Delhi High Court
Mideast Pipeline Products ... vs Fernas Construction Co. Ltd. on 19 March, 2018
$~47
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 19th March, 2018
O.M.P. (COMM) 536/2016
MIDEAST PIPELINE PRODUCTS THROUGH PROPRIETOR
MANINDER SINGH ..... Petitioner
Through Mr.Jayant Mehta, Mr.Sahil Tagotra
and Mr.Rahul Kukreja, Advs.
versus
FERNAS CONSTRUCTION CO. LTD. ..... Respondent
Through Mr.C.D. Mulherkar, Mr.Shailabh
Tiwari and Mr.Prashant Kumar,
Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
I.A. No.3771/2018
This application has been filed by the respondent seeking to address
the oral arguments.
The petition had been heard and reserved for judgment on 05.03.2018
in absence of the counsel for the respondent.
For the reasons stated in the application, the same is allowed and the
learned counsel for the respondent has been given an opportunity to make
oral submissions in opposition to the petition.
O.M.P. (COMM) 536/2016
1. This petition under Section 34 of the Arbitration & Conciliation Act,
1996 (hereinafter referred to as the 'Act') has been filed by the petitioner
challenging the Arbitral Award dated 13.05.2015 passed by the Sole
Arbitrator adjudicating the disputes between the parties.
2. The disputes between the parties arose out of the Work Order/contract
dated 05.05.2010 by which the respondent had taken on hire two "Pipelayer
Caterpillar 583" (hereinafter referred to as 'CAT 583') for a period of three
months on a monthly hire charge of Rs.3,07,000/- per unit. Some of the
conditions of this contract are necessary to be reproduced for the purpose of
the present adjudication:
"1. Scope of work:-
To provide a equipment on hire basis as per details and
specification given below:
Particulars/specification of Equipments & hiring
rates/prices for the equipment shall be as given here under:
Item Minimum Unit Quantity Unit rate per
Duration of month (Rs.)
work/order
contract
Pipelayer, 3 months Nos. 2 307000/-
Caterpillar
Any Change in the specification will not be acceptable. The
equipment shall be in good condition. In case equipment is
found to be not in good condition the same shall be returned
back and no payment whatsoever including the
mobilization/demobilization charges shall be payable. The
decision of FCCL shall be binding to confirm the condition
of the equipment.
The hiring rates/price, tor above equipments shall be for a
monthly working/operation for pipe layer, for the stipulated
period/duration of this work order The said rates are
inclusive one trained operator and one helper per machine
at site."
"28 Supercession Entire work order/contract:
This work order/contract constitutes and represents the
entire work order/contract between the parties with regard
to rights and obligation of each of the parties and cancels
and supersedes all prior understandings, letters,
representations, negotiations between the parties in respect
of the matters dealt with herein."
(Emphasis supplied)
3. The two equipments were supplied by the petitioner to the respondent
on 08.05.2010 when they were dispatched from the petitioner's yard at
Derabassi (Punjab) and Panipat (Haryana). It is the case of the petitioner
that before making the consignment of the equipments, the same had been
duly inspected by the representative of the respondent. This is denied by the
respondent.
4. On receipt of the equipment, the respondent vide its email dated
17.05.2010 complained as under:
"As per inspection your pipe layer make-Caterpillar model
583. These pipe layer didn't fulfill our requirement. Pipe
layer boom are of 40 ton not 65 ton. Secondly pipe layers
mechanisms are mechanical not hydraulic."
5. The respondent reiterated its complaint vide email dated 31.05.2010
and the same is reproduced herein below:
"We have received two no's pipe layer from your side but
as per clause 1, after inspection we found your pipe layers
are not suitable for 70 ton. These pipe layers don't fulfill our
requirement and all in bad & not with family boom and no
counterweight. Due to these we intently return the same.
Kindly return our advance payment and security deposit."
