Delhi High Court
Food Corporation Of India vs M/S Grewal Rice & General Mills & ... on 16 March, 2018
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Judgement: 16th March, 2018
+ FAO(OS) 272/2017 & CM APPL. 37538/2017
FOOD CORPORATION OF INDIA ... Appellant
Through: Mr. Rajeev Sharma, Adv.
Versus
M/S GREWAL RICE & GENERAL MILLS & ANR
... Respondents
Through: Mr. Kumar Dushyant Singh
with Mr. Siddharth Dutta, Advs
Mrs. Bharathi Raju, CGSC with
Ms. Saakshi Agrawal, Advs for
UOI.
CORAM:-
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR JUSTICE C. HARI SHANKAR
% (JUDGMENT)
C. HARI SHANKAR, J.
1. We had, vide our order dated 16th March, 2018, dismissed the
present appeal, stating that the reasons for dismissal would follow.
This judgement proceeds to record the said reasons.
2. The appellant seeks, by means of the present appeal, filed under
Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as "the 1996 Act"), to challenge an order dated 19th July,
2017 passed by the learned Single Judge in IA 7953/2017, preferred
FAO (OS) 272/2017 Page 1
by the appellant in OMP 690/2012 (in which the present appellant was
the petitioner).
3. Inasmuch as the impugned order is brief, it may be reproduced,
in extenso, as under:
" This application is filed by the respondent for
direction to the learned Arbitrator that the order dated
30.01.2015 passed by this Court be implemented
regarding leading of evidence and permission of cross-
examination etc. Earlier the learned Arbitrator had
passed the Award on 26.4.2012. In a challenge to the
Award before this court, this court on 30.1.2015 set aside
the Award and remitted the matter back to the learned
Arbitrator for deciding the claims filed by the petitioner
on merits, in accordance with law.
The grievance of the applicant / respondent
appears to be that when the matter was taken up afresh
by the learned Arbitrator an application filed by the
respondent seeking cross-examination of the claimant‟s
witness and application for bringing the entire original
documents was dismissed. A perusal of paragraph 6 of
the order passed by the learned Arbitrator dated
28.4.2017 dismissing the application filed by the
respondent seeking cross-examination of the claimant‟s
witnesses would show that the learned Arbitrator has
taken a view that implicit in the order of this court dated
30.1.2015 is the direction that the matter has been
remitted back for the limited purpose of passing a fresh
Award on merits on the basis of the existing record.
Hence, a view was taken that directions of this court do
not warrant any further evidence being recorded.
I dispose of this application with a clarification
that it would be for the learned Arbitrator to take a
decision regarding any request made for additional
evidence/cross-examination and a bar to the same cannot
FAO (OS) 272/2017 Page 2
be read in the order passed by this court dated
30.1.2015.
Application stands disposed of.
Dasti. "
4. The controversy in the present case being limited, an equally
limited recital, of the factual matrix wherein it arises, would suffice.
4.1 On 7th October, 1994, the appellant entered into an agreement
with the respondent, for storage-cum-milling of paddy. The period of
performance of the agreement was up till 28th February, 1995. On 6th
November, 1997, a legal notice was issued, by the appellant to the
respondent, alleging that, despite extension, of the period of
performance, by the appellant, till 31st May, 1995, the respondent had
failed to complete milling of the paddy by the said date, resulting in
liability, on the respondent, to pay an amount of Rs. 52,45,943.09.
No response being forthcoming from the respondent thereto, the
appellant, on 20th February, 1998, approached the Indian Council of
Arbitration (ICA) for appointment of an arbitrator, in accordance with
the arbitration clause contained in the agreement aforesaid. The ICA,
however, refused to appoint an arbitrator, stating that the arbitration
clause in the agreement was not in terms of the clauses governing the
ICA. The appellant, thereupon filed OMP 173/1999 before this Court,
under Section 11(6) of the 1996 Act, which was dismissed, by this
Court, vide order dated 10th February, 2000. The appellant moved the
Supreme Court, thereagainst, by way of Civil Appeal 4655-
4809/2003, which was allowed vide judgement dated 17th July, 2003,
FAO (OS) 272/2017 Page 3
with a direction, to the ICA , to nominate an arbitrator, as sought by
the appellant.
