Caselaw 1529 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CS(OS) No. 511A/1990 and I.A. No. 2256/2008

                                     Date of decision : 03.9.2008

IN THE MATTER OF :

       BEAT ALL SPORTS                                     ..... Petitioner
                                     Through Ms. Manjeet Chawla, Adv.

                      Versus

       STATE TRADING CORPORATION OF INDIA (STC)      ..... Respondent
                               Through Mr. Atul Verma, Adv.

       CORAM

*      HON'BLE MS.JUSTICE HIMA KOHLI

              1. Whether Reporters of Local papers may      be
                 allowed to see the Judgment?                       No

              2. To be referred to the Reporter or not?             No

              3. Whether the judgment should be reported in the
                 Digest?                                        No


HIMA KOHLI, J. (ORAL)

1. The present petition filed under Sections 30 and 33 of the Arbitration

Act, 1940, is directed against an award dated 18.1.1990 given by the Sole

Arbitrator while adjudicating the disputes between the petitioner/objector

and the respondent/STC, claimant before the Arbitration Tribunal.

2. Succinctly stated, the facts of the case are that the respondent/STC

entered into a contract dated 23.12.1978 with M/s Konsumex Hungarian

Foreign Trade Company (hereinafter referred to as the foreign buyer) for

export of sports goods mentioned in the foreign contract. The

respondent/STC entered into a back-to-back contract dated 24.3.1979 with

the petitioner/objector for the manufacture and supply of the goods covered

under the foreign contract.

3. Disputes arose between the parties when the respondent/STC served a

notice dated 28.3.1983 upon the petitioner/objector, calling upon it to

arrange to defend the claims made by the foreign buyer against the

respondent/STC and enter appearance before the Arbitration Tribunal

constituted by FICCI for the said purpose. The claim made by the foreign

buyer was for a sum of Rs.2,40,986.97 paise along with the interest @ 18%

and costs towards the damages, alleged to have been suffered by the

foreign buyer due to defective supplies made by the respondent/STC. In the

legal notice dated 28.3.1983, the respondent/STC informed the

petitioner/objector that, in case the latter fails to enter appearance before

the Arbitration Tribunal, the respondent/STC shall contest the claim at his

risk and cost and it shall be liable for the payments of any sums awarded on

the claims of the foreign buyer and for the costs of the proceedings. The

aforesaid notice was duly replied to by the petitioner/objector vide letter

dated 10.4.1983, stating inter alia that the dispute was purely between the

foreign buyer and the respondent/STC and that the petitioner/objector did

not come into the picture. In view of the above, the respondent/STC invoked

the arbitration clause governing the parties and approached the Indian

Council of Arbitration for referring the disputes between the parties

regarding the liability of the petitioner/objector for payment of any sums

awarded on the claims filed by the foreign buyer before the Arbitration

Tribunal and the costs to be incurred in relation to the aforesaid proceedings.

Pursuant thereto, an Arbitrator was appointed to adjudicate the disputes

raised by the respondent/STC against the petitioner/objector, which

culminated in passing of the impugned award.

4. A perusal of the impugned award shows that the learned Arbitrator

framed the following five issues, on the basis of the pleadings of the parties:

(i) Whether the arbitrator has jurisdiction to entertain present disputes between the parties for the reasons given by the defendant in its reply to the statement of claim?

(ii) Whether the claim of the claimant is barred by time?

(iii) Whether the relief claimed by the claimant in the statement of claim is pre-matured as alleged by the defendant in its reply to the statement of claim?

(iv) If issue No. 3, is decided against the defendant then to what relief, if any, the claimant is entitled?

(v) Relief

5. All the aforesaid issues were decided against the petitioner/objector

and in favour of the respondent/STC and it was ultimately held that the

respondent/STC was entitled to the relief of declaration, that the

petitioner/objector was liable for payment of any and all sums payable by the

respondent/STC under any award made by the Arbitration Tribunal in the

claim filed by the foreign buyer against the respondent/STC, in relation to the

contract dated 23.12.1978. The costs and expenses of the arbitral

proceedings were directed to be borne equally by the parties. Aggrieved by

the aforesaid award, the petitioner/objector has preferred the present

petition.

