Delhi High Court
Food Corporation Of India vs M/S Guru Nanak Rice And General ... on 11 September, 2018
$~26
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 11th September, 2018
+ O.M.P. 155/2012
FOOD CORPORATION OF INDIA ..... Petitioner
Through: Mr. Sukumar Pattjoshi, Senior
Advocate with Mr. Mohan Lal
Sharma, Advocate.
versus
M/S GURU NANAK RICE AND GENERAL MILLS..... Respondent
Through: None.
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. The Food Corporation of India (hereinafter 'FCI') has filed the
present petition challenging the award dated 6th August, 2011 whereby all
the claims of FCI had been rejected.
2. The chronology of facts and events are that an agreement was entered
into on 10th October, 1994 between FCI and Guru Nanak Rice & General
Mills, Jagraon - Respondent (hereinafter, 'Respondent'). As per the said
agreement, the Respondent was to store paddy in its mill, and mill the same.
After undertaking the process of milling, the resultant rice was to be
supplied to FCI. The terms and conditions as contained in the contract are as
under: -
"AGREEMENT FOR STORAGE-CUM-MILLING
OF FCI PADDY STORED IN MILLERS PREMISES
INTO CONVENTIONAL RATE/PERIODICAL
RICE."
"1. The miller shall be supplied paddy available at
Jagraon as per the arrangements agreed upon by
the miller and accepted by the Corporation.
2. The miller may associate himself at the time of
paddy purchases in the mandis and weigh
bridges to cross check its quality and quantity
respectively. Paddy shall be moved from mandis
to mill premises to be stored in joint custody of
FCI and the miller and the transportation and
stacking operations in mills premises shall be
arranged and cost against threes operations shall
be borne by the Food Corporation of India.
The miller shall undertake storage of paddy in
his premises without claiming any storage and
preservation charges.
3. The Miller shall undertake shelling of paddy at
FCI applicable custom milling rate which will
include all services as per details given below:-
SERVICES :
a) Lifting paddy from storage points in the
mills, loading into trucks and carriage to
the mills.
b) Drying of paddy;
c) Katal of paddy bags before dehusking;
d) Dehusking of paddy;
e) Filling of bags of rice prior to dara-making;
f) Dara making of rice bags and filling /
sewing of bags;
g) Transportation of milled rice to railway
stationed loading into wagons, inspection,
weighment and sampling as per directions
of the Corporation; or transportation of
milled rice to the storage points to the
Corporation including those of CWC/SWC
hired godowns as per directions of the
Corporation, unloading of trucks and
delivery after inspection, weighment,
sampling at scale point at the cost of miller.
Name of Name of Variety of paddy Weight of the
District the paddy in qtls. For
storage which contract is to
centre made for storage
and milling.
Ludhiana Jagraon Fine 35000=22750-00
Out-turn Milling Qty. of paddy out
ratio for Rate of which (col.4)
conservatio rice will be
n of paddy manufactured
into rice
P 67% 9 Rs. 14937-65 22295
eligible
...........................
7. The miller shall be responsible for the safe
custody milling of paddy issued to him
for/delivery of rice, as per agreed and recovery
of out-turn ratio. Miller shall also take good and
losses that may be incurred in paddy/rice during
transit/storage at 1.5 times the economic cost of
the variety of paddy/rice towards the shortfall.
...
8(iii) In case there is shortfall in the recovery of rice
the miller shall pay to the Corporation the cost of
paddy equivalent to the shortfall at the rate of 1
& half times the economic cost of paddy.
....
9(iii) The miller shall complete delivery of rice within
10 days of issuance of paddy to him and rice due
to the Corporation on the total quantity of paddy
issued to him or in joint custody released at
regular interval shall be delivered not later than
the 28th February, 1995. The miller shall further
ensure milling of paddy and delivery of rice in
the following manner : -
October / November 20%
December 26%
January 26%
February 28%
However, in case of process of milling is slowed
down due to operational exigencies beyond the
control of Miller/SRM may consider and extend
the above mentioned milling schedule.
...
16(c) The miller shall be responsible to make good all
shortages in paddy, rice and gunny bags that
might occur while in his custody till the entire
stocks are returned. These shortages can with
the consent of the corporation be made good in
kind according to the specification and variety of
paddy, rice and gunny bags involved. In case the
miller fails to do so, recovery would be made
from him for shortages of paddy and rice at 1 &
half times the economic cost of equivalent
paddy/rice according to the variety involved."
3. A total of 21865.35 quintals in 33639 bags of paddy was stored in the
Respondent's mill for the purposes of milling. The total paddy milled was
to the tune of 12320.0062 quintals in 19340 bags. The remaining paddy
continued to be stored in the Respondent's premises. It was neither milled
nor returned to FCI. The contract was for a period of around 4 months i.e.,
from 10th October, 1994 to 28th February, 1995. The contract was to be
completed by 28th February, 1995 which was extended till 31st May, 1995.
However, since the Respondent did not complete the milling, the left-over
paddy was considered to be sold and a sum of Rs.28,55,160.00/- was
adjusted from the said sale. A huge loss was caused to the FCI because of
which FCI invoked the arbitration clause in the agreement which is as under:
"21. ARBITRATION:-
All the disputes or differences but ever arising
between the parties out of or relating to the agreement
meaning and operation or effect of this agreement or the
breach thereof shall be settled by the arbitration in
accordance with the rules of arbitration of the Indian
Council of Arbitration and the award made in pursuance
thereof shall be binding of the parties the Senior
Regional Manager/ Zonal Manager of the corporation
shall appoint/ nominate arbitrator out of person in the
penal of arbitrators maintained by ICA. It is the terms of
this contract that in the event of arbitrator being
transferred, vacation of office, death or in ability shall
appoint another person out penal maintained by ICA to
act as arbitrators. Such a person shall be entitled to
proceed with reference from the stage where is left by his
predecessor.