4.2 In compliance therewith, a sole arbitrator was appointed, by the
ICA, to arbitrate on the dispute between the appellant and the
respondent. Statement of Claim was filed, before the sole arbitrator,
by the appellant and written statement, in response thereto, was filed
by the respondent. Affidavits in evidence were also filed by the
appellant and the respondent.
5. On 15th July, 2011, the following order was passed by the sole
arbitrator:
" Both the parties have filed duly sworn affidavit(s).
The same have been placed on record.
The counsels were directed to produce the deponents for
cross-examination and to file supporting documents. The
counsels for both the parties have expressly submitted
that they do not want to cross-examine the deponents and
further requested that the hearing be fixed for final
arguments.
After going through the replies, counter replies,
affidavits(s) of both the parties, the following issues are
framed on which both the parties will advance their
arguments.
1. Whether the appointment of Sole Arbitrator
to adjudicate the present dispute between the
parties is non-est and these proceedings without
jurisdiction for the reason set out in preliminary
objections by the respondent?
FAO (OS) 272/2017 Page 4
2. Whether there was a settlement of the
dispute between the parties, in the year 2006, if yes
its effects?
3. Whether the present reference to Arbitration
is barred by limitation?
4. Whether the Senior Regional Manager/Distt.
Manager, FCI was duly authorized to file the
statement of claim?
5. Whether the respondent committed a breach
of agreement dated 7.10.1994?
6. Whether the Claimant is entitled to claim
amount of Rs. 52,45,943/- or any part of that
amount form the respondent?
7. Whether the Claimant is entitled to recover
interest, cost, if any, if so, for what amount, rate
and period?
8. Relief.
The next date of hearing is fixed for 17th September, 2011
at 11:00 AM at Federation House, Tansen Marg, New
Delhi, for final arguments."
6. The sole arbitrator proceeded, on 26th April, 2012, to pass an
award, in the aforementioned arbitral proceedings between the
appellant and the respondent, holding that a deed of settlement had
been legally and validly executed, between the appellant and the
respondent, in 2006, in which it had been agreed that the appellant
would not pursue its claims against the respondents as the disputes
FAO (OS) 272/2017 Page 5
between them stood finally settled. As such, the learned sole
arbitrator held that the dispute was no longer arbitrable, and rejected
the claim petition of the appellant on this short ground.
7. Aggrieved thereby, the appellant moved this Court, under
Section 34 of the 1996 Act, by way of OMP 690/2012.
8. Vide order dated 30th January, 2015, a learned Single Judge of
this Court set aside the aforementioned award dated 26 th April, 2012,
passed by the learned sole arbitrator, holding that the "settlement"
stated to have been entered into, between the appellant and the
respondent, was not valid, on account of its not having been approved
by the Chairman and Managing Director (CMD) of the appellant. As
such, it was held that the learned sole arbitrator had erred in holding
the claims of the appellant,, not to be arbitrable and in dismissing
them on that ground. The award dated 26th April, 2012, of the learned
sole arbitrator, was, therefore, set aside and the matter was remanded
back to the sole arbitrator for deciding the claims of the appellant on
merits, in accordance with law.
9. In the said remand proceedings, an application was moved, by
the respondent on 13th November, 2015, before the learned sole
arbitrator, praying for grant of an opportunity, to the respondent, to
cross-examine the appellant's witness, and, for that purpose, to direct
the appellant to bring the entire original documents / record for such
FAO (OS) 272/2017 Page 6
cross-examination. The said application deserves to be reproduced, in
extenso, as under:
"APPLICATION FOR CALLING THE WITNESS OF
THE CLAIMANT WHO FURNISHED HIS AFFIDAVIT
FOR THE CROSS-EXAMINATION BEFORE
SUBMITTING THE WITNESS ARGUMENTS IN THIS
REFERENCE.
RESPECTFULLY SHOWETH:
1. Under the above noted arbitration reference was
fixed before this Ld. Arbitral Tribunal after the matter
has been remanded by Hon‟ble Delhi High Court, New
Delhi.
2. That on the last date of hearing, this Ld. Arbitral
Tribunal passed an order for submitting the written
arguments in support of the claim.