6. The petitioner responded to the above email vide its email dated
02.06.2010 inter-alia claiming that the equipments had been duly inspected
by the representative of the respondent before being dispatched to their work
place. I may at this stage note that the email admits that what was supplied
to the respondent was not the hydraulic machine for which the brochure has
been sent by the petitioner to the respondent. The petitioner by this email
further called upon the respondent to return the equipments paying at least
one month rental for the same and undertook to pay the balance on return of
the equipment.
7. The respondent vide its email dated 24.06.2010 reiterated that the
pipelyer is not suitable for 70 ton and does not satisfy its requirements. The
said email is reproduced herein below:
"We have received two no's pipe layer from your side but
As per clause no.- 1, after inspection at site we found your
pipe layer are not suitable for 70 ton. These pipe layers
don't fulfill our requirement and all in bad & not with family
boom and no counterweight. These pipe layer laying idle at
yard from the date of receiving at our site. Kindly
demobilized equipments & return our Advance payment
security deposit.
For more conversation you can discuss with our higher
management (Mr. Rohit Singhal- 9650784555 (CEO) & Mr.
Sanjiv Malhotra -09810120055 (Head- South East Asia)."
8. The petitioner vide its email dated 24.06.2010 reiterated that the
equipment supplied is the one which was selected by the respondent and the
respondent should have known its capacity. They further reiterated that the
equipment has been supplied only after due inspection and therefore, if the
equipment is not satisfying the purpose for which it was taken by the
respondent, the petitioner cannot be blamed for the same. The petitioner
further called upon the respondent to return the equipment in accordance
with Clause 2 and 3 of the contract.
9. The respondent, vide its email dated 25.06.2010 called upon the
petitioner to demonstrate that the equipment supplied to the respondent is
suitable for 70 tons. The said email is reproduced herein below:
"We are not accepting your below email point. Booms are
of 40 T. counter weight is not sufficient, please demonstrate
that they are suitable for 70 T."
10. By an email of the same day, the petitioner replied as under:
"1. xxxx
2. Please let us know in which communication you have
started your requirement (70 Ton) and where have we
committed to provide these requirements. The contract is for
CAT 583 and hence whatever are its capacities.
3. xxxx
4. We offered you CAT 583 which were sent to you and
have been inspected by the machines and have been loaded
in your presence. Everything you have claimed thereafter
does not stand and in fact if you are making these
accusations after you yourself inspected the machine and
now you are casting doubts on your own competence and
integrity and hence we cannot be responsible for your
mistakes.
5. The offer for inspection and your visit for inspection
was the time for any demonstrations of lifting capacities and
not after you have signed contracts and taken our
machines."
11. The respondent, vide its letter dated 04.08.2010 called upon the
petitioner to refund the advance rent paid by it. The contents of this letter
are also of importance for the purpose of the present adjudication and the
same are reproduced herein below:
"In continuation with our work order and our request for
quotation (email) dated 05.05.2010 earlier and our frequent
emails, we regret to inform that side boom provided to us
are not 70T capacity and cannot lift 70T.
The equipments capacity cannot be inspected prior to
transportation to site, you are therefore requested to refund
the advance and the rent paid by FCCL immediately so that
we can transport the machines (Booms already handed over
to you back) at the earliest and close the work order. No
further claims or cost impact shall be entertained under this
work order."
12. Finally, the respondent returned one of the equipment along with
some parts of the second equipment on 29.07.2010.
13. The petitioner vide its letter dated 07.09.2010 called upon the
respondent to return the balance of the second equipment as well. It
reiterated that the machines that were given to the respondent were 'CAT
583' which are in accordance with the specification given in the work order.
The respondent, however, insisted on the return of the advance before
returning the second equipment. This led to a criminal complaint being filed
by the petitioner against the respondent and it was only on 03.10.2011 that
the balance of the second equipment was returned by the respondent to the
petitioner.
14. The disputes before the Arbitrator can be summarized into the
following two issues:
1. Whether the petitioner was to supply to the respondent a pipelayer
with 70 tons capacity or the named equipment in the work order i.e
CAT 583?
2. Whether the equipment actually supplied by the petitioner to the
respondent was CAT 583 as specified in the work order or not?
