Delhi High Court
Fci, Ludhiana vs M/S Gupta Rice & General Mills, ... on 13 September, 2018
$~23
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 13th September, 2018
+ O.M.P. 117/2013
FCI, LUDHIANA ..... Petitioner
Through: Mr. Mohan Lal Sharma, Advocate.
versus
M/S GUPTA RICE & GENERAL MILLS, LUDHIANA
& ANR ..... Respondents
Through: Mr. S.S. Jain, Ms. Veena Ruparan,
Advs for LRs of D-2 (M-9891043078).
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 25th October, 2012 whereby all
the claims of FCI had been rejected.
2. The chronology of facts and events are that an agreement was entered
into on 13th October, 1994 between FCI and M/s. Gupta Rice and General
Mills, Ludhiana - 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 Weight of the
District the paddy paddy in qtls. For
storage which contract is
centre to make for
storage and
milling.
Ludhiana Jagrao Fine 40000 b/s=26000
qtls
Out-turn Milling Qty. of paddy
ratio for Rate out of which
conservation (col.4) rice
of paddy into will be
rice manufactured
P 67% 9 Rs. 25480 qtls
19071.60 rice
...........................
7. The miller shall be responsible for the safe
custody miling 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 26%
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 22611.55 quintals in 34787 bags of fine variety and 806.65
qtls in 1241 bags of common variety was stored in the Respondent's mill for
the purposes of milling. Out of the fine variety of paddy stored, the
Respondent milled only 6714.104 qtls of paddy in 10540 bags. Out of this,
the Respondent could only supply 4498.45 qtls of rice in 4750 bags. Nothing
was milled qua the common variety of paddy. 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 13th 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.58,88,140/- 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 the 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 5th November, 1997 to the
Respondent and sought payment of a sum or Rs.76,35,557.07/-. Vide the
said notice, the claims raised by FCI are as under: -
S. No. DETAILS FINE QUALITY
BAGS QTY.
1. Paddy stored in Mill 34787 22611 22611-55
premises of the respondent as
per the Agreement
2. Paddy Milled upto 31.05.95 10540 6714-10-400
(Raw & Par boiled)
3. Rice received upto 31.05.95 4750 4498-45-000
(Raw & Par boiled)
4. Storage loss at the rate of 2% 137-02-000
on paddy milled
5. Balance paddy as on 01.06.95 24247, fine 115760-42-600 Fine
1241 common 806-65-000 common
6. Cost of balance paddy @ Rs.1,31,94,155
Rs.837.17 of fine quality
83 fine
Rs.6,43,803-50
Common
7. Sale of paddy after 01.06.95 6000 qtl.
and amount realized.
Rs.58,88,140-66
8. Amount recoverable from the Rs.79,49,818-67
respondents
9. Rice received after 31.05.95 in
terms of paddy
10. Value of paddy Rs.2,68,775-78
11. Amount recoverable on Rs.1,11,012.28
account of quality cut/ - grunny
bags retained sales tax/ income Fine
tax etc.
Rs.12,699-74
Common
12. Total amount recoverable Rs.80,73,530-72
13. Amount payable to the miller Rs.67,541-59
towards milling charges,
Stitching charges Rs.6,656-25
14. Cost of gunnies Rs.65,000-00
15. Security Amount Rs.30,000-0
16. Net recoverable as on Rs.76,35,557-07
01.06.1995
5. 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.79,49,818.67/- from which the expenses payable to the Respondent were
Rs.74,197.84/-. Accordingly, Rs.76,35,557.07/- was recoverable from the
Respondent. Before the Arbitrator, it was the plea of FCI that the entire sum
is payable by the Respondent.
6. In the award dated 25th October, 2012, the arbitrator has simply held
that the Respondent did not appear despite repeated notices and hence
nothing remains to be adjudicated. The reasoning given by the arbitrator is
quite cryptic inasmuch as the Food Corporation of India had filed a detailed
claim petition before the Indian Council of Arbitration along with the
evidence by way of affidavit given all the details as to the paddy that was
supplied. In the evidence by way of affidavit, the affidavit also deals with
that there was no out of court settlement in the matter. However, none of
these facts and documents have been considered by the arbitrator. The
arbitrator has simply considered that despite publication notices, none
appeared for the Respondent and there were more than 30 hearings, where
the Respondent was unrepresented. In view thereof, he terminated the
proceedings. There is no finding given on the merits of the dispute.
Relevant paragraph of the award is set out herein below: -
"Claimant has argued the matter at length and have also
filed written submission. An arbitrator need not to go
into the merits of the matter or the question as to whether
the Arbitral Tribunal has been validly constituted, as in
my opinion the matter can be decided on the s basis of
the merit The respondent did not attend the first hearing
before the arbitration tribunal dated 21/1/2011 The
arbitrator directed the ICA to issue fresh notice to
respondent to present with reply to the statement of claim
filed by the claimant, thereafter ICA issued notice to the
respondent at fresh address or authorized
representatives to attend the hearing before the
arbitrator tribunal, Second hearing was fixed on
22/7/2011......... the respondent by way of DASTI, but
not filed after several hearing s respondent did not
appear and therefore proceeded ex- party and thereafter
notice was published in two local daily newspapers The
publication was sent by registered post to the respondent
also there were approximately more than thirty hearings
and none of the hearing was appeared by the respondent,
the last hearing was fixed 17/8/2012. The award was
reserved on 17/8/2012 and pronounced on 25/10/2012.
In my opinion nothing more remains to be adjudicated
in the present proceeding and the proceeding stands to
be terminated."
7. Without giving any findings on the claim of the Food Corporation of
India, the arbitration could not have been terminated in this manner. The
non-appearance of a party-respondent cannot result in dismissal of the
claims. Such a course of action defies basic logic. The Claimant cannot be
punished for the non-appearance of the Respondent. The Arbitrator has a
duty to decide the claims in accordance with law. The Award is, therefore,
not sustainable and, therefore, set aside.
8. OMP is allowed in the above terms.
PRATHIBA M. SINGH
JUDGE
SEPTEMBER 13, 2018
Rekha
