Union Of India. vs Surinder Kumar Khosla & Co. & Anr.
2008 Latest Caselaw 1539 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     CS(OS) 881A/1989
                                                 Dated : 04.09.2008


Union of India.                          ..... Plaintiff
                         Through : Mr. R.V. Sinha with Mr. Amresh
                         Kumar, Advocates

                    versus

Surinder Kumar Khosla & Co. & Anr.             ..... Defendent
                      Through : Mr. Amarjit Singh with Mr. R.C.
                      Bhatia, Advocates

CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT

1.    Whether reporters of local papers may be        Yes
      allowed to see the judgment?

2.    To be referred to the Reporter or not?          Yes

3.    Whether the judgment should be reported         Yes
      in the Digest?

Mr. Justice S. Ravindra Bhat (Oral)


1.    In these proceedings under Sections 14 and 17 of the Arbitration

Act, 1940, the correctness and legality of an award dated 28th

February, 1989, has been called into question. The Plaintiff, Union of

India questions the correctness in so far as the award does not allow

the full amount of claim made by it.

2.    The brief facts necessary for purpose of this case are, the

plaintiff entered into an agreement whereby the defendant (supplier)


CS (OS) 881A/1989                                                   Page 1
 was to supply firewood charcoal and limequick at the Supply Depot

ASC, Delhi Cantonment, at agreed rates. The Union of India alleged

that the defendant/supplier defaulted from the terms of the agreement

and did not make his supplies as agreed in October 1987.          It was

alleged that defendant was called upon to resume supplies in

accordance with the agreed schedule but without any success.           In

these circumstances, the dispute was referred to arbitration by one Lt.

Col Azim Ahmad Chida.

3.    The Sole Arbitrator, by his award dated 28.02.1989 directed that

an amount of Rs.6,39,796.88 as mentioned in the statement of claim

should be recovered from the defendant/supplier. The arbitrator in his

two page award reasoned that the material on record showed that the

supplier was granted fair and reasonable opportunity to resume supply

and that every time the plaintiff resorted to local purchase of the items

and secured the rates from the market, it sent quotations to the

defendant.    The defendant admittedly submitted the quotation only

once which was found to be the lowest.

4.    The arbitrator held inter alia as follows :

                   "4.   From the perusal of the material
             and evidence available on record, it is clear
             that the Respondent defaulted in making the

supplies; that the claimant had no other alternative but to procure the supplies from the market at the rates prevailing at the time; and that the Respondent was given fair and reasonable opportunity to resume the supplies

CS (OS) 881A/1989 Page 2 which he failed to do. Under the circumstances, I feel that due to respondents default, the Clamant had to resort to the local purchase in order to keep the troops supplies with the essential necessities. The entire responsibility of suspending the supplies rests on the respondent and as such they should bear the loss as per the terms of the contract. In my opinion the Claimant is entitled to recover the losses sustained by the State due to making of local purchases at the risk and cost of the respondent in accordance with the terms of the contract.

5. There is no substance to the claim of the respondent that sufficient reserves were stocked. On the other hand it is evident from documents available that the Claimant had time and again given ample opportunity to the respondent to stock the reserves.

6. There is also no truth in the claim of the respondent that payments were not made on time. I have checked the documents and I am convinced that payments were made on the day the respondent had submitted his complete bills along with the connected documents.

7. An amount of Rs.639796.88, as detailed in the statement of claim of the Claimant be recovered from the Respondent aforesaid to indemnify the State against the losses caused due to the Respondent's default.

The parties shall bear their own expenses of this arbitration."

5. The Union of India has challenged the award under Section 30/33

of the Act; it alleges that the arbitrator mis-conducted himself in not

considering that the total amount of claim was Rs.7,37,284.88 which

CS (OS) 881A/1989 Page 3 was recoverable and that no attempt was made by him to explain

reason why the lower figure of Rs.6,37,248.88 was held to be payable

by the defendants. The Union of India also contends having made an

amendment to the claim during the pendency of the arbitration

proceedings in January 1989, which however, is not reflected in the

award.