3. That during the preparation of the written
submissions, it has come to the notice of the counsel for
the applicant/respondent that in this case, the affidavit
has been furnished by the witness of the claimant and in
this affidavit Shri Sandeep Sangal, mentioned various
documents i.e. annexure have been referred but then
original of the said documents have not been produced
on record. Moreover, in this case, on the similar subject
matter, earlier matter was referred to Shri N.L. Kakkar,
Ld. Arbitral Tribunal who had rejected the reference on
29.3.1997. But this fact has also not been disclosed by
the claimant in the pleadings as well as in the affidavit.
Further, there was various documents which are most
essential to put to the witness of the claimant for the
cross-examination. Now in this reference, the merits of
the claim is to be determined by this Ld. Arbitral
Tribunal. So, the cross-examination of the witness of
FAO (OS) 272/2017 Page 7
documents on record, the written submissions cannot be
submitted to this Ld. Arbitral tribunal.
It is, therefore, prayed that the reference may please be
fixed up for the cross-examination of the claimant‟s
witness and he be further directed to bring the entire
original documents/record for the cross-examination in
the interest of justice and equity.
Submitted by:
M/s Grewal Rice & General Mills,
Jagraon, Distt. Ludhiana (Punjab)"
10. Vide order dated 28th April, 2017, the learned sole arbitrator
rejected the above mentioned application of the respondent. In doing
so, the learned arbitrator proceeded in a somewhat peculiar fashion.
He first held that the order of remand dated 30th January, 2015 (supra),
passed by the learned Single Judge of this Court, remitted the matter
back to the sole arbitrator "for the limited purpose for passing the
award on the merits of the case on the basis of the record and prior
proceedings of this Tribunal". In other words, the learned sole
arbitrator was of the view that the order of remand allowed him only
to examine the record before him and passed an award on merits. In
view thereof, the learned sole arbitrator held, in para 8 of his order,
that the application of the respondent, for permission to cross-examine
the appellant's witness, was liable to be rejected. Having, thus,
effectively opined that he had no jurisdiction to entertain the prayers
of the respondent on merits, the learned Sole Arbitrator proceeded,
nevertheless, to reject the said prayers on the ground that both parties
had, on 15th July, 2011, waived the right of further cross-examination,
FAO (OS) 272/2017 Page 8
and that arguments before him were part-heard. Inasmuch as the
documents filed by the appellant, which were stated to have provoked
the respondent's request for permission to cross-examine the
appellant's witness, were within the knowledge of the respondent even
on 15th July, 2011, the learned sole arbitrator held the belated request
of the respondent, to be permitted such cross-examination, to be
unjustified. The learned sole arbitrator further held that the right to
cross-examine the appellant's witness, which the respondent, of his
own will and volition chose to waive on 15th July, 2011, could not "be
revived now at his sweet will and pleasure". The right to be allowed
cross-examination to be discretionary in nature, the learned sole
arbitrator preferred to exercise the said discretion against the
respondent, thereby rejecting the application of the respondent.
11. Provoked anew, the respondent re-approached this Court by
filing an application (IA 7053/2017) in OMP 690/2012, for
clarification of the order dated 30th January, 2015 (supra), passed by
the learned Single Judge in the said OMP.
12. The impugned order, dated 19th July, 2017, allows the said IA
7953/2017, in the terms already set out in para 2 of the present
judgement.
13. The amenability, of an order such as that impugned in the
present case, to challenge in appeal, must necessarily be limited, as the
order is, on its face, merely clarificatory in nature, and does nothing
FAO (OS) 272/2017 Page 9
more than allow the respondent to make a prayer, to the Learned Sole
Arbitrator, for permission to cross-examine the respondent's witnesses
and for issuance of a direction, to the appellant, to produce the original
documents for the said purpose. The learned Single Judge has been
careful not to express any view in the matter, one way or the other,
and we, too, refrain from doing so. The impugned order merely opens
the door to the respondent to make the said prayers, leaving it entirely
in the discretion of the learned sole arbitrator to take a view thereon.
We do not read the impugned order as either allowing the prayers, of
the respondent, to be permitted to cross-examine the appellant's
witness, or to direct the Appellant to produce the original records, in
the arbitral proceedings; clearly, that ball is in the court of the learned
sole arbitrator, and not in this court.
