Orissa High Court

Nalco vs M/S. Agarwal Rasayan on 8 April, 2022

                 IN THE HIGH COURT OF ORISSA AT CUTTACK

                                  ARBA No.1 Of 2020
                                (Through hybrid mode)

            NALCO                                     ....                 Appellant

                                                           Ms. Pami Rath, Advocate
                                           -versus-

            M/S. Agarwal Rasayan                      ....               Respondent
                                            Mr. Goutam Mishra, Senior Advocate

                      CORAM: JUSTICE ARINDAM SINHA
                                      ORDER

08.04.2022

Order No.

5. 1. Ms. Rath, learned advocate appears on behalf of appellant and

submits, her client's appeal is against judgment dated 16th October,

2019 dismissing her client's challenge to award dated 17th March,

2015.

2. She submits, her client entered into a contract with respondent

for obtaining supplies of specified quantity over a period of 24-26

months. Respondent was in breach in not being able to supply

minimum specified quantity in any month. It purported to rely on force

majeure clause in the contract to claim on alleged second incident of

fire, they were unable to continue with the supplies. Her client, in view

of earlier continuing breach and wrongful termination, invoked the

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bank guarantees. The tribunal held that the termination was proper on

not requiring proof of fact on invocation of the force majeure clause.

As such, award for refund of proceeds of the bank guarantees and

interest thereon was made. The award suffers from patent illegality on

the face of it inasmuch as the finding is based on no evidence. She

relies on judgment of the Supreme Court in Delhi Airport Metro

Express (P) Limited Vs. Delhi Metro Rail Corporation Limited

(DMRC), paragraph 29. The relied upon passage therein is quoted

below.

"The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the

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expression "patent illegality"."

3. Mr. Mishra, learned senior advocate appears on behalf of

respondent and submits, his client was rendered unable to continue

with the supplies by reason of the second fire incident, the first having

seriously hampered his client's performance. The second incident of

fire was a fact. Appellant did not seek to verify and thereupon dispute

the incident as had happened or that it did not affect performance

capability of his client. In the circumstances, the tribunal being chosen

forum, considered and adjudicated the controversy and passed the

award. It bears reasoning and cannot be said to be based on no

evidence. He submits, the Court below appreciated the circumstances

and adjudication in the award, to dismiss the challenge. There should

not be interference in appeal.

4. Ms. Rath in reply relies on fax message dated 15th May, 2006

sent by her client to submit, her client did dispute the second incident

of fire and invocation of the force majeure clause, purportedly based

thereon. On query from Court she submits, the second alleged incident

of fire allegedly took place on 1st May, 2006. Text of the fax message

is reproduced below.

"THIS HAS REFERENCE TO OUT P.O. NO.

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NBC/MM/01/99/2372 DTD.24.01/2005 PLACED ON YOU FOR SUPPLY OF 13.600 MT OF LIQUID COAL TAR PITCH FOR THE YEAR 2005 & 2006 & ALL SUBSEQUENT CORRESPONDENCE INCLUDING OUR FAX DTD.09/05/2006 (.) THE CONTENSION MENTIONED BY YOU VIDE YOUR LETTER DTD.13/5/2006 IS NOT ACCEPTABLE & LEGALLY NOT TENABLE (.) YOU HAVE BEEN GIVEN ENOUGH OPPORTUNITY TO IMPROVE YOUR SUPPLY. BUT YOU HAVE FAILED TO SUPPLY MATERIAL AS PER TERMS OF THE ORDER (.) ACCORDINGLY RISK & COST PROCUREMENT WAS TAKEN AS PER TERMS OF THE ORDER (.) YOUR RELIANCE TO CLAUSE-14 IS NOT TENABLE & NOT ACCEPTABLE IN PRESENT SITUATION WHERE YOUR FAILURE IS NOT RELATED TO SO CALLED FORCE MAJEURE CONDITION (.)"

5. The only ground of appeal is that the award has patent illegality

on face of it by omission of basis in evidence to have the finding of

due invocation of the force majeure clause. The force majeure clause

is reproduced below.

" If an any time during the continuance of the order, the performance, in whole or in part by either party, or any obligations under the order, shall be prevented or delayed by reasons of any war, hostilities, acts of public enemy civil commotion, sabotage, fires, floods, explosion epidemics, quarantine restrictions, which

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affects the execution of this order directly or acts of God (hereinafter referred to as events then, provided a notice of the happening of any such event is given by either party to other by cable within 48 hours from the date of occurrence thereof, neither party shall be reasons of such events be entitled to terminate this order nor shall any party have any claim for damages against the order in respect of such non-performance or delay in performance and delivery order shall be resumed as soon as practicable after such an event has come to an end or ceased to exist provided it can be done within 60 (sixty) days time from the date of commencement of the event, provided further that if the performance in whole or part of any obligation under this order is prevented or delayed by reasons of any such event for a period exceeding sixty days either party may at its option, terminate the order."

6. Perused the award. On the point arising out of the ground

taken, the tribunal found, inter alia, as reproduced below.

" The language contained in the clause 14 above is not explicit when the notice for invoking force majeure can be issued, whether one party has to wait for 60 days before invoking force majeure or not. However, it is clear that if the performance can be done within 60 days, neither party can invoke force majeure. Considering the provisions of the clause above and the termination letter of the respondent, it is apparent that the respondent clearly informed the claimant that the

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performance under the contract cannot be resumed within 60 days. The claimant had opportunity and the means to verify any claim of the respondent and the provisions of the clause do not require the respondent to prove the force majeure. I am thus of the view that force majeure stood invoked with effect from 1/5/2006".