15. The Arbitrator, relying upon the letter dated 29.04.2010 from the
petitioner to the respondent, the email dated 01.05.2010 from the respondent
to the petitioner and the return email dated 01.05.2010 from the petitioner to
the respondent has held that the petitioner was to supply a 70 tons capacity
pipelayer to the respondent and having failed to do so, is in breach of the
agreement. The relevant finding of the Arbitrator in this regard are quoted
herein below:
"8.7 On the strength of these two clauses of the Work
Order set out in para 8.4, learned counsel for the claimant
submitted that the document marked Ex CW1/2 is
completely obviated from consideration. The Work Order
(Ex. CW 1/3) should be taken to be a complete document,
and any external aid is legally impermissible. The
contention completely overlooks the underlined portions of
clause 28, set out herein above. The net result is that the
capacity of the equipments needed by the claimants has not
been stated in the Work Order {Exhibit CW 1/3}, and in
view of the requirement clearly stated by the respondent as
well as the claimant in Ex.CW1/2, it is evident that the
intention of the parties was for supply of CAT 583, of 70
tons capacity. In other words, the capacity of the equipment
not having been stated in the Work Order, the clauses relied
upon by the claimant do not help the claimant. The
irresistible conclusion, therefore, is that the parties had
agreed for supply of CAT 583, of the capacity of 70 tons,
and of hydraulic variety."(Emphasis supplied)
16. In my opinion, the Arbitrator being a creature of the agreement itself
cannot act contrary to the terms of the agreement. In the present case, the
agreement, as quoted above, had mentioned the equipment to be supplied by
a brand name. There was absolutely no ambiguity in the terms of the
contract which required any interpretation from the Arbitrator. It is only in
case where a clause of the agreement is capable of interpretation in different
manner and the Arbitrator interprets it, the Court is precluded from
interfering with such award only on the basis that the interpretation, though
possible or plausible, is not how the Court would like to interpret it. In the
present case, the Arbitrator was not required to interpret the terms of the
agreement at all as there was no ambiguity in the terms of the Supply
Order/Agreement. The prior correspondence relied upon by the Arbitrator
had culminated in the final Work Order/contract. Therefore, the Contract has
to be read on its own terms. Of course, if the terms of the contract are
ambiguous in any manner, the Arbitrator can look into the prior negotiations
to find what the parties intended, however, where the terms of the contract
are clear and unambiguous, the Arbitrator cannot hold that these clear and
unambiguous terms do not reflect the true intent of the parties as may be
ascertained from the negotiations or correspondence exchanged between the
parties prior to entering into such contract. Naihati Jute Mills Ltd. v.
Khyaliram Jagannath AIR 1968 SC 522; Joseph Darmanin v. Carmel
Micallef, AIR 1946 PC 50.
17. In Nabha Power Limited (NPL) v. Punjab State Power Corporation
Limited (PSPCL), 2017 SCC Online 1239, the Supreme Court has cautioned
that the 'business efficacy test' cannot be applied by the Court to substitute
to its own view of the presumed understanding of the commercial terms by
the parties if the terms are explicit in their expression. The explicit terms of
a contract are always the final word with regards to the intention of the
parties. Therefore, there was no occasion for the Arbitrator to have, in the
name of interpreting the contract, re-written the same by imparting an
alleged intent gathered by it from the correspondence exchanged between
the parties prior to entering into the contract.
18. In Food Corporation of India vs. Chandu Construction and Anr.
(2007) 4 SCC 697, the Supreme Court had held that the express covenants
of contracts cannot be ignored and a claim for payment of money cannot be
granted on some vague plea of equity. As the Arbitrator derives its authority
from the contract, if he acts in disregard of the same, he acts without
jurisdiction. A deliberate departure from the contract amounts to not only
manifest disregard of his authority but would also be a violation of Section
28(3) of the Act. Paragraphs 11 to 15 and 19 from the said judgment are
reproduced hereinunder:-
"11. It is trite to say that the arbitrator being a creature of the
agreement between the parties, he has to operate within the
four corners of the agreement and if he ignores the specific
terms of the contract, it would be a question of jurisdictional
error on the face of the award, falling within the ambit of legal
misconduct which could be corrected by the court. We may,
however, hasten to add that if the arbitrator commits an error
in the construction of contract, that is an error within his
jurisdiction. But, if he wanders outside the contract and deals
with matters not allotted to him, he commits a jurisdictional
error (see Associated Engg. Co. v. Govt. of A.P. [(1991) 4 SCC
93] and Rajasthan State Mines & Minerals Ltd. v. Eastern
Engg. Enterprises [(1999) 9 SCC 283] ).
