M/S Ethix Alloy vs Hll Lifecare Limited
2023 Latest Caselaw 6981 Kant

                                  COMAP No.42/2021


                         1

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

  DATED THIS THE 5TH DAY OF OCTOBER, 2023

                     PRESENT

  THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR

                       AND

   THE HON'BLE MR. JUSTICE C.M. POONACHA

            COMAP NO. 42 OF 2021

BETWEEN :

M/S ETHIX ALLOY
ETHIX HOUSE
3 CASTELLINO ROAD
NEAR GOLIBAR MAIDAN, CAMP
PUNE-411 00
REPT. BY ITS PARTNER
SRI. DHARMESH GATHANI                    ... APPELLANT

(BY SHRI. SHREYAS JAYASIMHA, ADVOCATE)

AND :

HLL LIFECARE LIMITED
(FORMERLY KNOWN AS HINDUSTAN
LATEX LIMITED)
HAVING ITS REGISTERED/CORPORATE OFFICE
AT HLL BHAVAN, POOJAPURA
THIRUVANANTHAPURAM
KERALA-695 012.
REPRESENTED BY ITS
COMPANY SECRETARY
SRI. P. SREEKUMAR                    ... RESPONDENT

(BY SHRI. RATNESH CHANDRA, ADVOCATE FOR
    SHRI. ADARSH GANGAL, ADVOCATE)
                                      COMAP No.42/2021


                             2
      THIS COMAP IS FILED UNDER SECTION 13(1) OF THE
COMMERCIAL COURTS, COMMERCIAL DIVISION AND
COMMERCIAL APPELLATE DIVISION OF HIGH COURTS ACT,
2015 R/W SECTION 37 OF ARBITRATION AND CONCILIATION
ACT, 1996, PRAYING TO ALLOW THIS APPEAL AND
CONSEQUENTLY SET ASIDE THE JUDGMENT DATED:
29/01/2021 PASSED IN COM.A.S.No. 81/2013 ON THE FILE
OF THE LXXXII ADDITIONAL CITY CIVIL AND SESSIONS
JUDGE, COMMERCIAL DIVISION AT BENGALURU (CCH-83)
AND ETC.,

     THIS COMAP, HAVING BEEN HEARD AND RESERVED
FOR JUDGMENT ON 15.09.2023, COMING ON FOR
PRONOUNCEMENT     OF    JUDGMENT,    THIS  DAY,
POONACHA, J., PRONOUNCED THE FOLLOWING:-

                     JUDGMENT

The above appeal is filed under Section 13(1) of

the Commercial Courts, Commercial Division and

Commercial Appellate Division of High Courts Act, 2015

(hereinafter referred to as the 'Commercial Courts Act')

read with Section 37 of the Arbitration and Conciliation

Act, 1996 (hereinafter referred to as the 'Arbitration

Act'), challenging the judgment dated 29.1.2021 passed

in Com.A.S.No.81/2013 by the LXXXII Addl.City Civil

and Sessions Judge at Bengaluru (CCH.83) (hereinafter

referred to as the 'Commercial Court'), whereunder the

petition filed U/s 34 of the Arbitration Act has been

partly allowed and a portion of the Award dated COMAP No.42/2021

19.6.2013 passed by the Arbitral Tribunal has been set

aside.

2. Brief facts relevant for consideration of the

present appeal are that, the Appellant and the

Respondent entered into a Sale and Purchase Contract

dated 31.3.2010 for purchase of Iron Ore Fines on FOB

basis, whereunder the Appellant agreed to sell to the

Respondent, Iron Ore Fines of 40000 Metric Tonnes

('Mts' for short) from Goa Port, India, with the port of

discharge being One Main Port, China. The content of

the Iron Ore Fines was required to be of a minimum of

55% FE content/grade and the Respondent appointed

one M/s Inspectorate Griffith India Private Ltd.,

('Inspectorate Griffith' for short) to carryout the grade

analysis of the Iron Ore Fines. The Appellant was

required to load the goods at the rate of 7000 Mts., on

board the vessel per weather working day and the last

date of shipment of the goods was 25.4.2010. The

Respondent was required to open an irrevocable letter

of credit for 100% of value of the Contract.

