Food Corporation Of India vs M/S Globus Contractors Pvt Ltd & ...
2009 Latest Caselaw 2854 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  CS(OS)1645A/1996



%                               Date of decision: 27th July, 2009



FOOD CORPORATION OF INDIA                        .......Petitioner
                         Through: Mr. Anil K Sharma, Advocate


                                Versus


M/S GLOBUS CONTRACTORS PVT LTD ... Respondents
& ANOTHER
                         Through: Mr Raman Kapur, Advocate.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.     Whether reporters of Local papers may           Yes
       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


RAJIV SAHAI ENDLAW, J.

1. The petitioner instituted the petition under Sections 14 and 17

of the Arbitration Act, 1940 for filing of the arbitral award dated 13 th

June, 1996 before the court and for making the same rule of the

court. Notice was issued to the arbitrator to file the award in this

court and thereafter notice of filing of the award was issued to the

parties. The petitioner has not filed any objections to the award.

However, the record shows that considerable difficulty was faced

and time taken in service of the respondent No. 1 company. The

respondent company has filed the objections under Sections 30 and

33 of the Act pleadings whereof were completed and the usual issues

framed on 23rd March, 2001. Though the arbitral record has been

requisitioned but at the time of hearing it transpired that the arbitral

record on the file of the court was not complete. The matter being

very old and in view of the admitted position that the respondent

No.2 arbitrator who had rendered the award is now no more and

considering the likelihood of the record being now available to be

remote, the counsels were, during the course of hearing, permitted

to hand over copies of the arbitral record relied upon by them in

support of their respective submissions. A perusal of the order sheet

shows that on 20th April, 2006 also it was found that the record was

not complete and directions were issued to the registry. The registry

had reported that only the record on the file of this court had been

received from the arbitrator.

2. The arbitration in the present case also has a chequered

history. Disputes and differences had accrued between the parties

with respect to the contract/order of 1980 placed by the petitioner

on the respondent for construction of double story godowns at

Okhla; the time for completion of the work was of the essence of the

agreement and the works were to be completed on or before 7th July,

1981; the works were not so completed and the respondent

continued with the works; however the petitioner vide letter dated

22nd June, 1982 rescinded the contract. It is the case of the

petitioner that having found that the respondent was not in a mood

to complete the work, the contract was rescinded. The respondent

avers that the termination of the contract was illegal. It is further

the case of the petitioner that it got the work completed at the risk

and cost of the respondent and filed a suit for recovery of Rs

14,88,620.26 against the respondent. The respondent filed an

application under Section 34 of the Act in the said suit and also filed

a suit in this court being Suit No. 1675A/1983 under Section 20 of

the Act for reference of the parties to the arbitration in accordance

with the agreement. Vide order dated 13th February, 1985 in the

suit, arbitrator was ordered to be appointed.

3. In the aforesaid circumstances the petitioner appointed an

arbitrator. The said arbitrator retired from service on 31st March,

1988 before completing the proceedings. Another arbitrator was

appointed on 20th July, 1989 but resigned on 13th September, 1991.

The third arbitrator appointed on 7th February, 1992 expired before

completion of arbitration. It was in these circumstances that on 19 th

May, 1995 the arbitrator who has rendered the award was

appointed.

4. The award records and it is also borne out from the arbitral

record, that the arbitrator inter alia held proceedings on 19th June,

1995, 13th July, 1995, 18th October, 1995, 8th December, 1995, 17th

January, 1996, 16th February, 1996, 25th March, 1996 and 1st May,

1996 but were adjourned as the record of arbitration had not been

received from the earlier arbitrator. Mr Yogender Behal Managing

Director of the Respondent, appeared before the arbitrator on 19th

June, 1995, 16th February, 1996 and 1st May, 1996. On 1st May, 1996

the officer of the petitioner informed the arbitrator in the presence

of the said Shri Yogender Behal, that the arbitral record had been

collected from the earlier arbitrator and after pagination would be

handed over to the new arbitrator. The next date of 13 th May, 1996

was given in the presence of the said Shri Yogender Behal, for the

respondent.

5. However, none appeared for the respondent before the

arbitrator on 13th May, 1996. The arbitral record collected from the

earlier arbitrator was submitted before the new arbitrator. The

arbitrator ordered issuance of notice to Shri Yogender Behal,

Managing Director of the respondent for 3rd June, 1996.