12. In this context, a reference can usefully be made to the
observations of this Court in Alopi Parshad & Sons
Ltd. v. Union of India [AIR 1960 SC 588] wherein it was
observed that the Contract Act does not enable a party to a
contract to ignore the express covenants thereof, and to claim
payment of consideration for performance of the contract at
rates different from the stipulated rates, on some vague plea of
equity. The Court went on to say that in India, in the codified
law of contracts, there is nothing which justifies the view that a
change of circumstances, "completely outside the
contemplation of parties" at the time when the contract was
entered into will justify a court, while holding the parties
bound by the contract, in departing from the express terms
thereof. Similarly, in Naihati Jute Mills Ltd. v. Khyaliram
Jagannath [AIR 1968 SC 522] this Court had observed that
where there is an express term, the court cannot find, on
construction of the contract, an implied term inconsistent with
such express term.
13. In Continental Construction Co. Ltd. v. State of
M.P. [(1988) 3 SCC 82] it was emphasised that not being a
conciliator, an arbitrator cannot ignore the law or misapply it
in order to do what he thinks is just and reasonable. He is a
tribunal selected by the parties to decide their disputes
according to law and so is bound to follow and apply the law,
and if he does not, he can be set right by the court provided his
error appears on the face of the award.
14. In Bharat Coking Coal Ltd. v. Annapurna
Construction [(2003) 8 SCC 154] while inter alia, observing
that the arbitrator cannot act arbitrarily, irrationally,
capriciously or independent of the contract, it was observed,
thus: (SCC pp. 161-62, para 22)
"22. There lies a clear distinction between an error within
the jurisdiction and error in excess of jurisdiction. Thus, the
role of the arbitrator is to arbitrate within the terms of the
contract. He has no power apart from what the parties have
given him under the contract. If he has travelled beyond the
contract, he would be acting without jurisdiction, whereas if he
has remained inside the parameters of the contract, his award
cannot be questioned on the ground that it contains an error
apparent on the face of the record."
15. Therefore, it needs little emphasis that an arbitrator derives
his authority from the contract and if he acts in disregard of the
contract, he acts without jurisdiction. A deliberate departure
from contract amounts to not only manifest disregard of his
authority or a misconduct on his part, but it may tantamount to
a mala fide action (also see Associated Engg. Co. v. Govt. of
A.P. [(1991) 4 SCC 93].
xxxxx xxxxx
19. From the above extracted terms of the agreement between
FCI and the claimants, it is manifest that the contract was to be
executed in accordance with the CPWD specifications. As per
para 2.9.4 of the said specifications, the rate quoted by the
bidder had to be for both the items required for construction of
the godowns, namely, the labour as well as the materials,
particularly when it was a turnkey project. It is to be borne in
mind that filling up of the plinth with sand under the floors for
completion of the project was contemplated under the
agreement but there was neither any stipulation in the tender
document for splitting of the quotation for labour and material
nor was it done by the claimants in their bid. The claimants
had submitted their tender with eyes wide open and if
according to them the cost of sand was not included in the
quoted rates, they would have protested at some stage of
execution of the contract, which is not the case here. Having
accepted the terms of the agreement dated 19-9-1984, they
were bound by its terms and so was the arbitrator. It is, thus,
clear that the claim awarded by the arbitrator is contrary to
the unambiguous terms of the contract. We are of the view that
the arbitrator was not justified in ignoring the express terms of
the contract merely on the ground that in another contract for
a similar work, extra payment for material was provided for. It
was not open to the arbitrator to travel beyond the terms of the
contract even if he was convinced that the rate quoted by the
claimants was low and another contractor, namely, M/s Gupta
and Company had been separately paid for the material. The
claimants' claim had to be adjudicated by the specific terms of
their agreement with FCI and no other."