6. Counsel for the petitioner/objector has raised four arguments to assail

the impugned award. Her first argument is that the Arbitrator did not have

jurisdiction to adjudicate the disputes between the parties as the arbitration

clause governing the parties itself was washed away, in view of the fact that

the foreign buyer and the respondent/STC entered into a protocol dated

24.6.1980. She submits that the learned Arbitrator misconducted the

proceedings by not looking into the material documents, which were placed

on the record including the protocol letter dated 24.6.1980, letter dated

24.10.1980, issued by the respondent/STC and the letter dated 29.10.1980,

issued by the petitioner/objector. This aspect of the matter was decided by

the learned Arbitrator while dealing with issue No. 1 as reproduced above.

7. A perusal of the impugned award shows that the learned Arbitrator

duly took notice of the fresh protocol entered into between the foreign buyer

and the respondent/STC on 24.6.1980 and returned his findings to the effect

that the said protocol was not in supersession of the earlier agreement dated

23.12.1978, entered into between the foreign buyer and the respondent/STC,

but was in furtherance of that agreement. It was also held in the award that

the protocol agreement dated 24.6.1980 was not in supersession of the

agreement dated 24.3.1979 between the respondent/STC and the

petitioner/objector. Thus, the learned Arbitrator held that the protocol dated

24.6.1980 was only in continuation of the aforesaid earlier agreements and

the same did not, in any way, supersede the agreement dated 24.3.1979 and

the respondent/STC was entitled to invoke the provisions of the arbitration

clause being Clause 12 governing the parties as contained in the said

agreement and seek adjudication of the disputes interse the respondent/STC

and the petitioner/objector.

8. A perusal of the impugned award shows that the learned Arbitrator did

not misconduct himself while deciding the aforesaid issue as the said issue

has been decided after taking into consideration all the relevant documents,

and particularly two agreements dated 23.12.1978 and 24.3.1979 and the

protocol of 24.6.1980. A perusal of the said documents also shows that the

protocol dated 24.6.1980 was between the respondent/STC and the foreign

buyer alone. The petitioner/objector not being a signatory to the aforesaid

protocol, it cannot be claimed that the agreement between the

petitioner/objector and the respondent/STC dated 24.3.1979 stood

superseded by the said protocol. Therefore, this Court does not agree with

the submissions made by the counsel for the petitioner/objector, insofar as

the decision of the learned Arbitrator, in respect of the first issue is

concerned. The learned Sole Arbitrator was justified in holding that he had

the jurisdiction to entertain the disputes between the parties.

9. The second argument taken to assail the impugned award is that that

learned Arbitrator erred in arriving at the conclusion that the claim of the

respondent/STC is not barred by limitation. It is stated by the counsel for the

petitioner/objector that the aforesaid issue has been dealt with by the

learned Arbitrator in very general terms and not specifically. She relies on

the judgement rendered by the Supreme Court in the case of J.C. Budhraja

vs. Chairman, Orissa Mining Corporation Ltd. & Anr., (2008) 2 SCC 444 to

state that, in the case of arbitration, limitation for the claim is to be

calculated on the date on which the arbitration is deemed to have

commenced and that Section 37(3) of the Act provides that for the purpose

of the Limitation Act, an arbitration is deemed to have commenced when one

party to the Arbitration Agreement serves on the other party thereto, a

notice requiring appointment of an Arbitrator.

