Delhi High Court

State Trading Corporation ... vs Khushi Ram Behari Lal And Anr. on 23 March, 2010

Author: Manmohan

F-31

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+      O.M.P. 44/2003

       STATE TRADING CORPORATION
       (INDIA) LTD.                              ..... Petitioner
                    Through: Mr. Rakesh Tiku, Advocate.

                      versus

       KHUSHI RAM BEHARI LAL AND ANR.            ..... Respondents
                    Through: Mr. Shekhar Vyas, Advocate with
                             Mr. Jeevesh Mehta and Mr. Arun
                             Pathak, Advocates.


       %                                  Date of Decision : March 23, 2010

       CORAM:
       HON'BLE MR. JUSTICE MANMOHAN

       1. Whether the Reporters of local papers may be allowed to see the judgment?   No.
       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. Present petition has been filed under Section 34 of the

Arbitration and Conciliation Act, 1996 (hereinafter referred to as

"Act, 1996") challenging the Arbitral Award dated 06th June, 2002

read with the order dated 07th September, 2002.

2. Briefly stated the facts of the present case are that on 01st

February, 1995, a contract was executed between the petitioner-

objector and Ministry of Food, Government of Bangladesh

whereunder petitioner-objector agreed to supply/export 25,000 metric

tonnes plus/minus 5% Indian Non-Basmati Par Boiled rice.

3. On 21st February, 1995, a domestic contract was executed

between petitioner-objector and respondent-claimant for taking

delivery, loading, unloading, storing and rebagging of rice. In

pursuance to the said contract dated 21st February, 1995, respondent-

claimant took various steps and incurred expenditure under various

heads.

4. However, the main agreement between petitioner-objector and

Bangladesh Government got frustrated due to non-adherence to the

time schedule by the petitioner-objector for the supply of rice. Since

in the meantime, disputes arose between the parties, respondent-

claimant invoked the arbitration clause in the domestic agreement.

5. In the arbitration, respondent-claimant claimed reimbursement

of expenses on account of transportation, storage, insurance, bank

charges as well as wages paid to labourers. The Arbitral Tribunal

after hearing the parties at length, passed the impugned Award as well

as the order dated 07th September, 2002.

6. Mr. Rakesh Tiku, learned counsel for petitioner-objector

submits that the impugned Award is bad in law insofar as it awards

Claim Nos. 1 and 2. He submits that the said claims were awarded

purely on guess work. He points out that the petitioner-objector was

willing to pay the respondent-claimant a sum of Rs.1,75,944/- against

the said claims. He further points out that Arbitral Tribunal has

awarded under Claim No.3 an average of respondent-claimant's claim

and the amount which petitioner-objector was ready to pay to

petitioner-objector. He submits that the same was impermissible in

law.

7. Mr. Tiku further submits that the rate of interest awarded by the

Arbitral Tribunal is usurious and is contrary to law inasmuch as

interest on interest has been awarded.

8. Having heard the parties, I am of the view that the scope of

interference by this Court with an arbitral award under Section 34(2)

of Act, 1996 is extremely limited. Supreme Court in Delhi

Development Authority Vs. R.S. Sharma and Company, New Delhi

reported in (2008) 13 SCC 80, after referring to a catena of judgments

including Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.

reported in (2003) 5 SCC 705 has held that an arbitral award is open

to interference by a court under Section 34(2) of the Act, 1996 if it is

contrary to either the substantive provisions of law or the contractual

provisions and/or is opposed to public policy.

9. In fact, the Supreme Court in McDermott International Inc.

Vs. Burn Standard Co. Ltd. & Ors. reported in (2006) 11 SCC 181

has succinctly summed up the scope of interference by this Court by

stating "the 1996 Act makes provision for the supervisory role of

courts, for the review of the arbitral award only to ensure fairness.

Intervention of the court is envisaged in few circumstances only, like,

in case of fraud or bias by the arbitrators, violation of natural justice,

etc......"

10. In the present case, the claims ultimately awarded by the

Arbitral Tribunal were initially agreed to be partly paid by the

petitioner-objector itself. A chart indicating the claims raised by the

respondent-claimant and the amount agreed to be paid by petitioner-

objector as well as the amount ultimately awarded under the arbitral

Award are reproduced hereinbelow:

                    ISSUE         AMOUNT             AMOUNT          AMOUNT
                                  CLAIMED BY         ACCEPTED        AWARDED BY
                                  THE                BY STC          ARBITRATORS
                                  CLAIMANT

             Issue No.2 Claim Rs.17,85,875/-         Rs.1,75,944/-   Rs. 8 lacs
             No.5-7 relate to
             labour and wages
             paid to them

             Issue          No.3 Rs.8,19,458/-       Rs.7,14,971/-   Rs.7,67,215/-
             Transportation
             charges

             Issue No.4 relate to Rs.9,53,870/-      Rs.9,53,870/-   Rs.9,53,870/-
             storage charges

             Issue No.5 Misc. Rs.3,72,882/-          Rs.1,58,527/-   Rs.2 lacs
             Expenses

             Issue No.7 & 9 Rs.73,591/- and Rs.73,591/-              Rs.73,591/-
             Insurance Charges Rs.2,13,238                           Rs.2,13,238/-
             & Bank Charges

             Issue No.8 Relate to The claimants      STC      also   Arbitrators
             Claim of Interest    claimed interest   claimed         have awarded
                                  @ 14% for pre-     @24%       in   14% interest for
                                  reference and      their counter   pre-reference
                                  24%      towards   claim           period and for
                                  interest                           interest
                                  pendentelite                       pendentelite



                                  and future                       and       future
                                                                  interest @18%.