Provided further that any demand for arbitration in
respect of any claim(s) of the miller, under the contract
shall be in writing and mad within one year of the date of
completion of expiry of the period of contract if the
demand is not made within the period, claim(s) of the
miller shall be deemed to have been waived off and
absolutely barred and the corporation shall be
discharged and released of all liabilities under the
contract in respect of these claims.
The cost of proceeding in connection arbitration shall
be the discretion of the arbitrator who may make suitable
provision for the same in his award...."
4. Thereafter, FCI issued notice dated 23rd January, 1998 to the
Respondent and sought payment of a sum or Rs.53,26,241/-. The claims
raised by FCI are as under: -
SL. NO. DETAILS FINE QUALITY
BAGS QTY.
1. Paddy stored in the 33639 21865-35
Mill premises of the
respondent as per the
agreement
2. Paddy milled upto 19340 12320.00.062
31.05.95 (Raw & Par
boiled)
3. Rice received upto 8750 8299.75.000
31.05.95 (Raw & Par
boiled)
4. Storage loss @ 2% 251.42.000
driage on paddy
milled
5. Balance paddy as on 14299 9293.93.938
01.06.95
6. Cost of balance paddy Rs.77,80,598.86
@ 837.17 of fine
quality
7. Sale of paddy after 8201Qtl.
01.06.95 and amount Rs.28,55,160.00
realized
8. Amount recoverable Rs. 49,23,438.86
from the respondent
9. Rice received after 466,60qtl
31.05.95 in terms of
paddy
10. Value of paddy Rs. 25,719.25
11. Amount recoverable Rs.2,13, 261.63
on account of quality
cut/gunny bags
retained/sales tax/
income tax etc.
12. Total amount Rs.51,36,700.49
recoverable
13. Amount payable to the Rs. 1,17,147.75
miller towards milling
charges Stitching Rs. 11,562.50
charges
14. Cost of gunnies Rs. 2,00,000.00
15. Security Amount Rs. 30,000.00
16. Net amount Rs.45,27,279.99
recoverable as on
01.06.1995
5. Vide the said letter, FCI called upon the miller i.e., the Respondent
herein, after invoking clause 16(c) that the Respondent is liable to pay 1½
times the economic cost of the paddy/rice which comes to Rs.45,27,279.99/-
along with interest. Claim statement was filed by FCI before the Indian
Council of Arbitration as per which it was acknowledged by FCI that the
total sum recoverable from the miller for the unprocessed un-milled paddy
was Rs. 45,27,279.99/- from which the expenses payable to the Respondent
were to be deducted. Thus, FCI raised a claim before the Arbitrator to
recover the amounts due.
6. A perusal of the award reveals that the only reasoning given by the
arbitrator is that FCI had failed to prove the claim and the quantum by
documents and that the Claimant had also not explained the avoidable delay
in arbitration. The date of the contract is 10th October, 1994. The original
date of completion of the contract was 28th February, 1995 but the unsold
paddy was finally sold after 31st May, 1995. The FCI issued notice dated
19th/22nd July, 1997 and another notice on 6th November, 1997. The claim
petition was filed before the Indian Council of Arbitration on 20th February,
1998 along with the registration fee. The Indian Council of Arbitration
refused to proceed with the arbitration which finally resulted in the FCI
taking the matter right till the Supreme Court. Vide order dated 10th
February, 2000, the arbitration petition seeking appointment of arbitrator
was dismissed by this Court. However, on 17th July, 2003, the Supreme
Court allowed the appeals of the FCI and directed the Indian Council of
Arbitration to appoint the arbitrator. The said order of the Supreme Court
reads as under:
"Keeping into consideration all these aspects, we
consider it just and more appropriate, proper and
reasonable â\200\223 both in law and in equity and
interests of justice to direct ICA to forthwith and not
later than sixty days from this date nominate the
Arbitrator as sought for by the appellants and place the
matters before such Arbitrator, leaving open to the
parties to raise and pursue all objections and contentions
and thereby seek for the decision of the Arbitrator as
envisaged under Section 16 of the 1996 Act, besides
getting adjudication of the respective disputes in these
cases on merits and in accordance with law. Both parties
will have leave and liberties to do so before the
Arbitrator on being nominated/appointed by the ICA,
pursuant to these orders.
The appeals are allowed and accordingly disposed of as
indicated above. The respective parties will bear their
costs."
7. Thus the arbitrator who was appointed was to decide the matter in
accordance with law and not to simply refuse to take the claim into
consideration. The award is completely unreasoned. It merely rejects the
entire claim with one sentence "the burden to prove its case is very heavy on
the claimant. In its affidavit & supporting documents the claimant has not
been able to prove the clauses of agreement & quantum of claim by
evidence, oral or documentary". Such an award is wholly unreasoned and
unsustainable in law. The award is accordingly set aside.
8. The OMP is allowed in the above terms.
PRATHIBA M. SINGH
JUDGE
SEPTEMBER 11, 2018
Rekha