6. Learned counsel for the defendant submitted that this Court

should not exercise its jurisdiction and adjudicate on the disputes

raised or even make the award Rule of the Court to the extent it is

available on the file. Learned counsel contended that the entirety of

the proceedings which include the pleadings of the parties,

documentary evidence and the depositions adduced before the

arbitrator have not been made available as is evident from the order

sheet/proceedings of various dates. Counsel took the Court through

several order sheets made in this case right from the inception i.e.

1989 and submitted that despite repeated adjournments neither the

Union of India nor the arbitrator had made the relevant records

available.

7. Learned counsel relied upon Section 14 of the Arbitration Act

(hereinafter referred to as `Act') and contended that this Court can

take cognizance of arbitral award and proceed to make the award Rule

of Court only in accordance with the procedure outlined in Section 14

CS (OS) 881A/1989 Page 4 (2) of the Act, which in turn contemplates filing of the entire record

only after which notice could be issued and objections heard. It was

submitted that if these parameters are kept in mind, there is non-

compliance with the substance of Section 14 (2) of the Act, inasmuch

as no arbitral proceedings are before the Court. If such records were

made available, and notice issued on such basis, the

defendant/respondent would have had the opportunity of questioning

the award. In the absence of these mandatory conditions, it has to be

necessarily held that due to material non-compliance with Section 14

(2) of the Act, the Court should take no cognizance of merely the

award and should reject the petition.

Learned counsel relied upon the judgment of this Court in Union

of India Vs. M/s Vishkarma Shilpi And Another, ILR 1975 (1) Delhi 788

and the judgment of the Madras High Court reported as Engineering

Construction Corporation Ltd. Vs. Madras Port Trust, Madras and

Another, AIR 1968 Madras 335.

8. It is evident from the above discussion that the award in this

case was made on 28.02.1989. Soon after that, this Court directed the

present petition to be registered on 04.04.1989. The subsequent order

sheets dated 25.05.1989 and 11.09.1989 show that the Court was

apprised of the fact that the arbitrator had filed only the original

award. On 24.11.1989 the Court issued the following order :

CS (OS) 881A/1989                                                     Page 5
              "S.No.881-A/89

It is stated by the counsel for the petitioner that except the award there are no other proceedings and as such the award filed may be treated as one filed along with the proceedings.

Let notice of the filing of the award be issued to the parties without process fee for 15th February, 1990 calling upon them to file objections against the award if any in accordance with law.

9. Section 14 of the Act reads as follows :

"14. Award to be signed and filed - (1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.

(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court and upon payment of the fees and charges due in respect of arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award.

(3) Where the arbitrators or umpire state a special case under clause (b) of Section 13, the Court, after giving notice to the parties and hearing them, shall pronounce its opinion

CS (OS) 881A/1989 Page 6 thereon and such opinion shall be added to, and shall form part of, the award."

10. It is a matter of record that till date the arbitrator has not filed

the pleadings in the arbitration or proceedings recorded by him, so far.

The Union of India, which is objector, has also made no attempts to

place any such records on the file of this Court.

11. The effect and meaning of Section 14 was first considered by the

Supreme Court in the judgment reported as Nilkantha Sidramappa

Ningashetti Vs. Kashinath Somanna Ningashetti and others, AIR 1962

SC 666. The Court there was concerned with the question of limitation

in filing objections. The Court also considered the meaning of the

expression "notice" and held that it did not necessarily mean

communication in writing and that the expression "give notice" in

Section 14 (2) of the Act simply meant giving intimation of filing of the

award which was to enable the parties to take further steps. The court

rendered its decision in the context of Article 158 of the Old Arbitration

Act. Subsequently in the judgment reported as Secretary of Govt. of

Karnataka Vs. Harish Babu 1996 (5) SCC 400, it was held that if an

award is filed by one of the parties, the authority of the arbitrator to

the party concerned to file it should be established and the onus lies

on such party authorized by the arbitrator to file an award. The Court

considered its previous rulings in Ningashetti case (Supra) and held

that period of limitation for filing objections for setting aside the award

CS (OS) 881A/1989 Page 7 starts from the date of service of notice, issued by the Court upon the

parties regarding filing of the award under Section 14 (2). The

Supreme Court made a distinction between mere presence or

awareness of the representative or counsel of one party before the

Court, and actual issuance of notice which meant taking cognizance of

the case, by it, it was held in the facts of that case that the mere

lodging of the award in the Court with the further knowledge of such

lodging on the part of the respondent did not imply issuance of notice.

