Food Corporation Of India vs Jay Shree Shipping
2012 Latest Caselaw 5114 Del

R-8.

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                       Date of Decision: 30.08.2012

%      FAO (OS) No.442/2008

       FOOD CORPORATION OF INDIA           ..... Appellant
                      Through: Mr. P.K. Dey, Mr. N.B. Joshi
                               and Mr. Kaushik Dey,
                               Advocates
               versus

       JAY SHREE SHIPPING                         ..... Respondent
                     Through:          Mr. Ajay Kumar Gupta, Sr.
                                       Adv. with Mr. Partha Sil,
                                       Advocate

       CORAM:
       HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
       HON'BLE MR. JUSTICE VIPIN SANGHI

SANJAY KISHAN KAUL, J. (Oral)

1. The appeal arises from the order dated 01.07.2008 of the

learned Single Judge dismissing the objections filed by the appellant

under Sections 30 and 33 of the Arbitration Act, 1940 (hereinafter

referred to as the said Act) to an unanimous award dated 20.02.1992.

2. The genesis of the disputes is a charter party agreement dated

10.10.1988 executed inter se the parties, in terms whereof the

appellant chartered the vessel of the respondent known as M.V. Jaya

Laxmi to carry 25,000 metric tonnes („M.T.‟) (5% more or less) of

wheat in bulk from Portland, USA to one or two safe ports in India,

excluding Calcutta. The vessel is stated to have been loaded with

25499.47 M.T. bulk wheat at Portland, sailed on 29.11.1988 and

arrived at the discharging port at Nagapattinam on 05.01.1989. The

wheat was stated to have been completed discharged on 15.02.1989.

3. Disputes, however, arose inter se the parties with regard to a

number of issues on account of claims made by the parties, mainly, in

relation to lay time calculations and despatch/demurrage, shortage and

damage claims and delay in making payments. The agreement, inter

se the parties contained Clause 42 providing for resolution of disputes

through arbitration in accordance with the said Act, which reads as

under:

"42. ARBITRATION

All disputes arising under this Charter shall be settled in India in accordance with the provisions of the Arbitration Act, 1940 of India, each party appointing an Arbitrator and the two Arbitrators appointing an Umpire, whose decision, in the event of disagreement between the Arbitrators shall be final and binding upon

both parties hereto. The Arbitrators and the Umpire shall be commercial men".

The arbitration clause, thus, did not necessarily mandate a

reasoned award.

4. The aforesaid arbitration clause was invoked and the parties

appointed their arbitrators, who, in turn are stated to have elected an

umpire. But in view of the unanimous award dated 20.02.1992, the

umpire had really no role to play. The arbitrators appointed by the

appellant and the respondent were Rear Admiral Krishan Dev (Retd.)

and Mr. T.D. Thomas respectively. It is these two arbitrators who,

being experts in the field, have published the unanimous award dated

20.02.1992, albeit there being no reasons for the award recorded

therein.

5. The arbitrators have noted the controversy setting out the

main claims which have been referred to herein above. Thereafter,

they have recorded the facts as to the arrival of the vessel at the

loading port; the lay time calculations at the loading port; the lay time

allowed for discharge and the claims made by the respondents as well

as the counter claims made by the appellant. The matter is thereafter

stated to have been heard and the operative portion of the award is

contained in para-11 onwards. The arbitrators stated in para-11

onwards as under:

"11. Now, we, the said Arbitrators, having accepted the responsibility of this arbitration, and having carefully considered the written pleading and documents but before us, and having conferred between ourselves and having agreed one with the other, do hereby make, issue and publish this our joint and agreed AWARD as under in respect of the aforesaid matters put before us.

A. We find and hold that the CHARTERERS are liable to pay to OWNERS -

             (i)     Rs.17,708.35 towards Owners' Loading
                     Port demurrage.
             (ii)    Rs.5,97,201.93 in refund of the same amount
                     deducted by the Charterers while paying ten
                     percent balance freight.
             (iii)   Rs.3,56,284.50      towards        Owners'
                     discharging Port Demurrage

B. We find and hold that : the OWNERS are liable to pay to CHARTERERS -

Rs.24,051.00 towards port and customers overtime, and cargo damage claims.

C. Accordingly, WE AWARD AND ADJUDICATE that the Charterers pay to the owners without delay the net sum of Rs.9,47,143.78 i.e. Rs.9,47,144/- (Rupees Nine Lakhs Forty Seven Thousand and one hundred forty four only).

D. We further AWARD AND ADJUDICATE that:-

(i) The Charterers shall pay to the Owners 18 percent per annum interest on the above amount, such interest payment starting after one month from the date of the Award till the payment is made to the owners.

