Indcon Projects & Equipments (P) ... vs Dezurik (India) Ltd.
2009 Latest Caselaw 4937 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELH

+                          CS(OS) No.2679/2000

                                                 Reserved on : 23rd November, 2009.

                                                  Pronounced on: 2nd December, 2009


INDCON PROJECTS & EQUIPMENTS (P) LTD.                                    ...Petitioner

                                 Through:        Mr. S.C. Nigam, Advocate.
              VERSUS


DEZURIK (INDIA) LTD.                                         ....Respondent.

                                 Through:        Mr. S.S.Rana, Advocate with Ms.
                                                 B.Rana, Advocate and Ms. Meenu
                                                 Sharma, Advocate.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

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

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

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

    %                            JUDGMENT

VALIMIKI J. MEHTA, J.

I.A.No.2859/2001 in CS(OS) No.2679/2000

1. These are objections under Sections 30 and 33 of the Arbitration Act,

1940 to the Award dated 4.5.1998 passed by the sole Arbitrator. The Award in

CS(OS) No.2679/2000 Page 1 question is a non-speaking Award and which the Arbitrator was entitled to pass, and

the relevant part of which reads as under:

" I, K.C. Sodhia, the arbitrator in this case, having considered fully and carefully all relevant aspects of the claims and counter claims of the two parties, have come to the conclusion that, in full and final settlement of the claims and counter claims brought before me by the two parties, Dezurik (INDIA) Ltd. should pay a sum of Rs.3,24,500 (Rs. Three lacs twenty four thousand five hundred) to Indcon Projects & Equipment Ltd. within 60 days of the date of this Award. In case of delay in payment beyond the time limit mentioned, interest at the rate of 12% per annum shall be payable by Dezurik (INDIA) Ltd. for the period of delay."

2. The scope of challenge to a non-speaking Award is extremely limited.

The Court is not entitled to probe into the mental process of the Arbitrator which

has led to passing of the Award. Keeping in view the limitation of law as

aforesaid, I have heard the objections.

3. Mr. S.S. Rana, on behalf of the objector, has canvassed four main

points and which are:-

(i) The Award which has been passed is beyond the scope of the order of

reference.

(ii) The documents which are relied upon by the claimant are fabricated

and manipulated and therefore the Arbitrator was not justified in relying upon the

same.

(iii) The Arbitrator has mis-conducted himself and the proceedings by not

CS(OS) No.2679/2000 Page 2 ordering for the payment of three valves which have been illegally retained by the

claimant/non-objector.

(iv) The Arbitrator has mis-conducted himself because whereas the Award

is dated 4.5.1998, stamp papers put on the same are of the year 2000.

4. So far as the first issue is concerned, the matter was referred to

arbitration vide a petition under Section 20 of the Act by the order dated 6.3.1996

passed by this Court in suit No.1278/1990. Mr. Rana has argued that what was

referred to the Arbitrator by the order dated 6.3.1996 were the disputes as

enumerated in paras 5 to 10 of the petition and which disputes were two in number.

The first dispute was for a claim of Rs.1,50,000/- on account of the risk purchase of

three valves which the claimant alleged to have purchased from other sources on

account of the default in supply of the same by the objector and the delays caused

by the objector. The second claim was a claim for loss of profits allegedly on

account of the non-objector being not successful in getting a fresh contract from its

principal M/s. Jai Parkash Industries. Mr. Rana has thereafter taken me through the

paragraphs of the claim petition filed before the Arbitrator by the non-objector and

more particularly paras 13 and 14 which set out the claims. A reference to the

calculations which have been furnished for the claim of Rs.6,50,000/- shows that

the said claim is on account of the substitute valves and the additional spares which

had to be purchased by the claimant/non-objector for the new system where the

CS(OS) No.2679/2000 Page 3 substitute valves were to be installed. I may note that it was the case of the non-

objector/claimant in the arbitration proceedings that on account of failure of the

objector to supply the necessary valves, the non-objector was forced to re-design the

DPG unit so as to adapt the same to the new substituted valves which they had

sourced from elsewhere on account of the default of the objector.

5. No doubt, a reference to paras 5 to 10 of the petition under Section 20

of the Act shows that the claimant had originally claimed only a sum of

Rs.1,50,000/-, however, I may note that the head of the claim was with respect to

the loss caused to the claimant on account of the failure to supply the valves by the

objector and whereupon the claimant had to source valves at a higher cost from a

third person. The issue therefore is basically of a larger claim and also an issue

with respect to redesigning the DPG unit at a higher cost because of the new valves

which were to be sourced.