10. A perusal of the observations made by the learned Arbitrator while

deciding issue No. 2 as regards the claim of the respondent/STC that it is

barred by limitation shows that the learned Arbitrator took note of various

dates after perusing the pleadings and examining the material placed on the

record. It has been stated in the award that the claim of the foreign buyer

was initiated on 31.3.1982 and not on 31.3.1981, as claimed on behalf of the

petitioner/objector, and in view of the aforesaid, it was held that since the

claim petition of the respondent/STC was filed on 24.11.1984 before the

arbitration, the same was well within limitation. It is settled law that even if

it is assumed that two views can possibly be taken on the basis of the same

facts and law, this Court should restrain from interfering in the award merely

because the other view which may in its view be a possible view was not

taken by the learned Arbitrator. (Refer: Hind Builders vs. Union of India, AIR

1990 SC 1340).

11. Further arguments sought to be raised by the counsel for the

petitioner/objector, in respect of limitation by going into the question of

when the cause of action arose, in respect of the disputes between the

foreign buyer and the respondent/STC, and the date of invocation of the

arbitration clause governing the aforesaid parties can hardly be urged before

this Court when submissions to the said effect have apparently not been

made before the learned Arbitrator, as is borne out from the perusal of the

impugned award or, for that matter, even in the present petition. This Court

refuses to be drawn into the said issue, which is purely a question of facts, at

this belated stage. Hence, the plea raised on behalf of the

petitioner/objector to challenge the award on the ground of limitation, is

turned down.

12. The third argument urged on behalf of the petitioner/objector is that

the learned Arbitrator failed to give a finding in respect of issue No. 3, in

favour of the petitioner/objector. Issue No. 3 was framed to decide as to

whether the relief claimed by the respondent/STC was pre-mature. The

objection raised by the counsel for the petitioner/objector is that as the

respondent/STC was itself prosecuting the litigation with the foreign buyer,

which fact was not brought to the knowledge of the petitioner/objector and

the latter was kept out of the said litigation, the respondent/STC could not

have sought any relief for declaration against the petitioner/objector. The

aforesaid contention is demolished by a mere perusal of the impugned award

wherein the learned Arbitrator culled out the relevant facts of the case

before dealing with the claim of the respondent/STC. It has been observed in

the award that the respondent/STC served a notice dated 28.3.1983 upon

the petitioner/objector invoking the provisions of the back-to-back contract

and calling upon the petitioner/objector to take steps to defend the claim

made by the foreign buyer and enter appearance before the Arbitration

Tribunal constituted by the FICCI. The petitioner/objector was also informed

that in case it fails to contest the said claim, then the same will be contested

by the respondent/STC at the risk and costs of the petitioner/objector. In

reply to the aforementioned facts, the petitioner/objector issued a letter

dated 10.4.1983 informing the respondent/STC that it does not come into the

picture, in respect of the disputes between the parties. In view of the

aforesaid stand taken by the petitioner/objector, it cannot be inferred that

the litigation between the foreign buyer and the respondent/STC was not

brought to the notice of the petitioner/objector or that it was intentionally

kept out of the picture by the respondent/STC. On the contrary, it is clearly

established that the petitioner/objector was well aware of the litigation

initiated by the foreign buyer against the respondent/STC and chose to stay

away from it.

13. The last argument raised on behalf of the petitioner/objector is that the

counter-claim of the petitioner/objector for US$3037.50 was not considered

by the learned Arbitrator. When asked as to whether the said counter-claim

was made a subject matter of reference, counsel for the petitioner/objector

replies in the negative. The said fact is also borne out from a perusal of the

reply filed by the petitioner/objector to the claim of the respondent/STC. In

these circumstances, the learned Arbitrator cannot be blamed for not

considering a claim, which was never raised by the petitioner/objector before

him. In fact, had he taken note of the said claim without the same being

referred to him in accordance with the terms of reference, he would have

exceeded his jurisdiction. (Refer : Orissa Mining Corporation Ltd. vs. M/s.

P.V. Rawlley, AIR 1977 SC 2014).

14. In the light of the aforesaid discussions, this Court is of the opinion that

the objections taken by the petitioner/objector to the award are devoid of

merits and are liable to be rejected. Accordingly, the present application is

rejected. The award dated 18.1.1990 is made rule of the Court. Decree shall

be drawn up accordingly. There shall be no orders as to costs.

                                                                  HIMA KOHLI,J

       SEPTEMBER 03, 2008
       KA




CS(OS) No. 511/1990                                                      Page 10 of