Food Corporation Of India vs M/S. Kapil Kumar & Co. & Partners
2015 Latest Caselaw 3282 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                                          Date of decision: April 23, 2015


+                         OMP 632/2011


FOOD CORPORATION OF INDIA
                                                     ..... Petitioner

                          Through:      Mr. Mohan Lal Sharma, Advocate


                          versus

M/S. KAPIL KUMAR & CO. & PARTNERS
                                                  ..... Respondents

                          Through:      Mr. David George & Mr.
                                        Saiddharth Dutta, Advocates

CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J. (Oral)

1. The challenge in this petition is to the Award dated April 25, 2011

of the learned Arbitrator in the arbitration proceedings held before the

Indian Council of Arbitration (ICA). The learned Arbitrator has rejected

the claims of the petitioner both on the ground that the disputes have

been settled in terms of settlement deed dated March 06, 2006 and even

on merit the claims of the petitioner are not sustainable.

2. Some of the facts relevant for the purpose of this case are an

agreement dated October, 6, 1994 was executed by the Senior Regional

Manager acting through District Manager, FCI Faridkot on behalf of the

petitioner Corporation and the respondent M/s Kapil Kumar & Company

and Partners in respect of the job of milling the paddy. The disputes arose

between the parties. Suffice to state that the agreement had an Arbitration

clause.

3. It was the case of the petitioner before the learned Arbitrator that in

terms of agreement dated October 6, 1994, the petitioner had stored

6290.4 quintals of super fine paddy in 9832 bags in the premises of the

respondent. After the respondent delivered a part of rice still 671.3

quintals in 872 bags, remained with the respondent. It was the case of the

petitioner that the milling of the entire paddy was to be completed before

February 28, 1995. However, on a representation of the millers in the

entire Punjab State to the petitioner Corporation to provide relaxation in

the norms of acceptance of quality of rice in view of poor quality of

paddy, the stored paddy was not milled within the stipulated time. The

petitioner Corporation alleged breach of contract and claimed an amount

of Rs.3,99,139/- on account of above mentioned balance quantity of

671.3 quintals (872 bags) of paddy. The petitioner had also prayed for

award of Rs.20,000/- towards cost of limitation along with interest @

18% p.a.

4. The case of the respondent before the learned Arbitrator was

primarily of limitation and the petitioner had already signed a settlement

deed in the year 2006 and as per this deed, all matters have been

amicably settled. It was the case that the paddy stored with miller was

retrieved and sold by FCI under Government of India open auction policy

for which there is no provision in the agreement. Therefore, no damages

as alleged could be claimed by the petitioner. The learned Arbitrator had

accepted the plea of settlement having entered on March 6, 2006. The

relevant finding of the learned Arbitrator is as under:-

"Now, let us look at the Deed itself. Whether, it was subject to any such condition that it is subject to approval from head quarter of FCI. The answer is „No‟. Settlement Deed does not have any such condition. It is signed by District Manager, FCI, Faridkot on behalf of Senior Regional Manager, FCI Regional office, Punjab, Chandigarh. Agreement between the parties is also between Senior Regional Manager, FCI through Distt. Manager, FCI and the Miller. That means signing authority on behalf of FCI, for the Agreement and for settled deed, is same. As per delegation of powers in FCI, vide circular No. F No. 10 (1)/2004-BC ddt. 14.01.2005, submitted by claimants as part of their written submissions, indicate that Regional Manager has full powers for settlement of cases out of court or withdrawing or dropping original matter. The Deed is signed by claimant with wide open eyes. Also, till

filing of the reply to written submissions of respondents, claimants never informed the respondents about invalidity of settlement deed.

From above discussion, I am of the opinion that the settlement deed dt. 06.03.2006 between the parties is valid and objection of claimant in this regard is not tenable."

5. The learned Arbitrator has also discussed the case on merit,

according to him 9832 bags (6390.40 MT) paddy was stored in the

Miller's premises out of which 8960 bags (5719.1 MT) of paddy were

withdrawn by the petitioner Corporation by the contractual period of

February, 1995. The balance paddy of 872 bags (671.3 MT) remained

with the respondent till the extended period of contract i.e. May 31, 1995.

Same was withdrawn by the FCI after the extended period was over and

sold in open market.

6. The learned Arbitrator was of the following view:-

"Agreement between the parties was born on 06.10.1994 and paddy was stored in Miller‟s premises shortly thereafter. If the Miller was not milling the paddy at all, what was being done by FCI? It was totally silent about non-performance of the other party till end of contract period. No notice was ever issued to Miller for his non- performance. FCI should have acted upon after noticing wilful non-performance. It could have easily terminated

the Agreement in the 2nd or 3rd month of Agreement itself and got the work done at the cost of Miller elsewhere as per provisions of Agreement. There is also nothing on record or brought to the notice of Tribunal, FCI‟s intention to sell the stored paddy and recover economic cost from Miller.

It is also not clear why FCI wants damages for 872 bags of paddy only whereas total paddy stored was 9832 bags and admittedly none of the paddy was milled and in turn, entire paddy was sold off by FCI. No explanation is available for it.

If the Millers were agitating for relaxation in norms of rice recovery and quality right from the beginning of Agreement period, it was for FCI to decide the matter one way or the other instead of dragging its feat till end of contract period, extend the contract period unilaterally and then selling off the paddy on their own volition.