19. Learned counsel for the respondent has relied upon the judgment of
the Supreme Court in Commercial Auto Sales Private Limited v. Auto Sales
(Properties), (2009) 9 SCC 620; Mcdermott International Inc. V. Burn
Standard Co. Ltd & Ors., (2006) 11 SCC 181; National Highway Authority
of India v. ITD Cementation India Ltd. (2005) 14 SCC 21; National
Highway Authority of India v. JSC Centrodorstroy (2016) 12 SCC 592;
and order dated 03.07.2009 passed by this Court in OMP 338/2009 titled
Samho Gunyong Co. Ltd. v. Flakt (India) Ltd. & Ors. to contend that the
Arbitrator was obligated to take into consideration the correspondence
exchanged between the parties while interpreting the terms of the contract
and interpretation of a contract being a matter for the Arbitrator to
determine, this court would not substitute its view for that of the Arbitrator.
20. While there can be no doubt on the above-stated proposition, at the
same time, where the Arbitrator has wandered outside the contract and
ignores the express covenants thereof or puts an interpretation to the contract
that is wholly contrary to the express terms thereof, the court shall not be
powerless to interfere with such award. Food Corporation of India v.
Chandu Construction(supra); Numaligarh Refinery Ltd. v. Daelim
Industrial Co. Ltd. (2007) 8 SCC 466; Security Printing and Minting
Corporation of India Ltd. v. Gandhi Industrial Corportion (2007) 13 SCC
236. As observed above, the equipment being ordered by brand name, there
is no question of interpretation left for the Arbitrator to consider. Therefore,
these judgments, in my opinion would have no application to the facts of the
present case.
21. In this regard, though not strictly applicable, learned counsel for the
petitioner has rightly relied upon Section 15 and Section 16 of the Sale of
Goods Act, 1930, which are reproduced as under:-
"15. Sale by description.-- Where there is a contract for
the sale of goods by description, there is an implied
condition that the goods shall correspond with the
description; and, if the sale is by sample as well as by
description, it is not sufficient that the bulk of the goods
correspond with the sample if the goods do not also
correspond with the description.
16. Implied conditions as to quality or fitness,- Subject to
the provisions of this Act and of any other law for the time
being in force, there is no implied warranty or condition as
to the quality or fitness for any particular purpose of goods
supplied under a contract of sale, except as follows:-
(1) Where the buyer, expressly or by implication,
makes known to the seller the particular purpose for which
the goods are required, so as to show that the buyer relies
on the seller's skill or judgment, and the goods are of a
description which it is in the course of the seller's business
to supply (whether he is the manufacturer or producer or
not), there is an implied condition that the goods shall be
reasonably fit for such purpose:
Provided that, in the case of a contract for the sale of a
specified article under its patent or other trade name, there
is no implied condition as to its fitness for any particular
purpose.
Xxxxx"
22. The above provision clearly shows that where there is a contract for
sale (in this case the contract of hire) of a specified article under its trade
name, there is no implied condition as to its fitness for any particular
purpose. Applying the said principal to the facts of the present case, once
the equipment to be supplied by the petitioner to the respondent was
mentioned by the trade name i.e. 'pipelayer Caterpiller 583', its performance
or non performance for the particular purpose required by the respondent,
was of no importance and could not have been used for the purpose of
rewriting the contract between the parties.
23. Even otherwise, the prior correspondence relied upon by the
Arbitrator also cannot support the interpretation that he has put to the
contract or give rise to the implied term that he imported into the agreement.
24. The negotiations between the parties seem to have been initiated by
the respondent through some teleconversation, followed by the quotation
sent by the petitioner for "583 Pipelayer/Side Boom Machine" vide its letter
dated 29.04.2010. There is no mention of the capacity of this machine in the
letter/quotation.
