M/S Gail (India) Ltd. vs Bell Ceramics Pvt. Ltd & Ors
2010 Latest Caselaw 1327 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          OMP No. 280/2003
                                                        10th March, 2010


M/S GAIL (INDIA) LTD.                            ...Petitioner

                           Through:     Mr. Rajiv Bansal, Advocate

              VERSUS

BELL CERAMICS PVT. LTD & ORS                                     ....Respondents

                           Through:     None
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?

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

 %                               JUDGMENT (ORAL)

VALMIKI J.MEHTA, J

1. This petition under Section 34 of the Arbitration and Conciliation Act,

1996 challenges the Award dated 17.2.2003 passed by the sole Arbitrator.

The dispute is between the petitioner as the supplier of Gas and the

respondent as the consumer. The dispute pertained to the entitlement of

transportation charges by the petitioner and against the respondent for the

supply of the Gas.

OMP 280/2003 Page 1

2. The facts of the case are that since the respondent had laid down its

own pipeline for receiving gas, the present petitioner was not charging the

usual transportation charges from the respondent/consumer. There were a

total of five Agreements between the petitioner and the respondent and

which are dated 28.4.1993, 24.8.1993, 24.5.1994, 11.6.1996 and 10.2.1999.

By the first four Agreements, the respondent increased the demand/

consumption of Gas, and consequently, the consumption went up from 4000

CUM per day to 28,000 CUM with the result that the transportation charges

also slab wise increased from Rs.26,650/- per month to Rs.2,03,837/- per

month. By the 5th agreement, the consumption of Gas was however

decreased from 28,000 CUM per day to 21,000 CUM per day and the

transportation charges were also accordingly brought down to Rs.49,896/-

per month i.e., the same charges as payable vide Agreement dated 24.5.1994

when it was agreed to supply 21,000 CUM per day. Here it may be noted

that higher transportation charges are required for greater quantities because

in such case there is higher cost to petitioner for maintaining higher pressure

for transportation at different points in the pipeline.

3. The respondent however, resorted to over drawl of Gas, than as fixed

under the Agreement dated 10.2.1999. This fact is an undisputed and

admitted in the arbitration proceedings. The issue which therefore arose was

whether the respondent is liable to pay transportation charges for over

drawing in excess of 25,000 CUM per day or is it merely liable to pay

OMP 280/2003 Page 2 transportation charges at the contractual rate of Rs.49,896/- per month for

only at the contractual quantity of 21,000 CUM per day.

4. The Arbitrator by the impugned Award has allowed additional

transportation charges from 1st March, 1999 to 31st December, 1999 i.e. a

period of 10 months totalling to Rs. 5,08,330.20. This would come to only

Rs.58,330/- per month, although the contractual rate for 28000 M3 per day

was Rs.2,03,837/- per month.

5. In my opinion, the Award is absolutely illegal and perverse. Once

there is a breach of contract by the respondent in over drawing Gas, the

respondent was bound to compensate the petitioner in proportion to the cost

of transportation of higher quantities of Gas. In any case, under Section 70

of the Contract Act, 1872 a person who receives the benefit of a non-

gratuitous act has also to compensate the person on from whom the benefit

has been received. Transportation charges therefore have to be paid by the

respondent to the petitioner in terms of the actual drawl of Gas in excess of

25000 M3 and not the transportation charges for the lesser contracted

quantity of 21,000 M3. The transportation charges cannot be for the

contracted quantity because the contracted quantity is 21,000 CUM per day

whereas the actual drawl is admittedly in excess of 25,000 CUM per day.

No doubt, the Arbitrator is not bound by the strict rules of the Evidence Act,

1872 as per Section 19 of Arbitration and Conciliation Act, however, it is

not permissible for the Arbitrator to act wholly irrationally and

OMP 280/2003 Page 3 unreasonably. As already stated if we divide the figure of Rs.5,08,033/- by

a figure of 10, inasmuch as the aforesaid payment of 5,08,033/- has been

awarded for 10 months, the monthly charges will come to only Rs.50,833/-

per month. The evidence to determine the amount payable for transportation

of Gas in the slab of 21000 M3 to 28000 M3 was however available to the

Arbitrator and the Arbitrator is not permitted to ignore the admitted facts so

as to arrive at a totally arbitrary figure. The evidence is the Agreement

dated 11.6.1996, which shows that when the supply of Gas was 28,000

CUM per day, then transportation charges were fixed at Rs.2,03,837/- per

month. A reference to the earlier Agreements also show that the payment

for transportation for Gas is slab wise and there is a geometrical progression

of increase of transportation charges and it is not an arithmetical

progression. The slab of supply for transportation is the same between

21,000 M3 to 28,000 M3 per day. We therefore have to take the figure of

Rs.2,03,837 (payable under Agreement dated 11.6.1996) because charges

for supply of 25,000 CUM per day would come to the figure of charges

payable for the slab of supply of gas between 21,000 CUM per day to

28,000 CUM per day. Since the admitted evidence in the form of the

Supplementary Agreement dated 11.6.1996 was before the Arbitrator, the

transportation charges should have been atleast Rs.2,03,837 per month

considering that those were the charges in 1996 and the disputed period in

the present case is from March, 1999 to December 1999 and which evidence

OMP 280/2003 Page 4 has been illegally ignored by the Arbitrator making the Award perverse

which shocks the judicial conscience. Accordingly, I hold that instead of

Rs.50,08,33/- per month as awarded by the Arbitrator, the petitioner was

entitled to charges of Rs.2,03,837/- per month.

6. The counsel for the petitioner had also sought to contend that the

Arbitrator and the Directors of the respondent were common directors in a

company known as Asian Hotels Ltd., however, in view of my findings

above, I need not go into this aspect because nothing will turn upon the

same.

7. Under Section 34 of the Arbitration and Conciliation Act, 1996, once

the Award is perverse and against the provisions of the law of the land, a

court is entitled to, and in fact duty bound to interfere with the Award. In

this regard the following judgments are relevant which are as under:-

In ONGC Vs. Garware Shipping Corporation Ltd., 2007 (13) SCC

434 the Supreme Court has laid down in paragraph 30 of the judgment that

there is no such provision that Courts have to be slow in interfering with the

Arbitrator's Award even if the conclusions are perverse and the very basis of

the Award is wrong. In Security Printing & Minting Corporation of India

Ltd. and Anr. Vs. Gandhi Industrial Corporation, 2007 (13) SCC 236 in

paragraph 16 it has been held by the Supreme Court that even though the

courts are slow in interfering with the Award it does not mean that if the

Award is perverse the Courts are powerless to interfere in the matter.

OMP 280/2003 Page 5 In the present case, the Award is wholly violative of the provisions of

Sections 70 and 73 of the Contract Act, 1872 because it ignores the admitted

breach. The Award is wholly perverse which shocks the judicial conscience

because the Arbitrator has ignored the evidence in the form of the admitted

Supplementary Agreement showing a slab for payment from 21,000 to

28,000 CUM per day at Rs.2,03,837 per month. The present is therefore a

fit case for interfering and setting aside the Award.

8. Accordingly, objections to the impugned Award dated 17.2.2003 are

accepted and it is held that the petitioner herein is entitled to the

transportation charges from 1.3.1999 to 31.12.1999 at the rate of

Rs.2,03,837/- per month. With the aforesaid observations, the objection

petition is allowed to the extent as stated above. Since the respondent has

not appeared, the petition is disposed of leaving the parties to bear their own

costs.

                                               VALMIKI J.MEHTA, J

March 10, 2010
ib




OMP 280/2003                                                             Page 6