12. The real issue in this case is whether the notice under Section

14(2) was issued in these proceedings on 24.11.1989. The judgment

of the Madras High Court, in the opinion of this Court is an authority

on this point. The Court there was concerned with whether in the

absence of records, the issuance of notice would define the period of

limitation under Article 119 (b) of the Limitation Act. The Court in that

context held as follows :

"(14) ...... ...... When objection is raised as to the filing of the award, the Court has to pronounce judgment declaring that the award has been properly filed and also issue notice of the filing of the award and only then limitation would commence to run. If the depositions and documents are not filed, and if no objection is taken and a decree is passed in terms of the award, later on, the award cannot be attacked on the ground that S.14 (2) of the Act, the depositions and documents are not filed along with the award. But a party, at the time of filing of the award is entitled to insist upon the Arbitrator filing the depositions and the

CS (OS) 881A/1989 Page 8 documents and the Court is bound to hear such objections and pass some order and it is only then the stage would reach to the filing of the award."

"17. ........... If an award had been filed by the Arbitrator himself without any proceedings by either of the parties, under Section 14 (2) calling the Arbitrator to file the award mere knowledge of the filing of the award would not be sufficient and the Court should give notice in writing in conformity with Section 14(2). But even in the case of an arbitration without the intervention of the Court if a proceeding is initiated by either of the parties calling upon the Arbitrator to file the award and if in such proceeding when both sides are represented to counsel the Arbitrator files the award in Court to the knowledge of the respective counsel, notice under Section 14 (2), thereafter, may not be necessary."

13. In this case the order dated 24.11.1989 itself makes it apparent

that the arbitration records were absent. Neither were the depositions,

nor pleadings, nor even order sheet or proceedings in arbitration

produced before this Court. The Court no doubt issued notice to the

defendant, yet a facial reading of Section 14(2) suggests that notice

has to be issued after the court receives a copy of the award together

with depositions and documents filed in arbitration proceedings are

lodged in Court. These pre-conditions have not been fulfilled so far.

The Union of India which filed the present proceedings has not taken

care to ensure that in case for any reason such arbitral proceedings

and depositions etc. are not there, leave should have been sought to

CS (OS) 881A/1989 Page 9 produce copies of the same to place them on the record of the court

file. The Court therefore was left with no option but to issue notice to

the arbitrator who at one stage wrote back saying that he had filed

whatever he had in his possession. The order sheet also reveals that

the arbitrator is no longer residing in India.

14. Section 14 (2) of the Act was wanted as a measure of public

policy to ensure that the Court should take into account the entirety of

arbitral proceedings including depositions, pleadings and the orders or

minutes of arbitration records, before proceeding to pronounce its

legality and giving its imprimatur by making award the Rule of Court.

The quintessence of legal proceedings are their regularity, testified and

evidenced by the record. This is the objective underlying Section 14

(2) which enjoins the Court to issue notice after the award and the

relevant arbitral record are placed on the record. Such being the pre-

condition of the enactment before which even notice cannot be issued,

the absence of the record in the opinion of this Court has proved fatal

to this case.

15. The Court had adjourned the matter on numerous occasions, to

enable the Union of India to take appropriate steps, which are not

forthcoming. In the circumstances, the Court cannot proceed further,

since the notice issued in 1989, cannot be treated as one in

accordance with law under Section 14 (2).

CS (OS) 881A/1989 Page 10

18. In view of the above reasons, the Court is of the opinion that no

relief can be granted. The suit is accordingly dismissed.

S. RAVINDRA BHAT, J.

SEPTEMBER 04, 2008
mb




CS (OS) 881A/1989                                               Page 11