Welcast Steels Ltd. vs Cement Corporation Of India Ltd. & ...
2009 Latest Caselaw 2485 Del

              * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                           Date of Reserve: 3.7.2009
                                                          Date of Order: 6th July, 2009

CS(OS) No. 3125/1992 & IA No. 2389/1995
%                                                                        06.07.2009

        WELCAST STEELS LTD.          ... Petitioner/Plaintiff
                     Through: Ms. Meenu Sharma, Advocate

                 Versus


        CEMENT CORPORATION OF INDIA LTD.
        & ORS.                 ... Respondents/Defendants
                    Through: Mr. Puneet Taneja, Advocate


JUSTICE SHIV NARAYAN DHINGRA

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

2. To be referred to the reporter or not?

3. Whether judgment should be reported in Digest?

JUDGMENT

By this order I shall dispose of objections raised by the

Objector/Respondent against an award dated 30.6.1992 whereby the learned

Arbitrator allowed a sum of Rs.1,34,283/- to be paid to the petitioner within 30

days of the passing of the award and in case of delay in payment beyond this,

interest @ 18% p.a. to be paid.

2. In the objections raised by the Objector/Respondent i.e. Cement

Corporation of India Ltd., it is submitted that the learned Arbitrator misconducted

himself as well as the proceedings as he passed a non-speaking award. The

arbitration clause did not provide that a non-speaking award may be passed.

Since the award gives no reason and no calculations, the award was bad in law

and liable to be set aside. The other ground taken by the Objector is that claim

no.2 filed by the petitioner before the Arbitrator was beyond the scope of

Purchase Order/Contract between the parties and could not have been

considered/entertained by the learned Arbitrator. The arbitrator also failed to

take into consideration that the counter-claim made by the Objector/Respondent

was in accordance with clause 3 of the Special terms and conditions of the

contract and was liable to be allowed and the bank guarantee was rightly invoked

by the respondent and the amount of bank guarantee was liable to be adjusted

towards the liquidated damages. The other objection is that the learned

Arbitrator ignored the fact that there was no justifiable claim made by the

claimant and the only claim which could have been considered by the Arbitrator

was claim no.3 for Rs.14,200/- thus, the award of Rs. 1,34,283/- on the face of it

was disproportionate. It is also submitted that 18% p.a. interest as awarded by

the learned Arbitrator was exorbitant.

3. A perusal of record would show that the claimant had made six

claims before the Arbitrator; claim no. 1 was for Rs.2,99,595/- on account of

wrongful encashment of bank guarantee by the respondent, claim no.2 was for

Rs.2,65,200/- on account of difference in base price of supplies made to other

units of respondent with interest, claim no.3 was for Rs.14200/- on account of

Railway escalation charges/freight charges, claim No.4 was for Rs.75,700/- on

account of difference in base price of scrap and claim no.5 was for interest and

claim no.6 was for cost of arbitration. The Objector/Respondent in reply denied

all the claims and raised counter claim for liquidated damages to the tune of

Rs.1,79,512/- and a counter claim of Rs.2,83,817/- towards additional cost

incurred in procuring the material from alternate source.

4. The learned Arbitrator passed a non-speaking lumpsum award in

following terms:

4. I, K.C.Sodhia, the Sole Arbitrator, having considered carefully and fully all relevant aspects of the claims and counter-claims of the two parties, has come to the conclusion that, in full and final settlement of the claims and counter-claims of the two parties, the Cement Corporation of India Ltd. should pay a sum of Rs.1,34,283 (Rs.One lac thirty four thousand two hundred and eighty three) to Welcast Steels Ltd., within thirty days of the date of this Award. In case of delay in payment beyond the period mentioned, interest at the rate of 18% per annum will be payable by the Cement Corporation of India Ltd.

5. It is argued by the learned Counsel for the Objector that the

arbitration agreement does not say that a non-speaking award can be passed

although it does not say in specific words that only a reasoned award was to be

passed. He submitted that since there was no negative covenant, the Arbitrator

was supposed to pass a reasoned award. It is also argued that the Arbitrator

was obliged to hold whether any of the claims made by the claimant were

maintainable under the terms of the contract or not and then only decide what

was the amount payable and in view of the fact that the Arbitrator had not given

any finding about the maintainability of the claims of the petitioner and passed a

lumpsum award, the award was liable to be set aside. The Counsel relied upon

T.N.Electricity Board v. Bridge Tunnel Constructions and Ors. (1997) 4 SCC 121

in support of his arguments.

6. I consider that the judgment relied upon by the

Objector/Respondent does not help the Objector/Respondent. In T.N.Electricity

Board's case (supra) , the reference was made to the Arbitrator by the Court with

specific directions that the Arbitrator shall decide the arbitrability of the claims

and if he considered that the claims filed were within the scope of arbitration

clause, then he would have jurisdiction to decide the same. Despite these

directions of the Court, the Arbitrator gave a lumpsum award. It was under these

circumstances that the Supreme Court held that it was difficult to discern as to

what extent the Arbitrator had considered the admissible and inadmissible claims

which he adjudged and to what extent he had exercised his jurisdiction vis-à-vis

the admissible claims and disallowed the non-arbitrable claims. Thus, the award

was held to be non-acceptable by the Court. In the present case, the reference

to the Arbitrator was not made by the Court with any specific question to be

decided by the Arbitrator and the reference was made to the Arbitrator by the

parties. I, therefore consider that the above judgment is not applicable and the

award cannot be set aside on the grounds taken by the Objector/Respondent.

7. In State of Orissa & Ors. v. M/s Lall Brothers AIR 1988 SC 2018

Supreme Court held that the fact that there was an unreasoned award was no

ground to set aside an award. Lumpsum award was not bad per se. In M/s

M.K.Shah Engineers & Contractors v. State of Madhya Pradesh (1992) 2 SCC

594 Supreme Court reiterated the law on this issue and held that an arbitration

award was not vitiated merely because the Arbitrator had not given item-wise

award and had chosen to give a lumpsum award. A lumpsum award was not a

bad award. It was well settled that an award need not formally express the

decision of the Arbitrator on each matter of difference nor it was necessary for

the award to be a speaking award. This law was again reiterated in Rajendra

Construction Company v. Maharashtra Housing and Area Development Authority

and Ors. (2005) 6 SCC 678 and in Markfed Vanaspati and Allied Industries v.

Union of India (2007) 11 Scale 138.

8. I also do not agree with the Objector/Respondent that in case the

arbitration clause does not say that a lumpsum award may be given, the

Arbitrator cannot give a lumpsum award. An Arbitrator is bound to give a

reasoned award only if the reference made to him or the arbitration clause from

which he draws power specifically provides that he has to give a reasoned

award.

9. The argument of the Objector/Respondent that 18% p.a. interest

was on a higher side and the Court should reduce the interest also cannot be

accepted. The amount was awarded by the Arbitrator in the year 1992, at that

time 18% interest was not on the higher side and if the amount had been paid as

directed by the Arbitrator within 30 days, the Objector would not have to pay any

interest, the Objector is liable to pay interest only from one month after the date

of passing of the award, no pendent lite interest was awarded to the petitioner.

Under these circumstances, it would not be proper to interfere with the interest

granted by the Arbitrator.

10. The objections made by the Objector/Respondent are hereby

dismissed. The award dated 30.6.1992 is made a rule of the Court. Decree

Sheet in terms of the award be prepared.

With these, the suit/petition stand disposed of.

July 06, 2009                                 SHIV NARAYAN DHINGRA, J.
vn