COMAP No.42/2021

2.1. Subsequently, the last date of shipment was

extended to 30.4.2010. In April, 2010 the Respondent

reduced the quantity of goods to be supplied to 33000

Mts as against 40000 Mts., as agreed in the Contract.

The Appellant was informed by the Respondent that the

estimated date of arrival of the vessel was 1.5.2010 and

in anticipation of the arrival, the Appellant entered into

an agreement with one J.M.Baxi and Company for

loading of 33000 Mts., and the Appellant incurred an

expenditure of `9,09,975/- in that behalf. The vessel

arrived at the port of loading on 1.5.2010. Since one

M/s. Gururaj Associates/Enterprises was offered first

opportunity to load the goods on the vessel before the

Appellant, the vessel was made available to the

Appellant only on 13.5.2010 for loading and the

Appellant started loading its goods on the said date.

However, due to rough weather the Appellant completed

the loading of the goods, the goods were ready for

shipping on 22.5.2010 and the vessel set sail to the port

of destination on the said date.

COMAP No.42/2021

2.2. Although the Appellant was entitled to

receive 98% of the total payment in 5 days of

completion of loading the goods, the said payment was

not made. That various correspondences were

exchanged between the parties in that regard. The

Respondent, vide its communication dated 14.7.2010

informed the Appellant that the "FE content" was 46.91

and 46.81 respectively as against the requisite content

of 55.80 as certified by the agency, the Inspectorate

Griffith.

2.3. Since there was a dispute with regard to the

quality of the Iron Ore Fines shipped by the Appellant to

the Respondent and the payment for the shipment not

having been made, the said dispute was referred by the

parties to Arbitration and a Sole Arbitrator was

appointed. Both the parties appeared before the Sole

Arbitrator/Arbitral Tribunal and the said proceedings

culminated in Award dated 19.6.2013 whereunder, the

Respondent was directed to pay 98% of the contract

price to the Appellant amounting to `6,43,75,141/-

within one month, together with interest at 12% p.a., COMAP No.42/2021

from 27.5.2010 till date of filing of Statement of Claim,

15% from the date of claim till the date of award and

15% from the date of award till the date of payment.

The Respondent was directed to pay to the Appellant a

sum of `20 lakhs as costs of the arbitration proceedings

within one month, failing which the Respondent was

liable to pay the same with interest at 15% p.a., from

the date of Award till the date of payment

2.4. Being aggrieved by the Award the

Respondent filed a Petition under Section 34 of the

Arbitration Act before the Commercial Court. The

Appellant contested the said proceedings. The

Commercial Court, vide its judgment dated 29.1.2021

partly allowed the suit filed by the Respondent and

passed the following order:

"The petition filed by the plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996 is partly allowed. The portion of the Award is set aside with respect to claim relating to awarding 98% of the contract price amounting to Rs. 6,43,75,141/-, interest thereon from 27.05.2010 to the date of actual payment and the cost of arbitration proceedings to the Defendant and COMAP No.42/2021

refusing/rejecting the Counter-Claim of the plaintiff.

The plaintiff and the Defendant are at liberty to agitate the about said Claims and Counter Claims, in accordance with law.

The Award dated 19.06.2013 has reached finality with respect to the Claims not challenged before this Court by the Defendant.

The Defendant shall pay the Costs to the Plaintiff.

The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code read with Section 16 of the Commercial Courts Act.

The Office is hereby directed to return the Arbitral Records received as per letter dated 02.05.2014 to Indian Chamber of Commerce, along with copy of this Judgment, immediately. "

2.5. Being aggrieved, the present appeal is filed.

3. Learned Counsel for the Appellant assailing

the judgment passed by the Commercial Court

contended that:

i) The Commercial Court has appreciated

various factual aspects which it was not COMAP No.42/2021

entitled to do exercising jurisdiction under

Section 34 of the Arbitration Act;

ii) The Arbitral Tribunal had properly

appreciated the factual matrix and had

passed a reasoned award which ought not

to have been interfered with by the

Commercial Court.