11. From the aforesaid chart, it is apparent that respondent-

claimant's claims were neither frivolous nor baseless as petitioner-

objector had found substance in them and had agreed to pay some

amount under most of the claims. In fact, from a perusal of the chart,

it is apparent that petitioner-objector had agreed to pay a sum of

Rs.22,90,141/-, whereas the Arbitral Tribunal has awarded a sum of

Rs.30,07,914/- along with pre-reference, interest pendente lite as well

as post award and future interest. Moreover, on perusal of the

impugned Award, I find that Arbitral Tribunal has given cogent

reasons for award of amounts against the said claims. For instance,

the reasoning with regard to Claim Nos. 1 and 2 is reproduced

hereinbelow:

"36. Though we reject the case of the claimants as sought to be established before us about the visits of their representatives to various stations of Punjab as also about despatch of labour from Delhi to Kandla, we must find that the claimants did involve themselves in the inspection and sampling of rice in the second week of February 1995 and that they did engage some labour in handling the cargo at Kandla during the period 4th March, 1995 onwards.

37. Taking an over all view of the evidence before us in the course of the arbitration proceedings, we are inclined to record our conclusions as under:

i) The claimants, in the company of surveyors of Bangladesh Government did visit the godowns of FCI at various stations in Punjab for selection and sampling of rice lying in such godowns and that this exercise had been undertaken

some time during the week commencing on 8th February, 1995.

ii) No representative of the claimants was involved in arranging railway wagon or loading of rice at Ferozepur since it was the obligation of FCI alone and otherwise also because the claimants who were to be delivered the rice cargo only from the FCI godowns at Gandhi Dham had no locus-

standi to handle the cargo in any manner at Ferozepur.

iii) No labourer or other person as alleged by the claimants, much less 485 labourers, were sent by the claimants from Delhi to Kandla by railway.

iv) The claimants did engage enough labour at Kandla to handle the rice cargo delivered to them by the FCI from time to time with effect from 4th March, 1995.

38. The claimants did incur some expense in connection with their visits to the FCI godowns at various stations of Punjab as also on deployment of labour at Kandla for handling the total rice cargo of above 15000 MT of rice out of which 11852.697 MT was transported to various godowns arranged at Gandhi Dham for storage thereof, as also on the requisite supervisory staff. The exact amount of such expenses, however, has not been made available to us for obvious reasons.

39. In such circumstances, it would be unfair to disallow such expenses. We must therefore, rely on a guess work. Taking into consideration all the pros and cons of the case, we would fix the expenses covered by these issues as Rs. eight lacs."

12. It is further settled law that there is bound to be some

estimation even in reasoned awards. In this connection, I may refer to

the observation of this Court in following judgments :-

A) Kochhar Construction Works Vs. Delhi Development

Authority & Anr. reported in 74 (1998) DLT 118 wherein this Court

has held as under :-

"13.7. It is evident from the foregoing that while it may not be necessary to give the actual calculations but the reasons must disclose the thought process indicating nexus between the material on record and the conclusions arrived at. However there is bound to be some estimation even in cases of reasoned award based on the experience and qualification of the Arbitrator especially the technically qualified Arbitrators......"

B) M/s. Bhai Sardar Singh & Sons Vs. Delhi Development

Authority reported in 102 (2003) DLT 33 wherein this Court held as

under :-

"9. The law is well-settled that the Courts while considering objections against an Award under Sections 30 and 33 of the Act do not exercise appellate jurisdiction so as to re- appreciate and re-assess the evidence and material on record. The Courts must not substitute their own view in place of the view taken by the Arbitrator unless the view taken by the Arbitrator is found to be wholly capricious. In State of Rajasthan v. Puri Construction Pvt. Ltd., reported in (1994) 6 SCC 485, and Indu Engineering and Textile Ltd. v. DDA, reported in V (2001) SLT 190=(2001) 5 SCC 691, the Apex Court in no uncertain terms held that the Court's endeavour should be to preserve the Awards as far as possible and a close scrutiny of the findings of the Arbitrator is not permissible. It was held that even in a case of mis- construction or mis-appreciation of the material on record, the award may not be interfered with. In Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and Another, reported in AIR 1987 SC 2316, also the Apex Court held that the Arbitrator is the sole Judge of the quality as well as quantity of evidence and even where the Court feels that it could have arrived at a different conclusion on the basis of the evidence on record, it should not disturb the findings of an Arbitrator. In Kochar Construction Work v. DDA, reported in 74 (1998) DLT 118=1998 3 RAJ 222 (Delhi), it was held that Courts should not unnecessarily try to find faults with the Award and it was not necessary for the Arbitrator to give detailed reasons or conclusions in support of his conclusions. It was also held that some estimation was

also bound to be there based on the experience and qualifications of an Arbitrator if he is a technical man."

13. Consequently, in my opinion, the principal amount determined

by the Arbitral Tribunal cannot be said to be speculative or without

any foundation.

14. As far as the issue of rate of interest is concerned, Mr. Shekhar

Vyas, learned counsel for respondent-claimant has left it to be

determined by this Court.

15. Keeping in view the prevalent rate of interest as well as the

judgments of the Supreme Court in State of Haryana and Ors.Vs.

S.L. Arora and Company reported in MANU/SC/0131/2010 and

Krishna Bhagya Jala Nigam Ltd. vs. G. Harischandra Reddy & Anr.

reported in (2007) 2 SCC 720, I reduce the rate of interest for all the

periods i.e. pre-reference, pendente lite, post award and future interest