From above discussion, FIC claim, on merit also, is not sustainable."

7. Learned counsel for the petitioner would submit that the learned

Arbitrator has erred in rejecting the claims on the ground the disputes

have been settled in terms of settlement deed dated March 6, 2006. He

states that deed was forged. According to him, the document having been

executed on March 6, 2006, was notarized much before that date i.e.

March 1, 2006. He would dispute the conclusion of the learned Arbitrator

even on merit.

8. On the other hand, learned counsel for the respondent would

justify the award. According to him, the plea of forgery was never taken

before the learned Arbitrator. He denied that the settlement was forged.

He would rely upon a letter dated February, 18, 2014 written by the

District Office, Moga to the Assistant General Manager (Commercial)

Food Corporation of India, Regional Office Chandigarh, wherein the

District Office has admitted that a settlement deed with M/s Kapil Kumar

and Company, the respondent herein was executed. He would also refer

to a judgment of the Division Bench of this Court in FAO (OS) 489/2011

FCI vs. M/s Deep Rice Mills decided on October 19, 2011, wherein the

plea of the petitioner Corporation that the Area Manager had no authority

to enter into a settlement, without the approval of the Chairman-cum-

Managing Director of the FCI was rejected. According to him, when the

entire paddy was lifted by the petitioner Corporation, no loss had been

caused to the petitioner Corporation to even raise a dispute.

9. Having heard the learned counsel for the parties, this Court during

submissions had asked the counsel for the petitioner to substantiate his

plea of forgery; he would state the settlement having executed on March

6, 2006 could not have been notarized on March 1, 2006. This fact does

not have any effect on the authenticity of the document. I note the Moga

Office of the petitioner Corporation in its communication dated February,

18, 2014 addressed to the Regional Office did accept the execution of the

settlement deed with the respondent. I also note, no such plea was urged

before the Arbitrator. If that be so the plea of forgery need to be rejected.

The settlement having been entered wherein it has been agreed by the

parties that the corporation will not pursue its claims against the

respondent before the ICA and after adjustment of other statutory claims

if any, the security deposit of the miller will also be refunded and the

miller shall also have no claim whatsoever against the corporation, the

consequences must necessarily follow.

10. The conclusion arrived at by the learned Arbitrator, which is

reproduced above is justified. I note that the plea of competency of the

District Manager/Regional Manager was upheld. The award also notes

that a permission for amicable settlement of the arbitration cases was

received from FCI Headquarters vide letter dated October 21, 2003

which contained the approval of MD FCI. The arbitrator also noted that

the decision of CMD, FCI disfavouring out of court settlement was of

September 15, 2006, whereas, the settlement executed in the case in hand

was much before on March 5, 2006. That apart I note for benefit that the

Division Bench in M/s Deep Rice Mill (Supra) where a similar argument

of competency of the Area Manger was raised, it has held as under:-

"13. FCI gave no answer. It just said that the Area Manager, FCI did not have the authority to enter into the settlement.

14. Now, we find it surprising that if the Area Manager had no authority to sign the deed of settlement, why no disciplinary action has been taken against him till date. We highlight that Learned Counsel for the Appellant concedes that no disciplinary action has been initiated or is intended to be initiated against the Area Manager, FCI.

15. FCI is a statutory corporation. It is not the Government of India. Thus, concept of Business Allocation Rules would not be applicable to FCI. It relates to the indoor management of FCI as to who has the authority to act on behalf of FCI it was for FCI to have led evidence before the learned Arbitrator to show that the Area Manager was not authorized to enter into any such agreement and attempt made before us to rely upon some office orders is of no use. We highlight that before the learned Arbitrator the only stand taken was that the agreement in question did not have the approval of the Chairman-cum- Managing Director of FCI.

16. It was never told to M/s.Deep Rice Mills that the Area Manager has no authority to execute any deed of settlement. Learned counsel for the appellant has no answer to the question: If the Area Manager had no authority to enter into any settlement why was he put in the forefront to negotiate. To the preceding sentence, we need to add that Learned Counsel for FCI admits that a policy decision was taken to negotiate with the rice millers and try and resolve the dispute across the table. Learned Counsel further concedes that it was pursuant to the said policy decision that the Area Manager, FCI commenced the negotiations with M/s. Deep Rice Mills. Counsel concedes that there is no material with FCI to show that the brief entrusted to the Area Manager, FCI was to do preliminary ground-work i.e. if a settlement was possible, to outline the contours thereof and before finalizing the settlement to take the approval from the senior officers."

11. In view of the aforesaid position and the authenticity of the deed

having been established, the learned Arbitrator was right in holding that

the settlement deed between the parties is valid.

12. Even on merit, the learned Arbitrator has held that the claims are

not tenable. I agree with the conclusion of the learned Arbitrator. It is not

a case where the miller, the respondent herein had misappropriated the

paddy, rather there is a finding that the entire paddy was sold off by the

FCI.

13. This Court is conscious of the fact that the issue in this petition is

about the validity of an award. Within the contours of Section 34 of the

Arbitration and Conciliation Act, I see no reason to interfere with the

award. The present petition is dismissed.

(V.KAMESWAR RAO) JUDGE APRIL 23, 2015 rs