25. By its email dated 01.05.2010, the respondent informed the petitioner
that it required two 70 tons capacity pipelayer for its project and inquired if
the petitioner was interested in supplying such pipelayer on hire basis. The
petitioner by its email(s) of the same date supplied the brochure of CAT 583
and also its quotation. Interestingly, the brochure though mentions the
maximum lifting capacity of the machine as 65kgs., it also mentions the lift
capacity at tipping point as 35 kgs and working range as around 25 kgs.
Therefore, certainly CAT 583 did not have the capacity of 70 tons as
allegedly required by the respondent. Still, the respondent, who certainly
cannot claim itself to be a layman, entered into the contract with the
petitioner without mentioning the capacity of the machine required by it.
The maxim caveat emptor would clearly be applicable to a case of this
nature. It is also of relevance to note that the contract/Work Order dated
05.05.2010 is on the letter-head of the respondent, still the respondent did
not prescribe the capacity of the machines in the Work Order. The only
inference is that the capacity of the machine was not a condition of the
contract and no such implied condition can be imported into the contract.
The Arbitrator, therefore, has clearly rewritten the agreement between the
parties by importing conditions that were not found in the agreement itself.
26. The next question involved in the present case is whether the
petitioner did supply to the respondent pipelayer Caterpiller 583 or not?.
27. I have reproduced the above correspondence addressed by the
respondent to the petitioner in detail only to show that till 15.01.2011 i.e.
almost more than seven months after the supply of the equipments, there
was no complaint made by the respondent that the equipment supplied is not
the pipelayer Caterpillar 583 or a substitute version thereof. Even by the
email dated 15.01.2011, the dispute raised by the respondent was not that the
equipment supplied is not Cat 583. The said email is reproduced herein
below:
"1. Both the equipment supplied shall be tested for its
properties as per the Manufacture CAT 583. This shall
cover the aspects or equipment condition, load lifting
capacity, essential counterweights for lifting the maximum
load.
2. The results shall decide upon the agreement of final
settlement of the hire."
28. By another email of the same date, the respondent had stated that if
the test passed the acceptable limits of CAT 583, it would pay the entire
rental to the petitioner. The said email is reproduced herein below:
"Further to email below it has also been agreed that if the
tests passes to the acceptable limits of CAT 583, FERNAS
shall pay the rent till date and if it fails MIDEAST shall pay
5 times the advance paid. Please confirm for us to proceed
with the tests."
29. A reading of the above two emails would show that it was not the case
of the respondent that the equipment supplied is not CAT 583. The only test
the respondent wanted was whether the machine performed as per the
brochure published for the said machinery. This again cannot be a condition
put on the petitioner who is the supplier of the equipment and not the
manufacturer thereof.
30. It was only with the email dated 21.03.2011 that the respondent for
the first time raised a grievance that the machinery supplied by the petitioner
to the respondent was in fact not CAT 583. This email, as is evident from
its date, is after almost nine months from the supply of equipment. Further,
respondent curiously stated that the respondent was aware of this fact
immediately after supply of the equipment. Paragraph 12 of the letter
alleged that the operator of the petitioner had accepted this fact even at the
time of inspection and did not agree to operate the equipment at the time of
inspection. If this was so, why the respondent did not return the machines
immediately, has not been explained.
31. The above correspondence would clearly show that for a long period
of time, there was no dispute between the parties that the equipment
supplied by the petitioner to the respondent is not the one which is
mentioned in the Work Order. The dispute was only whether it is capable of
70 tons operation or not. It is only after a long lapse of time that the
respondent started raising the grievance that the equipment supplied is in
fact not the one mentioned in the Work Order.
32. The Arbitrator on this issue has held as under:
"It may incidentally be stated that the learned counsel for
the respondent during the course of submissions stated that
it would have raised no objection if the machines had
performed upto 65 ton as the CAT 583 brochure provides its
lifting capacity as such.
This was followed by the next e-mail dated 31.05.2010
(CW1/14), from the respondent to the claimant, regarding
return of the two machines. The text of the e-mail reads as
follows-
"We have received two nos. pipe layer from
your side but as per clause 1, after inspection we
found your pipe layers are not suitable for 70 ton.
