Central Coafields Ltd. vs Anil Rubber Mills Pvt. Ltd. & Anr.
2016 Latest Caselaw 3246 Del

$~21
*    IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                    Date of Decision : May 04, 2016
+                        FAO(OS) 267/2015
      CENTRAL COAFIELDS LTD                             ..... Appellant
              Represented by: None
                                     versus
    ANIL RUBBER MILLS PVT LTD & ANR              ..... Respondents
              Represented by: Mr.Jeevesh Nagrath, Advocate with
                              Mr.Baldev Kumar Singh and
                              Mr.Shobit Phutela, Advocates
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MS. JUSTICE MUKTA GUPTA
PRADEEP NANDRAJOG, J. (Oral)

1. We have summoned the record of OMP No.138/2013 and CS (OS) No.1115/2004. Learned counsel for the parties have been heard.

2. Under a contract the first respondent supplied a conveyor belt to the appellant and amongst other bank guarantees, the second respondent at the asking of the first respondent gave a bank guarantee in favour of the appellant. The supply was made and a dispute arose regarding the quality of the conveyor belt. The appellant threatened to invoke the bank guarantees. The respondent filed a suit for permanent injunction impleading Central Bank of India and the appellant as defendants. Various guarantees issued by Central Bank of India at the instance of the appellant were prayed as not encashable; with an injunction sought against the bank to pay under the guarantees. Ultimately, the performance guarantee in sum of `8,89,473/- became the subject matter of consideration in the said suit because the defence taken was that the conveyor belt supplied by the respondent No.1 to

the appellant was defective. After the pleadings were completed and documents were filed the parties consented that the dispute may be referred to the arbitration of Justice (Retd.) S.K.Katariar, a former Judge of the Patna High Court, and the order dated March 15, 2012 passed by the learned Single Judge of this Court in the suit, noting the consent, simply records that the dispute would be settled by arbitration and for which both parties shall file their respective pleadings before the learned Arbitrator as also the documents filed, meaning thereby, the suit was not referred to arbitration and the pleadings in the suit and the documents filed were not transmitted to the learned arbitrator.

3. We have checked up the file of the suit and especially Part C thereof and find that never was the suit file requisitioned by the learned Arbitrator nor sent to him.

4. Before the learned Arbitrator whereas the respondent No.1 filed its statement of claim and relied upon documents, the appellant did not file reply to the statement of claim filed by the respondent No.1 nor did it file any counter claim; and we highlight that in the award dated September 30, 2013, in paragraph 2, the learned Arbitrator has noted said fact.

5. The position therefore would be that the learned Arbitrator did not bother that the appellant files its counter statement of facts or documents relied upon and proceeded to publish the award on September 30, 2013.

6. In the award, there is a reference to a pre-delivery inspection report, a reference to a joint inspection report dated July 26, 2003 as also to a test report dated February 05, 2004, but concededly the learned Arbitrator had before him only the joint inspection report dated July 26, 2003 and the reference to the pre-delivery inspection report (without its date or contents

noted) and to the test report dated February 05, 2004 is obviously a narrative by the learned Arbitrator with reference to the arguments advanced and not the documentary evidence.

7. With reference to a part of the joint inspection report dated July 26, 2003, highlighting that the same records a part of the conveyor belt torn and with punch hole, the learned Arbitrator has returned a finding that the conveyor belt supplied was not up to the specifications and thus the performance guarantee could be invoked.

8. Vide impugned order dated March 19, 2015, holding that as per the law declared by the Supreme Court in the decision reported as (2014) 9 SCC 263 ONGC Vs. Western Geco International Ltd., the learned Arbitrator having failed to adopt a judicial approach in the matter, the award has been set aside.

9. Learned counsel for the appellant does not dispute that the appellant did not file any pleadings before the Arbitrator and did not file any document. The award shows that the joint inspection report dated July 26, 2003 is the only document considered by the learned Arbitrator and the same has been extracted in an arbitrary manner by the learned Arbitrator i.e. the part which supports the case of the appellant. Even said part has been recorded with a slight twist by the learned Arbitrator in the narrative because the joint inspection report simply observes that in Drum No.82 punch holes were observed and in Drum No.87 there was elongation.

10. The report records that 6 drums, 2 of which were Drum No.82 and 87 were received by the appellant on March 03, 2003. The report records a note by the respondent No.1 that while accepting the fact noted in the report i.e. of a punch hole and elongation in the two drums, it was not accepted as

being a manufacturing defect. The report records that in that view of the matter it was agreed that cause for the punch hole and elongation needs to be identified.

11. Therefore, before the learned Arbitrator the only evidence was of punch holes and elongation in the two drums, but not the reason thereof. The conveyor belt was a part replacing a part of the existing conveyor belt which was used for transporting coal and thus the cause of the punch holes and elongation could well be a mishandling of the coal or dumping in a manner resulting in damage being caused. Thus, the heart and soul of the dispute was : what caused the damage and not whether there was a damage caused.

12. Regretfully we note that the learned Arbitrator to whom a fixed fee was paid hurried through the arbitration resulting in an award being pronounced which has rightly been opined to be the result of a determination lacking in a judicious approach by the learned Single Judge.

13. The appeal is dismissed.

14. No costs.

CM No.9119/2015 Dismissed as infructuous.

(PRADEEP NANDRAJOG) JUDGE

(MUKTA GUPTA) JUDGE MAY 04, 2016/mamta