Abhishek Industrial Corporation ... vs The Municipal Corporation Of ...
2009 Latest Caselaw 4273 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI



                     +CS(OS)No.65A/1996

                                          23rd October, 2009


ABHISHEK INDUSTRIAL CORPORATION LIMITED                    ...Petitioner

                         Through:   Mr. M.A. Niyazi, Advocate with Mr.
                                    Manish Kumar, Advocate.

                         VERSUS


THE MUNICIPAL CORPORATION OF DELHI                   ...Respondents.

                         Through:   Ms. Kanika Agnihotri, Advocate with
                                    Ms. Shikha Tandon, Advocate and
                                    Mr. Aseem Chaturvedi, 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 (ORAL)

1. An award was passed by the sole Arbitrator in the disputes

between the parties. The petitioner is the supplier and was the claimant

CS(OS) No.65A/1996 Page 1 before the Arbitrator. The Municipal Corporation of Delhi, and now

represented by the Delhi Jal Board, was the respondent before the

Arbitrator and the non-objectors in this case. In the present case, suit

No.65A/1996 contains the objections in detail to the award and have

therefore been treated as objections under Sections 30 and 33 of the

Arbitration Act, 1940. Issues in this case were framed on 18.3.1998. The

only issue with respect to which the objector would seek to get the

decision in its favour is issue No.1 and which is whether the award is

liable to be set aside or remitted to another Arbitrator. Rest of the issues

pertain to whether the petition was properly instituted or that the Court

had jurisdiction or not or whether the petition was barred by limitation.

These later issues have not been pressed by the non-objector and

therefore I am only called upon to decide whether the award is to be set

aside on the ground as stated in objections being suit No.65A/1996.

2. The facts of the case are that a contract was entered into

between the parties for supply by the objector to the respondent of

Alumina Ferric for the period 1.7.1991 to 31.3.1993. The basic price of

the Alumina Ferric was fixed at Rs.1550/- per metric ton(pmt) and to

which was added the excise duty, central sales tax and freight charges to

make the price at Rs.2100/- per metric ton. The contract in question

CS(OS) No.65A/1996 Page 2 contained a price variation clause ( though titled as price escalation) and

the same reads as under:

" Price Escalation: The basic rate of Rs.1500/-PMT is based on the (Jan-March, 1991) Sulphur price for non-fertilizers use on Ex. Settee basis, which was Rs.3125/- PMT as announced by MMTC, for every increase/decrease in the suphur price for non fertilizers use, a variation of 20% will be allowed on Ex. Jetty basis in the basic rate of Alumina furric, as announced by MPTC from time to time."

3. The entire disputes between the parties centres around this

clause. Whereas the objector claims that even if the price falls below

Rs.1550 pmt even then it is entitled to at least the basic rate of Rs.1550/-

pmt, on the other hand, the stand of the respondent was that the clause

in question clearly contemplates both increase and decrease in the price

on account of the ingredient of sulphur in the product being Alumina

Ferric.

4. A plain and literal reading of the clause makes it more than

abundantly clear that what is contemplated is not only increase but also

decrease. It would be absurd if the plain language is interpreted so as to

remove the word decrease therefrom. In fact, there is a variation, both

positive and negative, that is an increase and a decrease, becomes further

clear because there is an immediately subsequent clause for both increase

and decrease of the freight charges on account of the variation of the

diesel price.

CS(OS) No.65A/1996 Page 3

5. The Arbitrator has passed a detailed and reasoned award

after having duly considered the arguments of the parties and interpreting

the clause. The Arbitrator consequently has held that the clause in

question entitles the respondents to seek decrease in the price as per the

price variation clause. Though the Arbitrator has also gone on the issue

that the respondent vide letter dated 9.9.1993 had intimated to the

objector of refusal to delete the price variation clause, I am not putting

any importance to the same because independent of such finding the

conclusion which is arrived at by the Arbitrator is sound in law and in the

facts of the case.

6. The scope for objection to an award under Sections 30 and

33 of the Arbitration Act, 1940 is well settled now. The award can only

be set aside if the Arbitrator has misconducted himself or the proceedings.

This proposition has been interpreted to mean that unless and until the

view of the Arbitrator is a view of a wholly unreasonable man or the

interpretation is so perverse which shocks the judicial conscience or that

the Arbitrator has acted beyond the terms of the contract and the law as

applicable, it is not permissible for the Court to go into the

reasonableness of the reasons as given by the Arbitrator.

CS(OS) No.65A/1996 Page 4

7. Applying these well settled principles as aforesaid, it is quite

clear that the Arbitrator was indeed justified in accepting the literal

interpretation of the clause.

8. What has been canvassed emphatically by the counsel for the

objector is the reliance on a decision of a Learned Single Judge (S.

Mukherjee, J.) dated 3.1.2003 with regard to a similar clause which was

interpreted by another Arbitrator holding that the clause will not apply if

the import of sulphur is decanalised and MMTC does not announce the

price of sulphur.

There are two reasons why I am unable to accept the decision in

the aforesaid case of Pokhram Alum and Chemicals Ltd Vs.MCD, Suit

No.165/1996 decided on 3.1.2003. The first reason is that in the present

case, the award shows that no grounds were canvassed that the clause

became inoperative on account of decanalisation of the import of sulphur

and further it is not the case of the objector that since MMTC failed to

announce the price, the clause in question became inapplicable. A

reference to the decision in the aforesaid Suit No.165/1996 shows that the

Learned Single Judge proceeded by accepting these two contentions

which are not found in the present case. Also, the decision was in light of

the scope of objections to an award in which if two views are possible,

the Court does not necessarily interfere if the Arbitrator is of one view

CS(OS) No.65A/1996 Page 5 and the Court may be of another view. The second reason for which I

feel that the said judgment would not apply is because in this particular

case a literal interpretation is clearly a more plausible view because if a

contractor seeks to claim benefit and compensation on account of

increase in the price, then it does not seem understandable as to why it

should in any manner get unjust benefit if prices have in fact decreased,

because, surely it is not the case of the objector that it continued to

purchase sulphur at a very high price and therefore was forced to sell at a

higher price to the non-objector. I may finally add that the issue with

regard to interpretation of a clause of a contract is in the realm of the

jurisdiction of the Arbitrator and the Court would not interfere with such

interpretation unless such interpretation is extremely perverse. Surely,

accepting the literal interpretation which is both logical and rational

cannot be said to be a perversity. I am also taking into consideration the

fact that one of the reasons why a person makes a claim is on account of

loss which is suffered by him. A price variation clause is basically meant

to compensate and not to cause an unjust enrichment and extra profit to

the contractor. That being so, a literal interpretation of the clause in the

present case is surely the order of the day.

9. In this view of the matter, I do not find any reason to

interfere with the award. The objections are dismissed with costs of

CS(OS) No.65A/1996 Page 6 Rs.15,000/-. The Award dated 5.12.1995 is made rule of the Court and

the objection petition being the suit No.65A/1996 is dismissed.

                                               VALMIKI J.MEHTA, J


October 23, 2009
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CS(OS) No.65A/1996                                                  Page 7