3.1 In support of his contentions, the learned

Counsel relied on the following judgments:

        i)      Dyna   Technologies    Pvt.               Ltd.,     v.
                Crompton Greaves Ltd., 1;

        ii)     Associate    Builders                v.          Delhi
                Development Authority2

        iii)    South East Asia Marine Engineering and

Constructions Ltd., v. Oil India Ltd., 3

4. Per contra, learned Counsel for the

Respondent supporting the judgment of the Commercial

Court contended that:

i) The Commercial Court has rightly

appreciated various aspects of the matter

(2019) 20 SCC 1

(2015) 3 SCC 49

(2020) 5 SCC 164 COMAP No.42/2021

and noticed that the Arbitral Tribunal has

passed the award without there being any

basis for the same;

ii) The judgment passed by the Commercial

Court is just and proper which ought not to

be interfered with by this Court in exercise

of its jurisdiction under Section 37 of the

Arbitration Act.

4.1 In support of his contentions, the learned

Counsel relied upon the following judgments:

i) State of Chhattisgarh v. SAL Udyog (P) Ltd., 4;

        ii)     Dyna   Technologies    Pvt.      Ltd.,    v.
                Crompton Greaves Ltd., 5;

        iii)    South East Asia Marine Engineering and

Constructions Ltd., v. Oil India Ltd., 6;

        iv)     ONGC     Ltd.,    v.    Western       GECO
                International Ltd.,7;

        v)      Anand Bros. (P) Ltd., v. Union of India8;

        vi)     ONGC Ltd., v. Saw Pipes Ltd.,9


  (2022) 2 SCC 275

  (2019) 20 SCC 1

  (2020) 5 SCC 164

  (2014) 9 SCC 263

  (2014) 9 SCC 212
                                              COMAP No.42/2021





        vii)    Associate    Builders                  v.         Delhi
                Development Authority10;

        viii) Haryana Tourism             Ltd.,        v.     Kandhari
              Beverages Ltd.,11

5. We have given our anxious consideration to

the arguments advanced by both the learned Counsel

and perused the material on record. The question that

arises for our consideration is:

Whether the judgment dated 29.1.2021 passed by the Commercial Court is liable to be interfered with under Section 37 of the Arbitration Act?

6. The following salient aspects are

forthcoming from the sale and purchase contract dated

31.3.2010 entered into between the parties are

relevant:

i) The commodity agreed to be purchased by the Respondent from the Appellant was Iron Ore Fines and the port of loading was Goa (clause-1);

(2003) 5 SCC 705

(2015) 3 SCC 49

(2022) 3 SCC 237 COMAP No.42/2021

ii) The quantity was 40000 Mts., and the last date of shipment was 25.4.2010 with the port of destination being China (clause-2);

iii) The specification of the chemical composition/ FE content was required to be 55% and below 54% was liable to be rejected (clause-3);

iv) The terms of payment were contained in clause- 4(A);

v) Clause-5(a) stipulates that the buyer has a right to reject the cargo if the FE content is 54% at the load port.

vi) The Certificate of Weight and draft survey report and quality analysis was to be issued by the Inspectorate Griffith India Pvt. Ltd., / S.G.S. India Pvt. Ltd., [clauses - 5(c) and 5(d)];

vii) Clause 8(A) and (B) states as follows:

"(A) At the loading port Buyer shall, at his expense, appoint SGS India Pvt Ltd/Inspectorate Griffith India Pvt Ltd to determine the weight of shipment of iron ore by draft survey. For all purpose draft survey results will be taken as final and binding on both the parties.

(B) At the loading port, Buyer shall, at his expense, appoint SGS India Pvt Ltd/Inspectorate COMAP No.42/2021

Griffith India Pvt Ltd for sampling & to determine the specification of iron ore fines content per clause 3 of this contract and shall provide a certificate showing details of the determination and also the percentage of free moisture at 105 degree centigrade."

viii) Clause 14 is the Arbitration clause;

ix)     Clause 17 reads as follows:

        "Clause 17 GUARANTEE

The Co-selleter/Guarantor here by guarantee to take same responsibilities of seller to perform all the obligations of this contract and indemnify buyer if seller fails to perform the contract.