(ii) The parties shall bear and pay their own costs of the Arbitration proceedings and charges incidental thereto".

6. We have already noticed that not only is there a complete

absence of reasons in the award, but also only the final amount due

after calculating the amount under different heads has been given.

7. The appellant, aggrieved by this award, preferred objections

under Section 30 and 33 of the said Act, which have been dismissed

by the impugned order dated 01.07.2008.

8. We are faced with an impugned order, which records reasons.

We are also faced with an award which, however, did not record

reasons. The result is that the learned Single Judge appears to have

supplanted the award with a possible reasoning which could have

weighed with the arbitrators while making the award. It is this course

of action, which we find impermissible.

9. The learned Single Judge has noticed the pleas advanced on

behalf of the appellant qua interpretation of clauses, the effect of

certain statutory provisions of the Indian Customs Act, 1962

published Rules - more specifically the Tamil Nadu Minor Ports

Habour Craft Rules, 1953, and the judicial pronouncements in

England and in India in this behalf. He also notices the principles as

to how lay time is to be calculated, as canvassed by learned counsel

for the parties. Thus, the judicial view taken qua methodology of

calculations regarding the quantification of the claims under different

heads has also been set out.

10. On the conspectus aforesaid, the learned Single Judge has

opined that there are two possible interpretations which were

canvassed before him, and the interpretation adopted by the learned

arbitrators being one of the two plausible interpretations, the same did

not require interference by the learned Single Judge.

11. Learned counsel for the appellant has canvassed, before us,

that the plausible view stated to have weighed with the learned

arbitrators, as canvassed by the respondent, is contrary to the

provisions of the Customs Act and the statutory Rules. Thus,

wherever, on a particular aspect, the charter party agreement is silent,

the provisions of the Customs Act and the statutory Rules ought to

have prevailed. It is his submission that the learned Single Judge fell

into an error in ignoring this principle.

12. It is also his submission that there is a contrary legal view of

a learned Single Judge of this Court in B.K. Vashisht v. East

International Limited & Anr., 95 (2002) DLT 716. The learned

Single Judge, however, accepted the contention of the respondent that

this view was based on an earlier judicial pronouncement in England

which, in turn, did not hold good, in view of the subsequent

pronouncement of the House of Lords, and thus he was free to take a

different view. Learned counsel for the appellant thus contends that

the principles of stare decisis would require that there cannot be ipso

facto overruling of the view of the learned Single Judge of this Court,

merely because the English judicial pronouncement which it had

relied upon, stood overruled by a superior Court, and if there was a

difference of view, the same ought to have been referred to a larger

bench for reconciliation of the two views.

13. Learned counsel for the appellant states that there are other

apparent errors in the reasoning of the learned Single Judge, on which

grounds too he has filed the appeal. He, however, fairly concedes that

some of the grounds have been specifically set out, while others may

not have been so specifically set out. But in view of the general pleas

and keeping in mind that some of these aspects may be purely legal in

character, he should be permitted to urge even those pleas.

14. We are of the view that the aforesaid would become an

academic exercise i.e. to seek reconciliation of the two views of the

two learned Single Judge‟s of this Court, since we are of the view that

the learned Single Judge ought not to have gone into a detailed

reasoning. The rationale for the same is that if the award itself does

not contain reasons, the Court cannot imagine what would have

weighed in the mind of the arbitrators or what reasoning would have

prevailed for coming to a particular conclusion, while awarding a

claim under a specific head. To us, this would be an endeavour to

read the minds of the arbitrators, which, in our view, would not be

permissible.

15. We are fortified in the view we seek to take by

pronouncements of the Hon‟ble Supreme Court. In Arosan

Enterprises Ltd. v. Union of India and Anr., (1999) 9 SCC 499, it has

been observed that no interference is called for in case of a non

speaking award, and even in case of a speaking award, unless there is

total perversity, the Court cannot permit reappraisal of evidence, and

if two views are possible, one taken by the arbitrator cannot be

interfered with. It is the latter principle, which appears to have been

adopted by the learned Single Judge, while that would be the course

open in case of a reasoned award. In case of a non reasoned award, it

would not be permissible to adopt a possible line of reasoning, which

may have weighed in the mind of the arbitrators. We may only say

that the Hon‟ble Supreme Court while observing that "the legislature

obviously had in its mind that the arbitrator being the Judge chosen

by the parties, the decision of the arbitrator as such ought to be final

between the parties", also observed that reappraisal of evidence by the

Court was not permissible. It further added "In the event of there

being no reasons in the award, question of interference of the court

would not arise at all".