14. For the sake of abundant caution, and in order to avoid any
misgivings on this score, however, we clarify that this court has not
expressed any view on the sustainability, of the request of the
respondent, to be allowed to cross-examine the appellant's witness or
for issuance of a direction, to the Appellant, to produce the original
records. The respondent would, however, be entitled to urge the said
prayers before the learned sole arbitrator, who would have to decide
the same on merits.
15. We are conscious of the fact that the learned Sole Arbitrator
has, even after opining that the order, dated 30th January, 2015, of this
Court did not allow him to entertain the prayers made by the
FAO (OS) 272/2017 Page 10
respondent, proceeded, nevertheless, to reject the application on merits
as well. Strictly speaking, the learned Sole Arbitrator ought not to
have done so. Consequent on the clarification provided by the learned
Single Judge vide the impugned order dated 19 th July, 2017, the
learned Sole Arbitrator would, therefore, have to reconsider his
decision. No exception can, therefore, be found, with the said
direction, as contained in the impugned order of the Learned Single
Judge.
16. Probably conscious of the limited nature of the impugned order,
and the necessarily equally limited scope of the interference therewith
in appeal, Mr Rajeev Sharma, learned counsel for the appellant, urged,
as his principal ground of attack, the maintainability of IA 7953/2017,
primarily contending that the order, dated 28th April, 2017, was
immune from challenge, as it was neither a final award nor an interim
award.
17. This issue, in our view, is no longer res integra, having been
settled by the recent judgement of the Supreme Court in Indian
Farmers Fertilizer Cooperative Ltd vs Bhadra Products, (2018) 2
SCC 534. The Supreme Court was concerned, therein, with the issue
of whether an award, deciding the issue of limitation, could be
challenged by the aggrieved litigant, under Section 34 of the 1996 Act.
The learned sole arbitrator, in that case, passed an award, styled as a
"First Partial Award", rejecting the plea of limitation advanced by the
respondent before him, i.e the Indian Farmers Fertiliser Cooperative
FAO (OS) 272/2017 Page 11
Ltd ("IFFCO"). IFFCO, thereupon, challenged this decision, of the
learned arbitrator, by way of a petition to the learned District Judge,
under Section 34 of the 1996 Act. The learned District Judge
dismissed the said petition, holding that the "First Partial Award", of
the learned arbitrator, could not be said to be an "interim award", and
was not, therefore, amenable to challenge under Section 34 of the
1996 Act. An appeal, preferred by IFFCO thereagainst, to the High
Court of Orissa, was dismissed, resulting in the Supreme Court being
moved in the matter. It was sought to be contended, by IFFCO, before
the Supreme Court, that the "First Partial Award" was an "interim
award" and was, therefore, amenable to challenge under Section 34 of
the 1996 Act. The decision of the learned District Judge, to the
contrary was, therefore, it was contended, erroneous. We may, in this
collection, reproduce Section 34(1) of the 1996 Act, as under:
"34. Application for setting aside arbitral award. --
(1) Recourse to a Court against an arbitral
award may be made only by an application for
setting aside such award in accordance with sub-
section (2) and sub-section (3)."
The expression "arbitral award" is, in turn, defined, in clause (c) of
Section 2 of the the 1996 Act, in the following terms:
"(c) „arbitral award‟ includes an interim award;"
The expression "interim award", however, sadly finds no definition, in
the 1996 Act.
FAO (OS) 272/2017 Page 12
18. The contention of the respondents before the Supreme Court, in
answer to the submissions of IFFCO, was that the "First Arbitral
Award" was, in essence, neither a final award, not an interim award,
but was merely an "order", passed by the learned arbitrator in exercise
of the powers, conferred on him, by Section 16 of the 1996 Act, to
rule on his jurisdiction. Such an order, it was sought to be contended,
being neither an "interim award", nor a "final award", could not be
challenged under Section 34 of the 1996 Act, as was - in the said
respondent's submission - rightly held by the learned District Judge.
19. As a sequitur, the respondent before the Supreme Court further
contended that the appeal, of IFFCO, to the High Court under Section
37 of the 1996 Act, was also incompetent, as appeals, under Section
37(1), lay only against "original decrees of the court passing the
order, namely
(a) refusing to refer the parties to arbitration under Section
8;
(b) granting or refusing to grant any measure under Section
9;
(c) setting aside or refusing to set aside an arbitral award
under Section 34."