               UNDER     ANY   CIRCUMSTANCES       OF   CARGO
        REJECTION      OR    FAILURE     OF     LOADING   THE

CONTRACTED QUANTITY OF CARGO IN THE VESSEL, ALL THE CONSEQUENTIAL LOSSES OF BUYER WILL BE PAID BY THE SELLER."

7. It is relevant to note that, the Guarantor in the

contract is M/s Goa Mining Industries Pvt. Ltd.

8. The essence of the dispute is the fact that at

the time of loading, the agency appointed by the

Respondent namely, Inspectorate Griffith had tested the

samples loaded and has issued the certificate certifying COMAP No.42/2021

that the FE content was 55%. However, it is the case of

the Respondent that when quality was checked on board

the vessel at China, the same was noticed to be 46.91 FE

content and hence, the Respondent not made payment to

the Appellant. Another area of dispute is that, the

Appellant had contracted to sell 40000 Mts of Iron Ore

Fines, whereas what was finally loaded by the Appellant

was 25205 Mts.

9. Both the parties had putforth their contentions

before the Arbitral Tribunal. Although nearly 20 issues had

been framed by the Tribunal, noticing the same to be

inextricably interlinked, clubbed all the issues and

considered them together. The Arbitral Tribunal has

considered the material on record with specific reference to

the two contentious issues i.e., quality of the Iron Ore

Fines loaded as well as with regard to the quantity. After

considering the oral and documentary evidence on record

with regard to the quality of the Iron Ore Fines that is

loaded, the Arbitral Tribunal has recorded the following

findings:

COMAP No.42/2021

"xviii) I have considered the arguments of both the counsel and I am firmly of the view on the finding of fact that once the certificate of Inspectorate Griffith India Pvt. Ltd, which company has been appointed by the Respondent specifically for the purpose of sampling at the load port has been accepted or in any event is unchallenged by the Respondent, the Respondent is bound by the same. Furthermore, I am bound by the terms of the contract under which I am bound to accept the certification by the Respondent's agent which is highly reputed international agency. Furthermore, although the CPC does not apply the Supreme Court in a number of decisions has held the principles behind the CPC and the evidence Act is applicable to arbitration proceedings. Without any particulars, I am unable to indirectly infer fraud as suggested by the learned Senior Counsel for the Respondent. I am also unable to accept any suggestion that there was interference in the sampling process particularly as Mr. Girish Kumar has already admitted that there was no interference in the sampling process of the Inspectorate Griffith's."

(emphasis supplied)

10. The contention putforth by the Respondent -

buyer that by virtue of clause-17 of the Contract, in the

event of rejection of the cargo, all consequential losses

were required to be borne by the seller has been

considered by the Arbitral Tribunal, which has recorded the

following findings:

COMAP No.42/2021

"xxii) In view of my earlier findings, it may not be necessary to decide this issue as I have already held that in terms of the contract and in view of the Respondent's agent certifying the quality of the cargo as per Exhibit - N the Respondent's are liable to pay to the Claimant 98% of the contract price. Be that as it may, as Counsel have argued his points, I hold that on a proper reading of Sections 41 and 42 of the Sale of Goods Act, 1930 and in terms of the judgment cited by the Claimant's Counsel as the Respondent had full liberty and fully availed of the right of inspection after the completion of the inspection, the Respondent's right to reject the goods has been lost. I have considered the Respondent's Senior Counsel's argument in terms of clause 17 and hold that while the Respondent had the right to reject the goods but once sampling having been done and the Respondent's agent Inspectorate Griffith India Pvt. Ltd. having certified the cargo having 55.80% Fe content, the Respondent's right of rejection had now been lost. I may add that Claimant's Counsel also pointed out that sampling that has been done throughout the process of loading and at each stage the Respondent was aware of the same and it is only the final certificate which was issued on June 1, 2010. In view of the above findings, I reject the Respondent's contention that it had a right of rejection of the cargo after the issuance of the Inspectorate Griffith India Pvt. Ltd. certificate. Therefore, the Respondent's rejection of the cargo at the port of discharge was wrongful and does not help the Respondent in terms of the contract."