6. On 3rd June, 1996 the arbitrator recorded that Mr Yogender

Behal, Managing Director of the respondent had been served with

notice for that date by registered post, A.D. and A.D. duly signed had

been returned; however none appeared on behalf of the respondent

and the arbitrator accordingly proceeded against the respondent ex

parte and listed the matter next on 7th June, 1996 for evidence of the

petitioner. On 7th June, 1996 permission was given to the petitioner

to file affidavits by way of evidence and the matter was adjourned to

10th June, 1996. On 10th June, 1996 the affidavit of one of the

witnesses of the petitioner was tendered into evidence and on

request of the petitioner the matter was adjourned to 11th June,

1996. On the next date again adjournment was sought and the

matter was adjourned to 12th June, 1996. On 12th June, 1996 the

affidavit of the other witness of the petitioner was tendered, the

petitioner closed his evidence and also made submissions before the

arbitrator. The Arbitrator on the next date i.e., 13th June, 1996

published the award.

7. The respondent has in its objections not disputed that it was

served with the notice of hearing for 3rd June, 1996 before the

arbitrator. It is, however, the case of the respondent that Mr

Yogender Behal, Managing Director of the respondent spent time,

besides in Delhi, in Jalandhar where he had some properties and

where litigation was going on; that due to certain rush of work with

regard to the property disputes the said Mr Yogender Behal had to

rush to Jalandhar and could not appear before the arbitrator on 3rd

June, 1996; that Mr Yogender Behal remained at Jalandhar for

considerably long period; that the respondent company had by that

time more or less closed the business and all the employees had left

and it was mainly Mr Yogender Behal who was left to look after the

affairs of the respondent company; that Shri Yogender Behal

remained at Jalandhar till 3rd week of June, 1996 and thus could not

appear before the arbitrator.

8. The main stay of the contention of the counsel for the

respondent is that from the dates aforesaid it is evident that the

arbitrator acted in haste and the ex parte award is liable to be set

aside on this ground alone. It is also the contention of the counsel

for the respondent that the arbitrator inspite of service of notice of

hearing on the respondent and non-appearance of the respondent on

3rd June, 1996, ought to have served another notice on the

respondent of his intention to proceed ex parte against the

respondent.

9. The counsel for the petitioner to rebut the aforesaid contention

of the respondent relied on Hemkunt Builders Pvt Ltd Vs Punjabi

University, Patiala 49 (1993) DLT 314 where a Single Judge held

that when a party was determined not to appear before the

Arbitrator and had been openly repudiating the authority of the

arbitrator to proceed with the arbitration, the arbitrator is not

required to issue notice of intention to proceed ex parte against such

person. He has also relied upon P.S. Oberoi Vs The Orissa Forest

Corporation Ltd AIR 1982 Orissa 168 holding that where an

opportunity has been given to the party, the principles of natural

justice were satisfied and the act of the arbitrator of proceedings ex

parte could not amount to misconduct. Reliance is also placed on

Dori Lal Vs Lal Sheo AIR 1954 All 244 (DB) holding that where due

notice of proceeding has been given, the arbitrator is entitled to

proceed ex parte against the party choosing not to appear and that

there is no provision in the Arbitration Act requiring the arbitrator to

give a second notice of his intention to proceed ex parte against the

absenting party. The conduct of the arbitrator of not giving a second

notice was not held to be legal misconduct.

10. Per contra, the counsel for the respondent/objector relied upon

Lovely Benefit Chit Fund And Finance Pvt Ltd Vs Puran Dutt

Sood 23(1983) DLT 261 where another Single Judge of this Court

held that an arbitrator ought not to proceed ex parte against a party

which has failed to appear at one of the sittings and the arbitrator

should fix another date for hearing and give notice to the defaulting

party of his intention to proceed ex parte on a specified date; it is

only if the party defaults in appearance inspite of such notice that

the arbitrator may proceed ex parte. It was further held that an ex

parte award will not be upheld unless it is apparent that the failure

to give notice of intention to proceed ex parte had not caused any

prejudice to the party against whom the ex parte award was made.

Reliance is also placed on M/s Shri Ram Ram Niranjan Vs UOI

AIR 2001 Delhi 424 wherealso finding that the arbitrator had acted

in haste, the award was set aside holding the same to be legal

misconduct.

