Hindustan Export And Import ... vs Union Of India & Anr.
2009 Latest Caselaw 4596 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+         I.A. No.5027 of 1997 IN C.S. (OS) No.2106-A of 1996


HINDUSTAN EXPORT AND IMPORT CORPORATION
PRIVATE LIMITED                         ..... Petitioner
                 Through: Mr. Shiv Khorana, Advocate.

                            versus

UNION OF INDIA & ANR.                                ..... Respondents
                   Through: None.

%                               Date of Decision : NOVEMBER 11, 2009


CORAM:
HON'BLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not?                          No.
3. Whether the judgment should be reported in the Digest?          No.


                             JUDGMENT

MANMOHAN, J (ORAL)

1. By way of the present application, petitioner-claimant has filed

objections under Sections 30 and 33 of the Arbitration Act, 1940

challenging the Award dated 24th July, 1996 passed by the sole

Arbitrator Mr. Ram Bahadur.

2. Mr. Shiv Khorana, learned counsel for the petitioner submitted

that the impugned Award was a non-reasoned one and the Arbitrator

had ignored material documents on record. Mr. Khorana seriously

challenged the Arbitrator's reasoning rejecting claim No.1. In fact,

claim No. 1 pertains to amount withheld on account of liquidated

damages.

3. The Arbitrator in the impugned Award has rejected the

petitioner-claimant's claim No.1 on the following grounds :-

"1. No details of the claim are given by the claimants. How have they reached the figure claimed?

2. Claimants have not proved that they have made compliance of clause 18 (1) and (II) of the A/T.

3. No document has been filed by the claimants/contractor to prove compliance of clause 18 (I) and (II) of A/T.

4. All extensions have been sought by the claimants/contractor.

5. As per letter dated 27.02.1978 filed by UOI at page 4- A-2 claimants have admitted L.D., if any, applicable under the terms of the contract.

6. Imposition of L.D. is in terms of 19 (e) of the subject A/T which has been accepted by the claimants with replacement of word "YOU" to "WE".

7. Supply has been made late by the contractor-

claimants."

(emphasis supplied)

4. It is now well settled that an Arbitrator is the sole judge of

quality as well as quantity of evidence and a court cannot sit in appeal

qua the Arbitrator's view with regard to the material on record. (Refer

to Sudarsan Trading Co. Vs. Government of Kerala and Anr. reported

in (1989) 2 SCC 38).

5. It is further settled law that Arbitrator is not expected to write a

judgment like a court of law. In my opinion even though it is

obligatory for the Arbitrator to state reasons, it is not obligatory for him

to give a detailed judgment (refer to Ircon International Ltd. Vs.

Arvind Construction Company Ltd. & Anr. reported in 1999 (81) DLT

268, Indian Oil Corporation Vs. Indian Carbon Ltd. reported in AIR

88 Supreme Court 1340 and College of Vocational Studies Vs. S.S.

Jaitely reported in AIR 87 Delhi 134).

6. In fact, the Hon'ble Supreme Court in Arosan Enterprises Ltd.

Vs. Union of India & Another reported in (1999) 9 SCC 449 has

observed as under :-

"36. Be it noted that by reason of a long catena of cases, it is now a well-settled principle of law that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the court to reappraise the evidence is unknown to proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award.

37. The common phraseology "error apparent on the face of the record" does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined. In this context, reference may be made to one of the recent decisions of this Court in the case of State of Rajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC 485 wherein this Court relying upon the decision of Sudarsan Trading Co. case (Sudarsan Trading Co. v. Govt. of Kerala, (1989) 2 SCC 38) observed in para 31 of the Report as below: (SCC pp. 502-03, para 31)

"31. A court of competent jurisdiction has both right and duty to decide the lis presented before it for adjudication according to the best understanding of law and facts involved in the lis by the Judge presiding over the court. Such

