Food Corporation Of India vs Shanti Cereals (P) Ltd.
2010 Latest Caselaw 2302 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     FAO(OS) No.484/2007

Food Corporation of India                .....Appellant through
                                         Mr.Yashobant Das, Sr. Adv.
                                         with Mr. Sukumar Pattjoshi,
                                         Adv.

                    versus

Shanti Cereals (P) Ltd.                  .....Respondent through
                                         Mr. Vijay Tandon, Adv.

%                          Date of Hearing: March 10, 2010

                           Date of Decision: April 30, 2010

      CORAM:
*     HON'BLE MR. JUSTICE VIKRAMAJIT SEN
      HON'BLE MR. JUSTICE MANMOHAN SINGH
      1. Whether reporters of local papers may be
         allowed to see the Judgment?                       No
      2. To be referred to the Reporter or not?             Yes
      3. Whether the Judgment should be reported
         in the Digest?                                     Yes

VIKRAMAJIT SEN, J.

1. This Appeal assails the Order of the learned Single Judge

dated 12.10.2007 dismissing the Objections filed by the Appellant

against the Award dated 12.8.1999 by the learned Arbitral Tribunal

whereby the claims of the Appellant, Food Corporation of India

(FCI) came to be rejected by the Award.

2. The dispute arises from an Agreement between the parties

for milling of 10,000 metric tons of paddy into rice by the

Respondent. The Appellant is a statutory corporation of

Government of India established under the provisions of the Food

Corporation Act, 1964 primarily entrusted with the purchase,

storage, movement and sale of food grains in order to effectively

implement the Food Policy of Government of India.

3. The facts, in a nutshell, leading to the dispute are that the

Appellant, namely, FCI, entered into an agreement with the

Respondent to mill 10,000 metric tons paddy which was to be

carried out in three phases. Under the contract, the Respondent

was to provide advance rice to the FCI in order to get equivalent

paddy from them. Owing to the failure of the Respondent to supply

the converted/processed paddy, the FCI brought a Claim against

them through arbitration. Before the Arbitration Tribunal, the

Appellant had alleged breach of contract by the Respondent for not

milling the agreed bulk paddy. Claims were also raised against the

paddy which according to Appellant was damaged because of it

having been left lying unattended by the Respondent. The

Respondent took the defence that the paddy which was supplied to

them by the FCI was already of a substandard quality and,

therefore, it was not contractually feasible to convert it into rice,

and further that the paddy was damaged because of the fault of

FCI as it was carelessly stored in the open.

4. The Arbitral Tribunal, after going into the facts of the case

and considering the rival contentions of the parties, has returned

the following findings:-

1. The Respondent had informed the claimants of the fact of the paddy being highly in damaged condition; and thus further supplies were not effected to which no grievance is shown to have been raised by the FCI. Thus, the Claimants (FCI) had accepted the stand.

2. Though the agreement contained a clause that the work was to be executed at the risk of the Miller/Respondent. However, since no efforts were made by FCI to mitigate the losses by selling the rice to other mills, the Respondent could not be held liable for the losses.

5. These Findings were assailed by the Appellant by filing

Objections before the learned Single Judge which have been

dismissed vide Order dated 12.10.2007 against which the

Appellant has filed the present Appeal. Mr. Yashobant Das,

learned Senior Counsel for the Appellant, seeks to assail the

Judgment of the learned Single Judge, and consequently the

Arbitral Award, on the ground that the Award passed by the

Tribunal is unsustainable in law as it is in contravention of the

expressed terms of the contract between the parties. The

agreement provided for a 'Speaking Award', whereas the Tribunal

passed a nonspeaking Award inasmuch as no determination or

dialectic had been articulated while rejecting some of its Claims

and that the Award also did not deal with the contention of the

Appellant that the Respondent was guilty of breach of contract

which has amounted to great losses to FCI and the return of the

cost of the Gunny Bags. Thus, the procedure adopted was not in

consonance with the law and Public Policy of India.

6. We have perused the Award and the Judgment of the learned

Single Judge and do not find any appreciable ground that warrants

our intervention in the impugned Judgment. The Award passed by

the Tribunal, though brief and concise, is not a nonspeaking order,

as noted by the learned Single Judge. The Award adequately sets

out the reasons for rejecting the Claim of the Appellant. It is not

required or expected of an Arbitral Tribunal to pass a verbose or

detailed order to qualify the criteria of speaking Award.

7. Further, the argument of learned Senior Counsel for the

Appellant that the rice supplied by FCI to the Respondent was not

damaged and, in fact, was of a fine quality, cannot be sustained by

us. As has been consistently held by this Court, as well as the

Hon'ble Supreme Court, the forum to raise factual pleas and

contentions in an arbitration matter is only the Arbitral Tribunal.

It is against the proprietary of the legal regime, as well as the

mandate of law set out in Section 34 of the Arbitration and

Conciliation Act, 1996 that the Courts in Objection (and more so in

appeal under Section 37) should entertain the arguments that are

purely factual in nature. There is no gainsaying that the Arbitral

Tribunal is the master of the factual arena and has the right to

even go wrong while deciding the factual issues, unless there is

something manifest from the face of the Award that is so grave as

to move the conscience of the Court that the error would result in

a monumental miscarriage of justice.

8. The claim of Rs. 1,98,884/- pertains to the gunny bags which,

according to Appellant, were used to carry the first and only

installment of paddy to the Respondent; the Appellant asserts that

the Claim has been completely ignored by the Arbitral Tribunal. In

our opinion, no illegality has occurred that requires setting aside of

Award on this score. No evidence has been shown by the Appellant

of any demand for these gunny bags being made to the Respondent

at any stage and/or that the same was either declined or not

adhered to.

9. After considering the submissions of counsel for the

Appellant and perusing the Award and the record, we find no

manifest error that warrants our intervention in the Judgment of

the learned Single Judge or the Arbitral Tribunal passed by the

learned Arbitral Tribunal. Appellant has sought reliance on ONGC

v. Saw Pipes Ltd, (2003) 5 SCC 705 and Hindustan Zinc Ltd. -vs-

Friends Coal Carbonisation, (2006) 4 SCC 445 to argue that since

the Arbitral Tribunal has made an Award in conflict with the

express provisions of the subject Contract and the Arbitration Act,

1940, the same is open to scrutiny of the Court and liable to be set

aside. In our considered opinion, reliance on both these Judgments

is of no avail to the Appellant. In the present case, since the

Respondent had written to the Appellant about the impossibility of

carrying out the contract because of the inferior quality of the

paddy supplied to it, and no grievance having been raised to that

effect at that time by the Appellant, the learned Arbitral Tribunal

was justified in deciding the question of damages against the

Appellant. In Hindustan Zinc, the Court noted an error apparent

on the face of the Award which made it vulnerable and liable to be

set aside. Learned Counsel for the Appellant has not pointed out

any such error on the face of the Award.

10. In the light of the above noted facts and arguments, the

Appellant has failed to make out any cause for our interference.

The Appeal is, therefore, without merit and is dismissed.

                                     ( VIKRAMAJIT SEN )
                                           JUDGE




                                     ( MANMOHAN SINGH )
April 30, 2010                            JUDGE
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