6. Admittedly, this objection that the claim with respect to re-designing

of the system and incurring cost with respect thereto and the higher cost of the new

valves being beyond the scope of the order of the reference was not taken up before

the Arbitrator at any stage of the arbitration proceedings. This objection has been

raised for the first time before this Court in these proceedings and the counsel for

the objector has argued that this being a legal plea the objector is entitled to take

the same at any stage because the Award being beyond the scope of the order of

CS(OS) No.2679/2000 Page 4 reference is an Award of an Arbitrator who lacked jurisdiction to pass the same.

The counsel for the objector has also relied upon two judgments, one of the

Supreme Court in Orissa Minning Corporation Vs. Prannath Vishwnath AIR

1977 SC 2014 and the other of a Division Bench of the Sikkim High Court in

Principal Chief Engineer cum Secretary Vs. M.B.Chettri 1995(2) Arbitration

Law Reporter 313. The judgment of the Supreme Court in Orissa Mining

Corporation's case (supra) holds that an Arbitrator cannot exceed his jurisdiction

by embarking upon a claim which is beyond the terms of reference. It was held that

the Arbitrator must confine himself to the claims referred to him only. In M.D.

Chettri's case (supra) the Division Bench of the Sikkim High Court has held that

even if no objection is taken during the arbitration proceedings, objection can be

taken for the first time in appeal that the Arbitrator has taken into consideration

claims beyond the reference order.

7. I am afraid that none of the two judgments cited by the counsel for the

objector have application to the facts and circumstances of the present case.

Whereas in the case before the Supreme Court in Orissa Mining Corporation's case

does not deal with the issue of estoppel which issue applies in the facts of this case,

the decision in M.D. Chettri's case will not apply in view of the below stated

decision of the Supreme Court. The judgment, which in fact is applicable to the

facts of the present case is, of the Supreme Court reported as Inder Sain Mittal Vs.

CS(OS) No.2679/2000 Page 5 Housing Board Haryana (2002) 3SCC 175 in which the Supreme Court has

clearly held that a person who does not take any objection with regard to the

jurisdiction of the Arbitrator during the course of the arbitration proceedings and

therefore takes the chance of the Award going in his favour, cannot once the Award

has gone against him object to the jurisdiction of the arbitrator and he is deemed to

have waived his right to object to the jurisdiction of the Arbitrator. As noted by me

above no objection was at all taken by the objector that part of the claim was

beyond the order of reference, and therefore, having contested the case on merits

and taken the chance of the Award going in its favour the objector now cannot turn

around and challenge the Award merely because the same has gone against it. The

objector is therefore deemed to have waived its objection to the jurisdiction of the

Arbitrator.

8. So far as the second point which has been argued is that the Arbitrator

has misconducted himself and the proceedings because he has relied upon

fabricated/manipulated documents, the said objection cannot be sustained because

the Award in this case is a non-speaking Award. The Award in fact states that the

Arbitrator has duly considered the pleadings of the parties as also the documents

relied upon by the parties in support of their contentions. The Arbitrator is the final

fact finding authority and this Court cannot reappraise the evidence merely because

two views are possible from the facts on the arbitrator's record. Once the Arbitrator

CS(OS) No.2679/2000 Page 6 has duly considered the documents, it means that the Arbitrator has arrived at a

finding of fact that the said documents relied upon are not forged and fabricated

considering that the Award is an non-speaking Award. Mr. Rana took me through

the documents with its alleged contradictions to show that the same are fabricated

and manipulated whereas and on the other hand Mr. Nigam on behalf of the non-

objector has endeavoured to show that there is no fabrication but only a change in

the name of the company, however, I need not dwell in too much depth with respect

to these findings of facts because, as stated above, not only is the Award a non-

speaking Award but there is also a finding of fact that the documents have been

considered (consequently the same not being fabricated) which is a pure finding of

fact with which this Court cannot interfere because it is in the domain of the

Arbitrator to arrive at a finding of facts. While deciding this issue I am also

affected by the fact that on merits of the case not much stress with any conviction

was laid by the counsel for the objector on the ground that there was no breach of

contract by the objector with respect to the valves supplied. Therefore, in other

words the objector is in fact guilty of breach of contract by not only supplying

defective valves but it made the supply after great delay. Considering all the

abovestated facts and circumstances, I am not inclined to interfere with the finding

of facts arrived at on the basis of documents with respect to the cost incurred by the

claimant for replacing the defective valves supplied by the objector on the ground

CS(OS) No.2679/2000 Page 7 that the documents in this regard are fabricated as contended.

