M/S. Geep Industrial Syndicate ... vs Union Of India
2009 Latest Caselaw 2674 Del

*      HIGH COURT OF DELHI : NEW DELHI

                    FAO. No.301/1995

%            Judgment reserved on:10th July, 2009

             Judgment delivered on: 17th July, 2009


      M/S. Geep Industrial Syndicate Ltd.
      B-11/2 Okhla Industrial Area, Phase II,
      New Delhi-110 020                  ....Appellants

                       Through: Mr. Rajesh Banati, Adv.

                  Versus

      Union of India
      Through
      Director-General of Supplies & Disposal
      Jeevan Tara Building
      Parliament Street
      New Delhi-110 001              ....Respondents.

                       Through: Nemo.

Coram:
HON'BLE MR. JUSTICE V.B. GUPTA

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

2. To be referred to Reporter or not?                  Yes

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




FAO No.301/1995                                  Page 1 of 11
 V.B.Gupta, J.

Appellant has filed the present appeal under Section

39 of the Arbitration Act, 1940 (for short as „Act‟) read with

Section 10 of the Delhi High Court Act, 1966 challenging

the judgment dated 7th April, 1995 of Additional District

Judge, Delhi, vide which appellant‟s petition under Section

30 and 33 of the Act for setting aside the award dated 4th

April, 1993, of the Sole Arbitrator was dismissed.

2. Brief facts of case are that, in response to an

Invitation to Tender, appellant submitted its Rate Contract

for the supply of Dry Batteries, which was accepted by the

respondent. As per terms and conditions of Rate Contract,

quarterly price escalation of rates was granted by

respondent on the basis of average variance in M.M.T.C.

declaration of monthly sale price of High Grade Electrolytic

Zinc. It is alleged that prices for the quarters July to

September, 1990 and October to December, 1990, were

declared on 1st November, 1990 i.e. after a delay of more

than two months and immediately after receipt of letter

dated 1st November, 1990 from respondent, appellant

moved an application to the excise department for approval

of the price which was approved w.e.f. 7th November, 1990.

Immediately thereafter, appellant made dispatches to

different consignees. It is alleged that respondent

arbitrarily and illegally levied a penalty to the tune of

Rs.1,33,152.50 and withheld the said amount from 98%

bills raised by appellant.

3. Dispute and differences having arisen between the

parties, a request was made by appellant for a reference of

the disputes/differences to an Arbitrator in accordance

with Clause 24 of General Terms and Conditions of the

Contract. Thereupon, Sh. Ram Bahadur, Additional Legal

Adviser, to the Govt. of India, was appointed Sole

Arbitrator for adjudication of the said disputes and

difference. The above named Arbitrator entered upon the

reference and made and published his award on 8 th April,

1993 and filed the same in the court.

4. Notice of filing of the award was issued to the parties

and in response thereof, appellant filed objections under

Section 30 and 33 of the Act, challenging the award of the

sole Arbitrator, inter alia, on the ground that the Arbitrator

has mis-conducted himself by exceeding his jurisdiction

and acting contrary to the terms and conditions of the

contract; the Arbitrator further mis-conducted himself by

not acting according to law; by ignoring the fact that there

has been no complaint from the consignees about the

quality of the stores supplied by appellant; there was no

consequential loss to the respondent and the stores

supplied by the petitioners were duly consumed by the

consignees.

5. The award is also sought to be set aside on the

ground that there is an error apparent on the face of the

award, in as much as, respondent consumed the goods and,

on the other hand, have asked for the refund of the prices,

as also on the ground that the Arbitrator has erred in

taking into account the question of MODVAT into

consideration.

6. Respondent/Union of India contested the objections

and filed its reply denying and controverting various

grounds on which the award is sought to be assailed. It is

stated that Arbitrator perused the entire pleadings of the

parties and material brought before him before making the

award. It is denied that the penalty imposed by the

respondent was arbitrary. On the other hand, it is

maintained that the penalty has been imposed as per

contractual terms which is evident from the letter of the

Pay and Accounts Officer dated 28th November, 1990 in

which they have clearly stated "as per Clause 5(d), the

stores are to be dispatched within 15 days from the issue of

I-Note and in case it was delivered after 15 days, a penalty

was leviable; that in this case the dispatch has been made

after 15 days, so the penalty amount may be calculated and

bills revised accordingly." Consequently, the bills were

revised and according to the calculation given by appellant,

penalty of Rs.1,33,152.50/- was levied and the amount was

withheld. It is denied that the award is liable to be set

aside on any of the grounds and, on the other hand, it is

maintained that the same is liable to be made a rule of the

court.

7. Notice of this appeal was issued to the respondent.

Respondent‟s counsel appeared earlier but after 15 th

November, 2007, she absented.

8. It is contended by learned counsel for the appellant

that Arbitrator mis-conducted himself and the proceedings,

by ignoring the fact that there has been no complaint from

consignee as to the quality of the stores supplied by the

appellant and thus there is an error apparent on the face of

the award.

9. Another contention is that Arbitrator came to the

conclusion that appellant has not filed MODVAT benefits.

There was no question of MODVAT in the present case.

Thus, there is also an error apparent.

