Karnataka High Court
The Union Of India vs M/S Soni Brothers on 12 November, 2024
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NC: 2024:KHC-D:16509
MFA No. 101643 of 2016
IN THE HIGH COURT OF KARNATAKA,
DHARWAD BENCH
DATED THIS THE 12TH DAY OF NOVEMBER, 2024
BEFORE
THE HON'BLE MR. JUSTICE C.M. POONACHA
MISCELLANEOUS FIRST APPEAL NO.101643 OF 2016 (AA)
BETWEEN:
THE UNION OF INDIA,
R/BY CONTROLLER OF STORES,
SOUTH WESTERN RAILWAYS,
HUBBALLI. R/BY SR. MATERIAL MANAGER/
GENERAL/ HEAD QUARTERS, (SSM/G/HQ),
SOUTH WESTERN IRAILWAY. HUBBALLI.
...APPELLANT
(BY SRI SHIVARAJ S. BALLOLI, ADVOCATE)
AND:
1. M/S SONI BROTHERS,
R/BY ITS PARTNER MR MOHANLAL SONI,
AGE: MAJOR, OCC: PARTNER M/S
SONI BROTHERS, R/O: NEAR DR.KAGAL
HOSPITAL, BELAGAVI.
Digitally signed
by SAROJA
HANGARAKI
2. SRI CHANDRA PAL,
Location: High DY CHIEF MATERIAL MANAGER/ ROLLING STOCK AND
Court of
Karnataka SOLE ARBITRATOR, PRESENTLY WORKING AS
DY CHIEF MATERIAL MANAGER IN THE OFFICE OF
CONTROLLER OF STORES, NEW GM OFFICE,
EAST WING, SOUTH WESTERN RAILWAY,
GADAG ROAD, HUBBALLI.
...RESPONDENTS
(NOTICE TO R1 AND R2 ARE SERVED)
THIS MFA IS FILED UNDER SECTION 37(1) OF THE
ARBITRATION AND CONCILIATION ACT, PRAYING TO SET ASIDE THE
ORDER DATED 17.03.2016 PASSED BY THE PRINCIPAL DISTRICT
AND SESSIONS JUDGE DHARWAD IN A.S.NO.06/2014 IN THE
INTEREST OF JUSTICE AND ETC.,
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NC: 2024:KHC-D:16509
MFA No. 101643 of 2016
THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: THE HON'BLE MR. JUSTICE C.M. POONACHA
ORAL JUDGMENT
(PER: THE HON'BLE MR. JUSTICE C.M. POONACHA)
The present appeal is filed under Section 37 of the
Arbitration and Conciliation Act, 19961 challenging the
judgment dated 17.03.2016 in Arbitration Suit No.06/2014
passed by the Principal District and Sessions, Dharwad2.
2. Relevant facts leading to the present appeal are
that, the appellant invited tender for supply of Jersey Woolen Y
Neck Khaki, IS:2360/1997 specification of a total quantity of
1484 numbers on 25.09.2012. Respondent No.1 / defendant
No.1 was the successful tenderer and a purchase order dated
28.11.2012 was issued for supply of materials. That respondent
No.1 who was required to submit sample for approval of the
appellant before effecting bulk supply. However, respondent
No.1 without submitting the sample for prior approval of the
appellant effected the bulk supply on 05.12.2012.
Hereinafter referred as to "Act"
Hereinafter referred as to "District Court"
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3. It is the case of the appellant that the technical
committee examined the materials supplied by respondent No.1
and opined that the materials were of poor quality and not as
per the specifications and accordingly, a rejection note was
issued. The payment not having been made by appellant, the
respondent No.1 invoked the arbitration clause and initiated the
arbitration proceedings before respondent No.2. The appellant
participated in the said arbitration proceedings. Vide award
dated 18.09.2014 respondent No.2 directed the appellant to
make payment of ₹5,17,023/-.
4. Being aggrieved the appellant preferred the
Arbitration Suit No.06/2014 under Section 34 of the Act before
the District Court. Respondent No.1 entered appearance in the
said proceedings and contested the same. The District Court by
order dated 17.03.2016 dismissed the same and passed the
following order:
"The suit under Section 34 of Arbitration and
Conciliation Act is dismissed.
However, in view of the memo dated 14.03.2016
reporting return of 1482 numbers of sweaters to the
defendant No.1 and the acknowledgment issued by
the defendant No.1 to that effect, the defendant No.1
is entitled to the award amount, minus the value of
the returned goods.
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In view of the facts and circumstance of the case,
there is no order as to costs.
Ordered accordingly."
5. Being aggrieved the present appeal is filed.
6. Heard submissions of learned counsel Sri. Shivaraj
S. Ballollli, for the appellant. The respondents are served and
unrepresented.
7. It is vehement contention of the learned counsel for
the appellant that the material supplied by respondent No.1
being inferior in quality and the same having been intimated by
the appellant to respondent No.1, both the Arbitrator as well as
the District Court erred in rejecting the defence put forth by the
appellant to the arbitration proceedings.