9. The third issue which was canvassed by the objector was that the

Arbitrator mis-conducted himself and the proceedings in not ordering for return of

the three valves which have been admittedly supplied to the claimant/non-objector.

Mr. Rana canvassed that the objector was entitled to refund of Rs.2,50,000/- being

the cost of three valves illegally retained by the non-objector. I may note that

initially I was inclined to consider this issue, but, I note that the Arbitrator has

specifically used the expression "in full and final settlement of the claims and the

counter claims brought before me by the two parties" and the amount which has

been awarded is Rs.3,24,500/- as against the claimed amount of Rs.6,50,000/-.

Therefore, it is conceivable that the Arbitrator in the non-speaking Award has

reduced from the claimed amount of Rs.6,50,000/- a sum of Rs.2,50,000/- towards

costs of the three valves of which the objector is seeking refund/adjustment.

Therefore, in the facts of the present case and in view of the non-speaking Award, I

do not find that the Arbitrator has necessarily not given the benefit of the counter

claim of Rs.2,50,000/- to the objector. This objection, therefore, is also

misconceived and cannot be sustained.

10. Another issue which was canvassed before me by the counsel for the

objector was with respect to the manipulation in affixing stamp papers to the

Award. I may note that the objection seems to be prima facie factually correct

CS(OS) No.2679/2000 Page 8 inasmuch as the Award is of 4.5.1998 and the stamp papers are of the year 2000,

however, even if that be so what would turn on the same? It is not disputed by the

objector that both the parties (including objector) received the copy of the Award

soon after the passing of the Award in the year 1998 itself and it is not therefore the

case that the contents of the Award passed in 1998 have been altered subsequently

in the year 2000 and in which year it was filed in this Court. The decision on merits

has not been affected by this avoidable act of the Arbitrator, more so as the Award

is a non-speaking Award. If that be so at best there is misconduct by the Arbitrator

not during the course of the arbitration proceedings but after the conclusion of the

arbitration proceedings in rewriting the Award on stamp papers which was

originally not done. Mr. Nigam has relied upon decision of Division Bench of the

Patna High Court reported as M/s Pradip Trading Co. Vs. State of Bihar AIR 1974

Patna 315 which states that merely because the Award is not on stamp papers will

not make it invalid within the meaning of Section 30 of the Act. In my opinion

nothing consequently turns on the objection that the Arbitrator has subsequently put

stamp papers on the Award because the Award was in fact duly received by both the

parties, immediately, after passing of the Award in 1998 itself and there cannot be

said to be any manipulation in the contents of the Award. I would, therefore, in the

facts of this case tend to ignore this technical argument and the flaw in the action of

the Arbitrator. At the very best additional penalty under the Stamp Act, 1899 can

CS(OS) No.2679/2000 Page 9 be imposed before enforcing the Award but the Award cannot under such

circumstances be set aside on the ground of mis-conduct.

11. The last point which has been urged by the counsel for the objector is

that the rate of interest awarded by the Arbitrator at 12% is a very high rate and the

Court should reduce the rate of interest. I feel that this contention of the counsel for

the objector is justified because the Supreme Court in a recent chain of judgments

reported as Rajendra Construction Co. Vs. Maharashtra Housing & Area

Development Authority & ors.2005 (6) 678, McDermott International Inc. Vs.

Burn Standard Co. Ltd.& ors 2006 (11) SCC 181, Rajasthan State Road

Transport Corpn. Vs. Indag Rubber Ltd. (2006) 7 SCC 700 and Krishna Bhagya

Jala Nigam Ltd. Vs. G.Harischandra, 2007 (2) SCC 720 and Stae of Rajasthan

Vs. Ferro Concrete Construction (2009) 3 Arb.LR. 140 (SC) has held that the

Courts should take note of the consistent fall in the rates of interest and must reduce

the rate of interest considering the changed scenario. This Court has, in terms of the

aforesaid mandate of the Supreme Court judgments, been uniformally awarding

interest @ 9% per annum simple. Therefore, in the facts and circumstances of the

present case and in terms of the mandate of the aforesaid Supreme Court judgments,

I reduce the rate of interest granted by the Award from 12% to 9% per annum

simple. In view of the above, the Award is made rule of the Court with the only

modification that the rate of interest as awarded in the Award shall be read as 9%

CS(OS) No.2679/2000 Page 10 per annum simple instead of 12% per annum.

12. With these observations the objection IA 2859/2001 is dismissed

except to the extent of allowing modification of the reduced rate of interest. The

I.A & suit stand disposed of accordingly.

December 2, 2009                            VALMIKI J.MEHTA, J
Ne




CS(OS) No.2679/2000                                                    Page 11