(emphasis supplied)

11. The Arbitral Tribunal had also referred to

various judgments of the Hon'ble Supreme Court which COMAP No.42/2021

have set out the settled proposition of law and while

allowing the claim of the claimant therein in part, the

Arbitral Tribunal gave reasons while awarding the claim.

12. The Commercial Court has recorded a finding

that the Arbitral Tribunal has not discussed about issue

Nos.1, 7, 11, 12, 13, 14, 17 and 18 and further recorded a

finding that the Arbitral Tribunal has virtually refused to

decide issue No.4 on the ground that M/s Gururaj

Associates had an independent contract which does not fall

within the arbitration clause. Further, the Commercial

Court, considering the material on record with regard to

clause 17 of the agreement, has recorded a finding that

the view of the Arbitral Tribunal with respect to counter

claim of the Appellant is not a plausible view and a correct

interpretation of clause 17 of the agreement and hence

allowed the application filed by the Respondent under

Section 34 of the Act.

13. It is relevant to note that although the Arbitral

Tribunal had framed 20 issues with the consent of the

parties, the crux of the matter which was required to be COMAP No.42/2021

adjudicated was the quality and quantity of the Iron Ore

Fines loaded as well as the dates within which they were

required to be delivered as contracted by the parties.

14. Admittedly, the contracted quantity of Iron Ore

Fines to be purchased was 40000 Mts., and the stipulated

quality was with FE content of 55%. The last date of

shipment was 25.4.2010. The quality was required to be

certified by the agency appointed by the buyer i.e.,

Inspectorate Griffith. It is not in dispute that pursuant to

the contract entered into between the parties, there were

correspondences exchanged between them and the

Appellant - seller intimated the Respondent - buyer vide e-

mail dated 26.4.2010 (Ex.R3) that they are ready with the

cargo for 33000 Mts., and they were given an

understanding that M/s Gururaj Associates are having

ready cargo of 25000 Mts.

15. It is forthcoming that M/s Gururaj Associates

was permitted to load the cargo before the Appellant -

seller loaded its cargo. The Appellant - seller vide e-mail

dated 29.5.2010 (Ex.R5) intimated the Respondent -

COMAP No.42/2021

buyer that they have loaded the Iron Ore Fines of FE

content of 55.80% and the total quantity loaded was

53300 Mts., and the Appellant -seller had loaded a

quantity of 28095 Mts., with grade 55.80 FE and M/s

Gururaj Associates had loaded a quantity of 25205 of Mts.

A Certificate issued by Inspectorate Griffith dated 1.6.2010

(Ex.R6) stipulates that the quantity loaded by the

Appellant was 28095 Mts., and the sampling was done

between the period from 3.5.2010 to 22.5.2010 and the FE

content was 55.80%. The Respondent - buyer has sought

to rely upon a Certificate of Superintendence and Analysis

issued by Mitra S.K. Hong Kong Ltd., which stipulates that

the quality of Iron Ore Fines which were loaded on the

vessel by the Appellant - seller and M/s Gururaj Associates

had an FE content of 46.91%. The contention of the

Respondent - buyer is that the FE content while tested on

board the vessel at China was 46.81% and they have

relied on a Certificate dated 29.5.2010 (Ex.R10).

16. As regards the quality and quantity of Iron Ore

Fines loaded by M/s Gururaj Associates, as rightly noticed COMAP No.42/2021

by the Arbitral Tribunal, the same is not the subject matter

of arbitration and the said aspect cannot be adjudicated in

the present proceedings.

17. The Counsel for the Respondent has

vehemently contended that although the Appellant had

contracted to supply 40000 Mts., of Iron Ore Fines, they

have supplied only 28095 Mts. It is forthcoming from the

material on record that consequent to the agreement

between the parties and having regard to the various

correspondences, the Respondent at no point of time

objected to the Appellant sending a reduced quantity.