16. Similarly, in Ispat Engineering & Foundry Works, B.S. City

Bokara v. Steel Authority of India Limited, B.S. City, Bokaro, (2001)

6 SCC 347, it has been observed that in case of a non speaking award,

it cannot be held that the same is "otherwise invalid" on the basis of

reappraisal of evidence keeping in mind Section 30(c) of the said Act.

Where there was no evidence on record that the umpire had

overstepped his jurisdiction or had travelled beyond the agreement

between the parties, it was held objections against non speaking award

ought not to have been entertained on the ground of being "otherwise

invalid".

17. The Hon‟ble Supreme Court took note of its earlier decision

in Union of India v. A.L. Rallia Ram, AIR 1963 SC 1685, wherein it

had been observed that the decision of the arbitrator, right or wrong, is

binding except in the case of error of law on the face of it, or in the

event "the award itself or in a document actually incorporated in it,

there is found some legal proposition which stands out to be the basis

of the award and which is erroneous". In the present case, a perusal

of the award does not disclose that the legal proposition advanced by

the appellant or, for that matter, by the respondent forms the basis of

the award. Therefore, in our view, there was no occasion for the

learned Single Judge or even for us to undertake an academic exercise

to find out as to which of the competing propositions, as advanced by

the parties, is correct or erroneous.

18. The Hon‟ble Supreme Court has also taken note of the

decision in Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji, AIR

1965 SC 214, wherein it has been laid down that it is not open to the

Court to speculate, where no reasons are given by the arbitrator, as to

what impelled the arbitrator to arrive at his conclusion and it is not

open to the Court to attempt to assess the mental process by which the

arbitrator has reached his conclusion where it is not disclosed by the

terms of the award.

19. In D.D. Sharma v. Union of India, (2004) 5 SCC 325, while

dealing with the jurisdiction of the Court under Section 30 of the said

Act, qua a non speaking award, it was held that interpretation of a

contract was a matter for the arbitrator, even if it gives rise to

determination of a question of law and the Courts jurisdiction in this

behalf is merely to see whether the arbitrator has exceeded his

jurisdiction, and whether there was any bar on the face of the contract,

as the jurisdiction to interfere with non speaking award was very

limited. The averments in a non speaking award are to be accepted at

face value unless the contrary is proved by a party questioning its

validity and thus, where the arbitrator had categorically recorded that

he had examined pleadings and evidence submitted by the parties and

taken into account the relevant material in a non speaking award,

interference with the arbitral award was held to be not justified.

20. If we apply the aforesaid principles to the facts of the present

case, it is not possible to conclude from the award as to what principle

they have adopted while making their award, as they have not said so.

We cannot thus read the mind of the arbitrators as to what weighed

with them while awarding the relevant amounts. But they have

certainly observed that they have carefully considered the written

pleadings and documents and have conferred between themselves and

have agreed to the amount being awarded.

21. There is also another aspect of the matter which needs to be

noted. The two arbitrators are stated to be experts in the field. Much

greater weightage is given to the views of such arbitrators and, that

too, when they are unanimous, as they know best the trade practices,

and the reason for appointing such experts is that they would take a

practical view of the matter. This view finds support from the

pronouncement in Shri Sunder Lal Khatri v. Delhi Development

Authority, 1994 (2) Arb. LR 479 (Del), where the learned Single

Judge of this Court has opined that where there was selection of an

arbitrator who was an expert in the field, the intention of the parties

was to have an adjudication by an expert in the line and such an

award, in any event, should not be interfered with lightly. In adopting

this view, the learned Single Judge drew strength from the

observations in M/s. Hind Builders v. Union of India, (1990) 2 SCR

638.

22. We are, thus, of the view that the impugned award dated

20.02.1992 was not required to be interfered with being a non

speaking award by the experts, and the learned Single Judge ought not

to have gone into the reasoning of a probable view, which may have

weighed with the arbitrators while reaching their conclusion. Thus,

the impugned judgment does not have our imprimatur, as that was not

an aspect required to be examined by the learned Single Judge.

23. We, thus, dismiss the appeal agreeing with the conclusion of

the learned Single Judge, though not for the reasons recorded in the

judgment.

24. Parties are left to bear their respective costs.

25. We may, in the end, express deep sense of regret for this

prolonged litigation qua an agreement of the year 1988 where a

commercial dispute has dragged on for such a long period of time.

The appellant, though has deposited the amount, is faced with a

situation where the interest element itself is a number of times more

than the principal sum awarded. This amount is stated to be deposited

in a FDR in pursuance of the order dated 02.12.2008 and has not been

withdrawn by the respondent, in view of certain difficulties. The

amount lying in the FDR alongwith accrued interest thereon be

released to the respondent forthwith.

SANJAY KISHAN KAUL, J

VIPIN SANGHI, J AUGUST 30, 2012 sr