11. This court's own research shows that yet another Single Judge

of this court in Anil Jain Vs Madhunam Appliances (P) Ltd 68

(1997) DLT 194 has expressly differed with the view taken in Lovely

Benefit Chit Fund (supra) and relying upon the judgments of the

Division Bench of the Allahabad High Court and of the Single Judge

of the Punjab High Court held that it will be of no use to go on

serving a man who is not ready to cooperate and to participate in the

proceedings despite innumerable opportunities granted to him to

appear and defend himself. It was further held that if the arbitrator

is required to give a notice again despite the previous non-

appearance, then it would tantamount to putting premium on the

party's lapse. However, it appears that the judgment in Anil Jain

(supra) was not brought to the attention of the court in subsequent

judgment in Shri Ram Ram Niranjan which is based merely on

Lovely Benefit Chit Fund. I also find that the matter has also

invited the attention of the Division Bench of this court in Power

Grid Corporation of India Ltd Vs Electrical Manufacturing Co.

Ltd & NTPC Ltd 153 (2008) DLT 440. Though the judgment

including in Lovely Benefit Chit Fund was cited before the Division

Bench, the Division Bench did not lay down any proposition that a

second notice of intention to proceed ex parte has to be necessarily

served by the arbitrator. Rather emphasis was placed on compliance

with the principles of natural justice and fair opportunity. In the

facts of that case it was held that the principles of natural justice and

fair play had not been complied with and the arbitral tribunal had

acted in haste and thus the award was set aside. To complete the

narrative, reference also must be made to judgments of other Single

Judge of this court in UOI Vs The Kohinoor Tarpaulin Industries

156 (2009) DLT 106 wherealso the ex parte award was set aside.

12. Coming to the facts of the present case, it is found that the

arbitration proceedings were pending for over ten years; pleadings

had already been completed before the earlier arbitrators. The

proceedings before the arbitrator, who has rendered the award,

were held up for the reason of non-availability of the arbitral record.

The respondent was fully aware of the appointment of the new

arbitrator and was appearing before the arbitrator intermittently

when the proceedings were being adjourned awaiting the record.

On 1st May, 1996 when the official of the petitioner informed the

arbitrator of the arbitral record having been collected from the

earlier arbitrator, the respondent was represented through its

Managing Director and in the presence of the respondent the next

date of 13th May, 1996 was given. The respondent thus knew that by

the next date the arbitral record would be filed before the arbitrator

and further proceedings commence. The respondent, however,

failed to appear before the arbitrator on the next date i.e., 13th May,

1996. There is no explanation whatsoever for non appearance on

13th May, 1996. Even though the arbitrator could have proceeded ex

parte against the respondent on 13th May, 1996 itself, since the

respondent had appeared on the previous date and had notice of that

date, but the arbitrator still chose to issue notice of the next date i.e.

3rd June, 1996 to the respondent. The said notice is admitted to have

been served. The respondent still neither appeared before the

arbitrator nor sent any communication to the arbitrator. In these

circumstances it cannot be said that the principles of natural justice,

audi altrum partum had not been complied with or that fair play

has not been meted out to the respondent.

13. I also do not find the reasons given by the respondent for non

appearance to be sufficient. All that has been said is that the

Managing Director of the respondent had to go to Jalandhar in

connection with some litigation. Neither the particulars of the said

litigation, if any, been disclosed nor is it the case that the said

litigations were listed before the court and the appearance of the

Managing Director of the respondent was necessary before the

court. By 1996 there was huge advancement in communications in

the country and Jalandhar was literally a call away from Delhi. The

respondent even if was unable to be represented on 13th May, 1996

and/or 3rd June, 1996 ought to have at least informed the arbitrator

and/or sought further time. There is no explanation whatsoever why

the same even was not done. In these circumstances, the non-

appearance of the respondent before the arbitrator appears to be

intentional and deliberate.