These pipe layers don't fulfill our requirement and
all in bad and not being with family boom and no
counter weight. Due to these we intently return the
same. Kindly return our advance payment and
security deposit."
Such prompt communications from the respondent to the
claimant, conveying in no uncertain terms supply of grossly
deficient machines, read with the position that it had
deposited a sizeable sum of Rs.9,84,242.00 with the
claimant by way of advance and security deposit well before
the equipments were mobilised, speaks volumes as to the
bonafides of the respondent. It is thus manifest on the face
of it that the claimant did not have in its possession CAT
583, of 65/70 tons, of the hydraulic variety, and had
supplied different equipments, possibly a converted Dozer a
converted of 40 tons, and the mechanical variety. It is
evident that the claimant, knowing full well that it did not
have machines of the contracted specifications, purposely
and with the motive of wrongful gain had supplied different
equipments and of different specifications and hence
avoided all attempts to have the equipments tested in the
presence of a Cater Pillar representative as sought for by
the respondent on several occasions. This was clearly an act
of breach of agreement on the part of the claimant who took
a chance of sending such equipments possibly in the hope
that it may not be detec.ted, or that the respondent will 110t
pursue the matter as it has done, and the claimant had
already pocketed Rs.9,84,242.00P."
33. The above would show that the Arbitrator has not considered the
effect of the delay in making of the complaint by the respondent nor has
discussed any evidence led by the parties on this issue. The Arbitrator draws
an adverse inference against the respondent for it not agreeing to put the
equipment to test, without even appreciating if the insistence on such test
was in accordance with law or contract. The finding of the Arbitrator at best
can be summarized as conjecture and not based on the evidence.
34. Another important issue in the present case as been noted above is
that one of the equipment had been returned by the respondent to the
petitioner on 29.07.2010, while the second equipment had been returned,
only after filing of a criminal case, on 03.10.2011. The petitioner had raised
a claim for wrongful detention of this equipment by the respondent.
Learned counsel for the respondent has been unable to show any provision
in the contract or law which would allow the respondent to retain the
equipment for the advance rent paid by it to the petitioner. In any case, this
was an issue to be determined by the Arbitrator while considering the claim
of the petitioner. Unfortunately, the Arbitrator has dismissed the claim of
the petitioner in a cursory manner, which is reproduced herein below:
"In view of clause 1 of the Work Order set out hereinabove,
if the equipment is not in good condition, the same shall be
returned back and no payment whatsoever including the
mobilization/demobilization charges incurred by the
respondent shall be payable with effect from the date of
such expenditure till the date of refund. In view of the
conduct of the claimant, the entire consequences adverse to
the claimant shall be attributable to it, for example, the
delay as well as the cost involved in
mobilization/demobilization of the equipment on both sides
of the journey, deterioration of the equipments, if any, in the
respondent's yard (for which there is not sufficient evidence)
etc. The respondent cannot at all be held responsible for the
same. Thus the claims of the claimant must be rejected."
35. The Arbitrator therefore, has not considered the claims made by the
petitioner at all and has rejected the same without giving any cogent reason.
36. The Arbitrator, in the Impugned Award, has further awarded damages
of approximately Rs. 36 lakhs in favour of the respondent for the alleged
breach of contract by the petitioner. As noted above, the contract in question
was for hire of two machines at the monthly rent of Rs. 3,07,000/- per month
per machine and for a period of three months. The total contractual value
was, therefore, 18,42,000/- plus taxes. The damages awarded are therefore,
totally unreasonable especially when by its email dated 02.06.2010, the
petitioner had offered to refund back the advance rental paid by the
respondent after deducting one month's rental.
37. In view of the above, the Impugned Award is set aside, leaving it
open to the parties to initiate such appropriate proceedings as may be
available to them in law. If any such proceeding is initiated, the parties shall
be entitled to claim the benefit of limitation in terms of Section 43(4) of the
Act.
38. The petition is allowed in the above terms with no order as to cost.
NAVIN CHAWLA, J
MARCH 19, 2018/Arya