8. The District Court while considering the case of the
appellant has recorded the following findings:
"17. The specific case of the Plaintiff is that as the materials
supplied by the Defendant No. 1 were of poor and
substandard quality not being conformed to the
specifications issued by the Plaintiff, it withheld the
payment to the Defendant No.1. The case of the Defendant
No.1 is that it has supplied the materials in conformity to
the specification issued by the Plaintiff. Alternatively it is
the case of Defendant No.1 that even if there was any
defect in the materials supplied by the Defendant No.1, the
same should have been intimated to the Defendant No. 1
within 90 days from the date of the supply whereas the
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Plaintiff intimated the supply of alleged poor quality
materials to the Defendant No. 1 after 265 days of
effecting bulk supplies.
18. As there is arbitration clause, the Defendant No.1 invoked
the same and an arbitrator was appointed to decide the
dispute between the parties. Both sides put forth their
respective cases before the sole arbitrator and ultimately
the sole arbitrator the Defendant No.2 passed the
impugned award directing the Plaintiff to pay a sum of
Rs.5,17,023/- with interest. This award of the sole
arbitrator has been challenged before this court by the
Plaintiff.
19. On page No. 12 of the award the learned sole arbitrator has
observed as under:
"During the hearing, claimant stated that they supplied
materials as per specifications of the purchase order and
rejection advise issued by the consignee is not acceptable
as the same was not issued within reasonable time.
The Respondent stated that reasons for the delay in
issuing of rejection advise can be explained by consignee
only. Hence another date of hearing was fixed on 10-7-
2014 and consignee was asked to submit their counter
statement and claimant and Respondent were asked to
submit any additional documents if any.
At the time of hearing on 10-7-2014, no counter statement
was submitted by representatives of consignee but
claimant submitted a copy of certificate from manufacturer
certifying that the materials conforming to IS:2360/1997"
20. From the above observation made by the learned sole
arbitrator in his award it is seen that there was time
restriction to intimate the defective materials supplied by
the Defendant No.1 within a reasonable time. Further at
the time of hearing before the Arbitrator the Defendant
No.1 also produced a certificate to the effect that the
materials supplied to the Plaintiff were in conformity to
IS:2360/1997.
21. The Plaintiff has not denied that rejection advise was sent
to the Defendant No.1, 265 days after effecting the bulk
supplies and there was delay. The Plaintiff has not
submitted his objections if any to the certificate produced
by the Defendant No.1 to the effect that the materials
supplied were in conformity to IS:2360/1997.
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22. Considering all these aspects of the matter the learned sole
arbitrator has allowed the claim of the Defendant No. 1
and directed the Plaintiff to pay Rs.5,17,023/- including
the interest and the security deposit. When the Plaintiff
has exhibited slackness in sending the rejection advise
belatedly, it can not blame anybody particularly the
Defendant No.1.
23. The sole arbitrator is none other than the officer of the
Plaintiff viz., Dy. Chief Material Manager, South Western
Railway Habli and as such the Plaintiff cannot have any
grievance against sole arbitrator.
24. When the matter was posted for final disposal, on 14-3-
2016 the learned counsel for the Plaintiff has field a memo
stating that out of total quantity of 1484 numbers of
sweaters supplied, the Defendant No. 1 has taken back
1482 numbers. The copy of the receipt of the said
materials or acknowledgment duly singed by the
Defendant No.1 along with copy of handing over and
taking over of the materials is produced before the Court.
25. The learned arbitrator has passed the award for Rs.7,023/-
which includes Rs.446194/ being the price of the goods
supplied, Rs.26209/- being the interest at 8% for the
delayed period of 268 days and Rs.44620/- being the
security deposit furnished by the Defendant No. 1.
26. In view of the Defendant No. 1 taking back 1482 number of
sweaters from the plaintiff, the value of such returned
good- will have to be deducted from the award amount
and the Defendant No.1 is entitled to receive the
remaining award amount. To that extent interference of
this Court in the impugned award is necessary."
(emphasis supplied)
9. It is forthcoming that the District Court in the
proceedings under Section 34 of the Act has adequately
appreciated the relevant factual aspect of the matter and has
noticed that the appellant was required to communicate to
respondent No.1 regarding the quality of goods supplied by
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respondent No.1. Further the District Court has recorded a
finding that the appellant informed respondent No.1 regarding
the alleged work quality of the materials after 265 days of the
bulk supply, which was admittedly beyond the period
contemplated. Further the District Court has recorded a finding
that the appellant has exhibited slackness in sending rejection
advice belatedly and hence, the blame for the same cannot be
fastened on respondent No.1.
10. However, the District Court has noticed that the
appellant had filed a memo stating that out of the total quantity
of 1484 sweaters supplied, respondent No.1. has taken back
1482 sweaters. Hence, the District Court has, noticing the said
memo ordered for deduction of the value the returned goods
from and out of the award passed by the Arbitrator.
11. The District Court having regard to the limited
scope of interference as contemplated under Section 34 of the
Act, has rightly appreciated the relevant factual aspects of the
matter and while affirming the award passed by the Arbitrator,
has also ordered for deduction of the value of the goods taken
back by respondent No.1.
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12. Having regard to the same and having regard the
scope of the interference as contemplated under Section 37 of
the Act, the appellant has failed in demonstrating that the said
arbitral award dated 18.09.2014 as modified by the judgment
dated 17.03.2010 passed in the Arbitration Suit No.06/2014 by
the District Court is erroneous and liable to be interfered with
by this Court in exercise of its jurisdiction under Section 37 of
the Act.
13. In view of the aforementioned, the above appeal is
dismissed as being devoid of merit.
Sd/-
(C.M. POONACHA)
JUDGE
PNV
CT-ASC