20. Adjudicating on the controversy, the Supreme Court noted, the
outset, that Section 31(6) of the 1996 Act, which empowered the
Arbitral Tribunal to, "at any time during the arbitral proceedings,
make interim award on any matter with respect to which it may make
FAO (OS) 272/2017 Page 13
a final arbitral award", was widely couched, in view of the expansive
nature of the expression "any matter". Para 8 of the report opines, on
this issue, as under, in unmistakable terms:
"The language of Section 31(6) is advisedly wide in
nature. A reading of the said sub-section makes it clear
that the jurisdiction to make an interim arbitral award is
left to the good sense of the Arbitral Tribunal, and that it
extends to "any matter" with respect to which it may
make a final arbitral award. The expression "matter" is
wide in nature, and subsumes issues at which the parties
are in dispute. It is clear, therefore, that any point of
dispute between the parties which has to be answered by
the Arbitral Tribunal can be the subject-matter of an
interim arbitral award."
(Emphasis supplied)
21. Applying this dictum to the present case, it is clear that the
decision of the learned sole arbitrator, dated 28th April, 2017, though
styled as an "order", partook of the character of an "interim award".
The submission, of the appellant, to the contrary has, therefore,
necessarily to be rejected.
22. That apart, the submissions of Mr. Rajeev Sharma really
amount to missing the wood for the trees, as IA 7953/2017, which was
decided by the impugned order dated 19th July, 2017, merely sought
clarification of the earlier order, dated 30th January, 2015 (supra).The
right of a litigant before a Court to seek clarification of the order of
the Court can hardly be gainsaid - subject, of course, to the cautionary
note, sounded by the Hon'ble Supreme Court in Zahira Habibullah
FAO (OS) 272/2017 Page 14
Sheikh vs. State of Gujarat, (2004) 5 SCC 353, against the
surreptitious camouflage of review applications as applications
seeking clarification. In the present case, the occasion for the
respondent to move the said application was the adoption, by the
learned arbitrator, in his order dated 28th April, 2017, of the view that
the order passed by this Court on 30th January, 2015 (supra) was
limited in nature, allowing him only to decide the controversy before
him on merits and foreclosing the right of the parties to either seek for
production of additional evidence, or request for permission to cross-
examine each others' witnesses. The impugned order dated 19th July,
2017, merely clarified that no such limitations were contained in the
order dated 30th January, 2015 (supra), and that, therefore, there was
no embargo on the learned arbitrator in taking a view on the said
prayers made by the respondents.
23. We are at a complete loss to understand as to how such an order
could prejudice either party. Having read the order dated 30th
January, 2015 (supra), which has already been reproduced
hereinabove we - like the learned Single Judge - are also unable to
find, in the said order, any restriction on the learned arbitrator
adjudicating on the request of the respondent, before him, to be
permitted to cross-examine the witnesses of the appellant or even for
directing the Appellant to produce the original record. Whether the
said prayers, as made by the respondent, before him ought, or ought
not, to be allowed, would be a matter on which the learned arbitrator
would have to take a view, on merits, and we express no opinion
FAO (OS) 272/2017 Page 15
whatsoever, thereon. In doing so, however, the learned Sole Arbitrator
would have to proceed uninfluenced by the observations made by him
in his order dated 28th April, 2017, for the reasons already stated
hereinabove.
24. We may also observe, in passing that, if the appellant's
submission, that the order dated 20th April, 2017, of the learned sole
arbitrator, was not an interim award, were to be accepted, the very
maintainability of the present appeal, under Section 37 of the 1996
Act, may also be imperiled. However, in view of our findings
hereinabove, we refrain from entering into that arena.
25. Clearly, therefore, the present appeal was an entirely
unnecessary exercise, which has only served to further delay the
arbitral proceedings. Such appeals, in the ultimate analysis, do
disservice to the purpose and philosophy of the 1996 Act, which seeks
to ensure prompt and expeditious resolution of disputes by the arbitral
mechanism.
26. Subject to the above observations, the present appeal is
accordingly dismissed, without any order as to costs.
C. HARI SHANKAR
(JUDGE)
ACTING CHIEF JUSTICE
MARCH 16, 2018/gayatri
FAO (OS) 272/2017 Page 16