decision even if erroneous either in factual determination or application of law correctly, is a valid one and binding inter parties. It does not, therefore, stand to reason that the arbitrator‟s award will be per se invalid and inoperative for the simple reason that the arbitrator has failed to appreciate the facts and has committed error in appreciating correct legal principle in basing the award. An erroneous decision of a court of law is open to judicial review by way of appeal or revision in accordance with the provisions of law. Similarly, an award rendered by an arbitrator is open to challenge within the parameters of several provisions of the Arbitration Act. Since the arbitrator is a Judge by choice of the parties, and more often than not, a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. Over the decades, judicial decisions have indicated the parameters of such challenge consistent with the provisions of the Arbitration Act. By and large the courts have disfavoured interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the materials on record and have shown definite inclination to preserve the award as far as possible. As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the courts were impelled to have a fresh look on the ambit of challenge to an award by the arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not been given the wide immunity as enjoyed earlier, by expanding the import and implication of „legal misconduct‟ of an arbitrator so that award by the arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decision of the lis between the parties to arbitration. Precisely for the aforesaid reasons, the erroneous application of law constituting the very basis of the award and improper and incorrect findings of fact, which without closer and intrinsic scrutiny, are demonstrable on the face of the materials on record, have been held, very rightly, as legal misconduct rendering the award as invalid. It is necessary, however, to put a note of caution that in the anxiety to render justice to the party to arbitration, the court should not reappraise the evidences

intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the court, erroneous. Such exercise of power which can be exercised by an appellate court with power to reverse the finding of fact, is alien to the scope and ambit of challenge of an award under the Arbitration Act. Where the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible viewpoints, the interference with award based on erroneous finding of fact is permissible. Similarly, if an award is based by applying a principle of law which is patently erroneous, and but for such erroneous application of legal principle, the award could not have been made, such award is liable to be set aside by holding that there has been a legal misconduct on the part of the arbitrator. In ultimate analysis, it is a question of delicate balancing between the permissible limit of error of law and fact and patently erroneous finding easily demonstrable from the materials on record and application of principle of law forming the basis of the award which is patently erroneous. It may be indicated here that however objectively the problem may be viewed, the subjective element inherent in the Judge deciding the problem, is bound to creep in and influence the decision. By long training in the art of dispassionate analysis, such subjective element is, however, reduced to minimum. Keeping the aforesaid principle in mind, the challenge to the validity of the impugned award is to be considered with reference to judicial decisions on the subject."

7. Keeping in view the aforesaid parameters, I find that the

impugned Award calls for no interference as firstly, the Arbitrator has

given cogent, concise and intelligible reasons for rejection of the

petitioner-claimant's claim.

8. Though there is some merit in Mr. Khorana's argument that

details of the amount withheld on account of liquidated damages was an

admitted figure mentioned in the respondent's own letter dated 22nd

February, 1979, I find that the petitioner-claimant had itself, after the

stipulated period of contract written a letter dated 27th February, 1978 to

the respondent agreeing to pay liquidated damages if the shipment date

was extended till 31st May, 1978 and the delivery period was

regularized. The relevant portion of the petitioner-claimant's letter

dated 27th February, 1978 is reproduced herein below :-

"1. A revised proforma listing out the deletion of tooling as recommended by our Principals, M/s. Dixi and the additional tooling they have agreed to supply free of cost will be submitted to you at the very earliest to enable you to issue the required amendment to the A/T.

2. We have taken note of your agreement to extend date of shipment till 31st May, 1978.

3. As a very special case and in deference to your wishes, Dixi have agreed to the following terms of payment :-

"100% nett FOB value shall be paid to Dixi with liquidated damages, if any, as applicable under the terms of the contract, against shipping documents to be furnished by Dixi and subject to Dixi furnishing a Bank Guarantee for 10% of the value of the contract, the Bank Guarantee being valid till the end of the warranty period."

M/s. Dixi have agreed to these terms on the basis of your assurance that the procedure for regularization of the delivery period will be initiated immediately on shipment having been made and completed at the earliest possible time.

4. The other terms of payment with regard to agency commission etc. will remain unchanged.

5. M/s. Dixi will check up and advise if it is considered necessary by them to have the N.C. cabinets air-lifted. As soon as we have this information in our hands, we shall revert.

We hope, the above will be found satisfactory. We now look forward to your issuing necessary instructions to DGISM, London, with a copy to Dixi and under advice to us so that the visual inspection proposed to be carried out on the toolings, etc. is carried out by them at an early date to enable Dixi to expedite shipment of the machines."

(emphasis supplied)

9. In view of the petitioner-claimant's own admission as contained

in the letter dated 27th February, 1978, I am of the view that the

Arbitrator need not have referred to any other document. Accordingly,

the ground that Arbitrator has ignored material documents is meritless.

Consequently, the objections being devoid of merit are dismissed and

the Award is made rule of the Court. Registry is directed to prepare a

decree in terms thereof.

10. With the aforesaid observations, present suit and application

stand disposed of.

MANMOHAN, J.

NOVEMBER 11, 2009 'AA'