10. Further it is contended that award given by the

Arbitrator is ex facie invalid, since the stores supplied by

the appellant were duly consumed by the consignee and

thus, there is no dispute in so far as store supplied by the

appellant are concerned and respondent has not proved

that they have suffered any loss and thus, the respondent is

not entitled to withhold the amount. The Arbitrator mis-

conducted himself, as respondent has nor given any notice

under Section 55 of Indian Contract Act as was required

before levying any penalty.

11. Lastly, it is contended by learned counsel for the

appellant that if the value of the claim in a reference

exceeds Rs.1 lac, Arbitrator has to give reasoned award but

in the present case, no reasons have been given by

Arbitrator and in the absence of reasoned award,

Arbitrator mis-conducted himself. On this point learned

counsel for the appellant cited College of Vocational

Studies v. S.S. Jaitely, AIR 1987 Delhi 134, in which it

was held;

"In case of reasoned award, the Arbitrator is required to indicate the trend of his thought process but not his mental meanderings, the purpose of commercial arbitration, being speedy certainly and a cheaper remedy. When the finding of the Arbitrator is based on no evidence, then certainly the court can go into such finding and set aside such an award as being perverse. The Arbitrator is entitled to decide rightly or wrongly but if an error of law appears on the face of the award, then the court can interfere and set aside the award."

12. The question to be seen in the present case is, as to

whether Arbitrator has mis-conducted himself or not.

13. Supreme Court in Food Corporation of India v.

Chandu Construction and Anr., JT 2007 (5) SC 305

laid down as to what constitute misconduct, it held;

"While considering objections under Section 30 of the Arbitration Act, 1940 (for short „the Act‟), the jurisdiction of the Court to set aside an award is limited. One of the grounds, stipulated in the Section, on which the Court can interfere with the award is when the Arbitrator has „misconducted‟ himself or the

proceedings. The word "misconduct" has neither been defined in the Act nor is it possible for the Court to exhaustively define it or to enumerate the line of cases in which alone interference either could or could not be made. Nevertheless, the word "misconduct"

in Section 30(a) of the Act does not necessarily comprehend or include misconduct or fraudulent or improper conduct or moral lapse but does comprehend and include actions on the part of the Arbitrator, which on the face of the award, are opposed to all rational and reasonable principles resulting in excessive award or unjust result."

14. In another decision of Supreme Court in Markfed

Vanaspati and Allied Industries v. Union of India, JT

2007 (11) SC 141, it observed that scope of interference

is extremely limited in a non speaking award. The Court

held;

"15. The decided cases of this Court demonstrate that this Court has consistently taken the view that scope of interference in a non-speaking award is extremely limited. The Court cannot probe into the mental process of the Arbitrator. The court should endeavour to support a non-speaking arbitration award provided it adhered to the parties agreement and was not invalidated due to Arbitrator‟s misconduct.

16. Russell on Arbitration 19th Edition at Pages 110-111 described the entire genesis of arbitration as under;

An Arbitrator is neither more or less than a private judge of a private court (called an arbitral tribunal) who gives a private

judgment (called an award). He is a judge in that a dispute is submitted to him: he is not a mere investigator but a person before whom material is placed by the parties, being either or both of evidence and submissions: he gives a decision in accordance with his duty to hold the scales fairly between the disputants in accordance with some recognized system of law and rules of natural justice. He is private in so far as (1) he is chosen and paid by the disputants (2) he does not sit in public (3) he acts in accordance with privately chosen procedure so far as that is not repugnant to public policy (4) so far as the law allows he is set up to the exclusion of the State Courts (5) his authority and powers are only whatsoever he is given by the disputants agreement (6) the effectiveness of his powers derives wholly from the private law of contract and accordingly the nature and exercise of those powers must not be contrary to the proper law of the contract or the public policy of England bearing in mind that the paramount public policy is that freedom of contract is not lightly to be inferred with."

15. In the light of above principles, it is to be seen as to

whether Arbitrator has given reasons or not and whether

he has mis-conducted. The reasons given by Arbitrator for

disallowing the claim of the appellant are as under;

1) Clause 5 (D) of the A/T page 10 in the document filed by the claimants has been agreed upon and acted upon by them.

2) The claimants have not filed MODVAT benefits, if any to the respondents as required by them.

3) Delayed supply of the stores, has lessened the self-life of battery, hence damage to the U.O.I.

4) The rulings cited by the claimants are not applied to this case because in them the contractor did not agree for penalty in the contract itself.

5) The Arbitrator in this case has to interpret the terms of the contract. It is beyond his jurisdiction to add or subtract any condition of contract.

6) Late dispatch is admitted by the claimant/contractor at page 2 of the Annexure C-4 filed by them."

16. In view of the above reasons given by Arbitrator,

there is no force in the plea of the appellant. In any case,

the appellant is not entitled to raise any plea with regard to

the merits of the case in order to assail the findings of the

Arbitrator. In view of the above settled legal position as

Arbitrator is the sole Judge of the quantity and quality of

the evidence, there is no merits in the present appeal.

Thus, no infirmity or illegality can be found with the

impugned judgment of the trial court.

17. The appeal is accordingly dismissed with no order as

to costs.

18. Trial court record be sent back forthwith.

July 17, 2009                          V.B.GUPTA, J.
rb