There is no material on record to demonstrate that the

Respondent refused to receive a reduced quantity from the

Appellant. Hence, the said contention putforth by the

Respondent being unsustainable, is liable to be rejected.

18. With regard to the quality of the Iron Ore Fines

dispatched by the Appellant, the Arbitral Tribunal has

considered the entire factual matrix and having noticed the

various answers given in the cross-examination of

Mr.Girish Kumar, on behalf of the Respondent as regards COMAP No.42/2021

to the manner in which samples were collected by

Inspectorate Griffith as well as the plausibility of the cargo

loaded by the Appellant having been mixed up with cargo

of M/s Gururaj Associates, the Arbitral Tribunal has

recorded a categorical finding of fact as extracted at para 9

and 10 hereinabove.

19. Another aspect that was contended by the

Respondent - buyer before the Arbitral Tribunal was that

the Certificate issued by the Inspectorate Griffith certifying

the quality of the goods loaded by the Appellant - buyer

was fraudulent and also that there were correspondences

exchanged between the parties (more specifically e-mails

dated 14.5.2010 - Ex.R7 and dated 17.5.2010 - Ex.R8)

regarding the same. Vide e-mail dated 14.5.2010 the

officials of Mitra S.K Hong Cong Ltd., informed the

Respondent - buyer that their suppliers tried to influence

their samplers and when they refused, they were

threatened. Vide reply dated 17.5.2010 (Ex.R8) the

Respondent - buyer replied to the said e-mail and

communicated that they have taken said aspect seriously COMAP No.42/2021

and warned their suppliers that in case of attempt of such

type, they will stop loading from that particular supplier.

The Arbitral Tribunal has considered the aspect as to

whether the Certificate issued by the Inspectorate Griffith

itself was valid and has recorded a categorical finding that

the parties are bound by the Certificate issued by

Inspectorate Griffith having regard to the fact that the said

agency was appointed by the Respondent - buyer and also

by recording a finding that in the Arbitral proceedings the

Respondent - buyer did not set out as to how the

Certificate issued was not valid by demonstrating as to any

error or wrong doing in the process of collection of samples

or in any other manner. There is no material on record to

indicate that the Respondent refused to accept the

certificate issued by Inspectorate Griffith when the vessel

set sail due to any irregularity in the same. Further, it was

noticed by the Arbitral Tribunal that the Respondent has

not averred regarding fraud, if any, or given any

particulars of such fraud in the issuance of the certificate

by Inspectorate Griffith.

COMAP No.42/2021

20. The judgments relied on by both the learned

Counsel in order to notice the settled proposition of law are

considered as follows:-

i) In the case of SAL Udyog(P) LTd.,4 relied

upon by the learned counsel for the Respondent, the

Hon'ble Supreme Court has held as under:

"14. The law on interference in matters of awards under the 1996 Act has been circumscribed with the object of minimising interference by courts in arbitration matters. One of the grounds on which an award may be set aside is "patent illegality". What would constitute "patent illegality" has been elaborated in Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , where "patent illegality" that broadly falls under the head of "Public Policy", has been divided into three sub-heads"

(emphasis supplied)

ii) In the case of Dyna Technologies Pvt

Ltd.,5 relied upon by the learned counsel for both the

parties, the Hon'ble Supreme Court has held as under:

"24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to COMAP No.42/2021

a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."

35. When we consider the requirement of a reasoned order, three characteristics of a reasoned order can be fathomed. They are: proper, intelligible and adequate. If the reasonings in the order are improper, they reveal a flaw in the decision-making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for COMAP No.42/2021

the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards.

36. At this juncture it must be noted that the legislative intention of providing Section 34(4) in the Arbitration Act was to make the award enforceable, after giving an opportunity to the Tribunal to undo the curable defects. This provision cannot be brushed aside and the High Court could not have proceeded further to determine the issue on merits.