14. There is yet another very important aspect of the matter.

Though the Managing Director of the respondent is stated to have

returned from Jalandhar to Delhi at least in 3rd week of June, 1996

but still no efforts are stated to have been made to contact the

arbitrator or to find the fate of proceedings. Had the respondent

been bonafide unable to appear on 13th May, 1996 and 3rd June,

1996, it would have immediately thereafter, upon finding of ex parte

award, applied to this court for filing thereof and setting aside

thereof. Then the respondent's contention of arbitrator acting in

haste and prejudice thereby caused to it would have been

established. On the contrary, the respondent could not be served

with the notice of this court for nearly four years. Even though the

notices of this court erroneously issued in the name of the Managing

Director of the respondent instead of in the name of the respondent

Company were served as recorded in the order sheet dated 11th

January, 1999 but still the respondent did not appear before this

court. All this shows the intention of the respondent to, somehow or

the other, delay the proceedings. From the conduct of the

respondent, the haste even if any of the arbitrator is not found to

have caused any prejudice to the respondent.

15. There is yet another aspect of the matter. The respondent has

in its objection petition itself stated that the business of the

respondent company has come to an end and it has no employees.

The petitioner had in the present proceedings filed IA.No. 159/2001

under Order 38 of the CPC for attachment of certain monies in

another proceeding between the petitioner and M/s T.R.Behal &

Company. However, the said application was dismissed on 23rd

March, 2001 for the reason of the award in the present case being

against the company, even though it appears that the firm M/s. T.R.

Behal and company was of the directors/shareholders of the

respondent company only. The respondent though preferred claims

before the arbitrator has also not shown any urgency for pressing

the same. In fact, the respondent, in spite of termination of the

agreement, is not stated to have initiated any proceedings

whatsoever for recovery of its claims, if any, against the petitioner.

The arbitrator was appointed only after the petitioner instituted the

suit for recovery of monies. The facts of the arbitrator who has

rendered the award having expired, the arbitral record being not

available and likelihood of any recoveries under the award being

made by the petitioner from the respondent company being remote,

also compel me to hold that no useful purpose would be served in

giving another opportunity to the respondent for setting aside of the

award merely for the reason of being ex parte.

16. Yet another factor which prevails upon me is that the

procedure before the arbitrator cannot be made more stringent than

before the court, unless expressly agreed by the parties. The courts,

upon finding service to be completed or upon non appearance of any

party on any date are free to and generally do proceed ex parte

against such party. There is no requirement for the courts to issue a

notice to the defaulting party giving it a second chance informing it

that upon another default it will suffer. If that be so, I find no reason

to hold that arbitrator is so liable. However, if it were to be found

that the arbitrator has acted in connivance with the party, to enable

that party to steal a march owing to accidental non appearance of

the other, then the court would certainly be entitled to interfere.

Nothing of this sort is found in the present case. The arbitrator who

has rendered the award is a retired judge of High Court and is not an

officer of the petitioner. It is not the case of the respondent also that

the arbitrator did not issue a second notice to help the petitioner in

any manner whatsoever.

17. The purpose of arbitration is expediency. Arbitration law has

been re-enacted with the said motive. It is also common knowledge

that in most of the cases one party is interested in delay. If general

propositions that a notice of intention to proceed ex parte must be

given, were to be laid down, it will give a handle to unscrupulous

litigants to indefinitely delay the arbitral proceedings and to make it

virtually impossible for the arbitrator to proceed. It would also add

to the costs of the arbitration.

18. The counsel for the respondent has also argued that while the

arbitrator was earlier giving dates of minimum 15 to 20 days or over

a month, after non-appearance of the respondent, the proceedings

were concluded within ten days. There is no merit in the said

contention also. Long dates were being given earlier since the

arbitral record was being requisitioned from the family of the earlier

arbitrator. Once the arbitral record had been received, there was no

reason for adjourning the matter for a long date. No party can claim

a right to delay litigation. Moreover, as aforesaid no case of the

respondent having suffered any prejudice is made out.

19. The respondent had made claims before the arbitrator of Rs

10,70,800/- for works done and not paid for, of Rs 52,133/- for refund of

security deposit; for Rs 1,50,000/- towards costs of its material lying at site

and not permitted to be removed, of Rs 3,05,780/- as costs of its tools,

plants & machinery besides scaffolding, shuttering etc lying at the site and

not permitted to be removed, of Rs 4,00,000/- for wrongful suspension of

work, of Rs 2,45,000/- as compensation for idle labour and staff and

overhead expenses and finally Rs 12,00,000/- as damages for wrongful

termination.