37. In case of absence of reasoning the utility has been provided under Section 34(4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34(4) of the Arbitration Act to cure defects can be utilised in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act. However, in this case such remand to the Tribunal would not be beneficial as this case has taken more than 25 years for its adjudication. It is in this state of affairs that we lament that the purpose of arbitration as an effective and expeditious forum itself stands effaced."

(emphasis supplied) COMAP No.42/2021

iii) In the case of South East Asia Marine

Engineering and Constructions Ltd.,6 relied upon by

the learned counsel for both the parties, the Hon'ble

Supreme Court has held as under:

"12. It is a settled position that a court can set aside the award only on the grounds as provided in the Arbitration Act as interpreted by the courts. Recently, this Court in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. .....

13. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning.

14. However, the question in the present case is whether the interpretation provided to the contract in the award of the Tribunal was reasonable and fair, so that the same passes the muster under Section 34 of the Arbitration Act?"

iv) In the case of ONGC Ltd.,7 relied upon by

the learned counsel for the Respondent, the Hon'ble

Supreme Court has held as under:

"35. What then would constitute the "fundamental policy of Indian law" is the question. The decision in ONGC [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expression "fundamental policy of COMAP No.42/2021

Indian law", we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a "judicial approach" in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi-judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge.

38. Equally important and indeed fundamental to the policy of Indian law is the principle that a court and so also a quasi-judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice.

Besides the celebrated audi alteram partem rule one of the facets of the principles of natural justice is that the court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non-application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it COMAP No.42/2021

can be described as a fundamental policy of Indian law.

39. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 : (1947) 2 All ER 680 (CA)] of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available.

40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest."

(emphasis supplied)

v) In the case of Anand Bros. (P) Ltd.,8 relied

upon by the learned counsel for the Respondent, the

Hon'ble Supreme Court has held as under:

COMAP No.42/2021

"14. It is trite that a finding can be both : a finding of fact or a finding of law. It may even be a finding on a mixed question of law and fact. In the case of a finding on a legal issue the arbitrator may on facts that are proved or admitted explore his options and lay bare the process by which he arrives at any such finding. It is only when the conclusion is supported by reasons on which it is based that one can logically describe the process as tantamount to recording a finding. It is immaterial whether the reasons given in support of the conclusion are sound or erroneous. That is because a conclusion supported by reasons would constitute a "finding" no matter the conclusion or the reasons in support of the same may themselves be erroneous on facts or in law. It may then be an erroneous finding but it would nonetheless be a finding. What is important is that a finding presupposes application of mind. Application of mind is best demonstrated by disclosure of the mind; mind in turn is best disclosed by recording reasons. That is the soul of every adjudicatory process which affects the rights of the parties. This is true also in the case of a finding of fact where too the process of reasoning must be disclosed in order that it is accepted as a finding in the sense the expression is used in Clause 70."

(emphasis supplied)

vi) In the case of Haryana Tourism Ltd.,11

relied upon by the learned counsel for the Respondent,

the Hon'ble Supreme Court has held as under:

"8. So far as the impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the COMAP No.42/2021

Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act."

(emphasis supplied)

vii). The judgment of the Hon'ble Supreme Court

in the case of Associate Builders2 relied upon by both

the learned Counsel. However, the same has not been

separately appreciated herein since the said judgment

has been considered by the 3 Judge Bench of the

Hon'ble Supreme Court in the case of Dyna

Technologies Pvt. Ltd.,1 as well as in the case of SAL

Udyog (P) Ltd.,4.

20. It is relevant to note that the Commercial

Court at para 25 of its judgment has recorded a finding

that the view of the Arbitral Tribunal with respect to the

counter claim of the Plaintiff is not a plausible view and

a correct interpretation of clause 17. However, it is

noticed that how and in what manner the Commercial

Court has disagreed with the findings recorded by the

Arbitral Tribunal is not set out. It is further relevant to COMAP No.42/2021

notice that the Commercial Court has recorded that

there are no reasons insofar as issue No.19 and the

finding of the Arbitral Tribunal that the counter claim

does not survive for consideration, which is erroneous.