20. Even though, in my view, upon default of the respondent to appear

before the arbitrator and substantiate its claims, the arbitrator was entitled

to dismiss the same in default and consider only the counter claims of the

petitioner but the arbitrator allowed Rs 5,17,022.28p to the respondent for

the works done and not paid for and Rs 52,133/- for refund of security

deposit. The remaining claims of the respondent were dismissed.

21. The arbitrator has allowed counter claims of the petitioner of Rs

98,501/- for removal of goods/materials supplied by petitioner and removed

by respondent from site without permission, of Rs 8,34,269.33p on account

of penal recovery of steel issued by the petitioner at site and removed by

the respondent from the site, of Rs 1,16,492.72p towards price of cement

removed by the respondent from the site and of Rs 13,78,501.88p towards

costs of getting the work completed at the risk and costs of the respondent.

Interest at 12% per annum from 1st May, 1986 on the amounts due to the

petitioner, after adjusting the amounts found due from the respondent has

also been awarded. Other claims of the petitioner have been dismissed.

22. The counsel for the respondent has challenged the award on merits

contending that there is an inconsistency therein. It is urged that once the

arbitrator had allowed the claim of the respondent for refund of security

deposit, it implies that there was no breach of agreement by the

respondent. It is contended that, in the circumstances, the arbitrator could

not have, on the other hand, allowed the claim of the petitioner on the

premise of the respondent being in breach of the agreement. This

contention of the counsel for the respondent is fallacious. The petitioner

had before the arbitrator admitted the receipt of security deposit from the

respondent but had asserted its claims to forfeit the same in satisfaction of

its claims against the respondent. The arbitrator has in the award, in fact,

adjusted the security deposit in the claims of the respondent. Merely

because security deposit has been so taken into account does not imply

that the arbitrator has returned the finding of the petitioner not being in

breach.

23. It is next contended that during the pendency of the suit under

Section 20 of the Act before this court a Commissioner was appointed who

had submitted a report and had shown materials/goods lying at site. It is

contended that the respondent had no access to the site thereafter and

thus the award holding that there were no material/steel lying at site is

erroneous. Though as aforesaid the arbitral records are not available but

the counsel for the respondent has handed over a copy of the report dated

2nd January 1986 of the Court Commissioner in Suit No.1675A/1985. The

same shows some bricks and steel lying at site. However, upon default of

the respondent to appear before the arbitrator and establishing that after

the said report said materials continued to be at site and / or of being not

removed by it, it cannot be said that there is any error on the face of the

award or that the arbitrator has misconducted himself.

24. Similarly, objections are raised to other amounts allowed under the

award. However, in my view, if a party does not press/establish its case

before the arbitrator, opportunity to do the same cannot be given at this

stage, especially when no sufficient cause has been found for non

appearance of the respondent before the arbitrator. I must however record

that the counsel for respondent has urged that that non application of mind

by arbitration is borne out from paras 6 and 7.5 of the award. It is argued

that in para 6 claims of contractor are stated to be of Rs 10,86,133/- only,

from para 6.1 to 6.7, they are found to be of much more . However, I find

this to be merely a typographical error. With respect to para 7.5 it is

pointed out that while the claim for cost of excess cement was of Rs

10,064.73p only, a sum of Rs 1,16,492.72p is allowed. The counsel for

respondent has not filed anything to demonstrate the same. The counsel

for the petitioner has filed a copy of its claim. Though under claim No.4 at

one place it is mentioned that Rs 10.064.73p is claimed for excess cement,

at another place, the amount claimed is mentioned as Rs 1,21,525.09. The

respondent having chosen not to appear before arbitrator, he cannot be

permitted a second chance before this court. The counsel for respondent

has also urged that while the officials of petitioner were caught selling

imported steel, the arbitrator has awarded costs of steel to the petitioner

against the respondent. This submission also cannot be considered. There

is nothing to show that the steel attempted to be sold was that issued to the

respondent and with respect to cost of which award has been made. Also,

the steel issued to the respondent was to be in custody of respondent and

the question of officials of petitioner selling the same does not arise.

25. Resultantly the objections are dismissed. The arbitral award dated

13th June, 1996 is made rule of the court and judgment in terms thereof is

pronounced. The petitioner shall also be entitled to interest under Section

29 of the Act on principal amount, with effect from the date of the decree

at 12% per annum. The petitioner shall also be entitled to costs of Rs

25,000/-.

RAJIV SAHAI ENDLAW (JUDGE) 27th July, 2009/M