It is further noticed that at para 15 of its judgment, that

at para 7 of the Award the Arbitral Tribunal has

mentioned that after consultation with both the

Advocates all the issues were clubbed together and

answered as they are inextricably interlinked, which has

been disbelieved by the Commercial Court since the

details as to when the consultation was made after filing

of written arguments is not forthcoming. Further, it has

recorded that up to issue No.14 the burden is cast on

the Defendant and issue Nos.16 to 19 the burden is cast

on the Plaintiff.

21. It is relevant to note that although there

were 20 issues framed before the Arbitral Tribunal, the

crux of the dispute between the parties is with regard to

the quality and quantity of the iron ore fines loaded as

well as the dates within which they are required to be COMAP No.42/2021

loaded on the vessel. It is consequent to adjudication of

the said aspects that the liability of the parties under

the contract was required to be determined. The finding

of the Commercial Court that the view of the Arbitral

Tribunal with respect to counter claim is not a plausible

view having regard to interpretation of clause 17 of the

Agreement is untenable since the Arbitral Tribunal has

recorded its finding on the aspect of quality and

quantity and it was held that the Respondent is bound

by the Certificate issued by its agent. Clause 17 of the

contract was specifically considered by the Arbitral

Tribunal at pages 81 and 82 of its award and findings

regarding the same have been adjudicated. There was

no basis for the Commercial Court to hold that rejection

of the Counter claim was not a plausible view.

22. The Arbitral Tribunal while interpreting

clause 17 pertaining to guarantee has noticed clause 8.

It is relevant to note that clause 17 with regard to

guarantee cannot be read in isolation and is required to

be read along with clause 8 which pertains to weighing, COMAP No.42/2021

sampling and analysis. It is relevant to note that in

clause 8(b) it was the entitlement of the buyer to

appoint an agency and they have appointed

Inspectorate Griffith India Private Limited which has

issued the Certificate (Ex.R6). It is noticed in the

findings recorded by the Arbitral Tribunal that the said

Certificate was not impeached by the buyer in the said

proceedings and hence, the Arbitral Tribunal has

recorded a categorical finding that the buyer is bound

by the said Certificate.

23. It is clear from the aforementioned, that the

Commercial Court while considering the petition under

Section 34 of the Act has clearly travelled beyond the

scope of the said provisions and has interfered with the

findings of fact recorded by the Arbitral Tribunal without

even noticing the basis on which the said finding was

recorded. The Arbitral Tribunal upon appreciating the

essence of the dispute between the parties has

considered the contentions putforth as also the relevant

oral evidence of the witnesses examined by the COMAP No.42/2021

respective parties and the documentary evidence on

record. The Commercial Court appears to have carried

away by the number of issues framed and the fact that

the Arbitral Tribunal did not record a separate finding

for each of the issues framed by it. Notwithstanding the

fact that the Arbitral Tribunal has not recorded its

findings on each of the issues separately, it has

adequately appreciated the factual matrix of the matter

and after considering the oral and documentary

evidence on record as well as the issues of both the

parties has recorded a finding that the Respondent is

bound by the Certificate issued by the agency appointed

by it and cannot escape its liability under the Agreement

by relying upon a subsequent Certificate after the ship

has reached its port of destination.

24. Having regard to the aforementioned, in

view of the fact that the Commercial Court has

exceeded its jurisdiction under Section 34 of the Act

while interfering with the award of the Arbitral Tribunal, COMAP No.42/2021

this Court in exerciser of its jurisdiction under Section

37 of the Act deems it expedient that the judgment of

the Commercial Court be interfered with.

25. Hence, the following order is passed:

ORDER

i. The above appeal is allowed;

ii. The judgment dated 29.1.2021 passed in

Com.A.S.No.81/2013 by the LXXXII Addl.City Civil

and Sessions Judge at Bengaluru (CCH.83), is set

aside;

iii. The Arbitral Award dated 19.6.2013 rendered in

the dispute between the parties is affirmed.

Parties to bear their respective costs.

Sd/-

JUDGE

Sd/-

JUDGE nd