Ms Gaurav Rice Industries Udyog Marg ... vs The Haryana State Cooprative Supply And ...
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Punjab-Haryana High Court

Ms Gaurav Rice Industries Udyog Marg ... vs The Haryana State Cooprative Supply And ... on 5 April, 2024

Author: Arun Palli

Bench: Arun Palli

                            Neutral Citation No:=2024:PHHC:046630-DB
                                                     2024:PHHC:046630-DB


      IN THE HIGH COURT OF PUNJAB AND HARYANA AT
                     CHANDIGARH


                                              FAO-CARB-58-2023 (O&M)
                                              Reserved on: 06.02.2024
                                              Pronounced on: 05.04.2024


M/s Gaurav Rice Industries and another                      ....Appellants

                                 V/s

The Haryana State Coop. Supply and Marketing Fed. Limited
(HAFED)                                             ....Respondent


CORAM: HON'BLE MR. JUSTICE ARUN PALLI
       HON'BLE MR. JUSTICE VIKRAM AGGARWAL


Present:    Mr. Lekh Raj Sharma, Advocate
            Mr. Abhishek Sharma, Advocate
            Mr. Raj Kumar Sharma, Advocate
            Mr. Abhikant Vats, Advocate and
            Mr. Vivek Kumar, Advocate, for the appellants.

            *****

VIKRAM AGGARWAL, J.

CM-7-FCARB-2024 Prayer in the instant application preferred under Section 151

CPC is for placing on record certain documents as Annexures A-2 to A-6.

Learned counsel for the applicant-appellants submits that the

documents in question could not be produced before the Arbitrator during

the course of the arbitration proceedings and that the applicant-appellants be

now permitted to place the said documents on record.

We do not find any reason to accede to the prayer made in the

application, as the applicant-appellant cannot be permitted to now place on

record the said documents once he did not even bother to file a written

statement of defence before the Arbitrator. No cogent reason has been given

for the acceptance of the prayer made in the application.

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Accordingly, finding no merit, the application is dismissed.

FAO-CARB-58-2023

1. The present appeal assails the order and judgment dated

17.11.2023 passed by the Court of learned Additional District Judge,

Kaithal, vide which the petition preferred by the appellants under Section 34

of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act"), was

dismissed. Along with the petition under Section 34 of the 1996 Act,

objections had also been filed by the appellants in the execution petition

preferred by the decree-holder (DH), which were also dismissed.

2. The respondent-HAFED invited tenders for leasing out its rice

mills located at Ladwa, Pehowa, Dhand, Kalayat, Jakhal, Ratia, Ding,

Kalanwali and Rania. The appellants, along with others, submitted their

bids along with earnest money of Rs.5 lakh as per the terms and conditions

of the tender notice. The offer of the appellants was accepted qua HAFED

Rice Mill, Dhand for leasing of 9000 MT paddy for the year 2016-17, for a

total lease money of Rs.26.01 lakh. Thereafter, agreement dated 01.10.2016

was also executed, wherein the terms and conditions for running the rice mill

were enumerated. The possession of the rice mill was taken over by the

appellants on 01.10.2016. As per the terms and conditions of the agreement,

the appellants were to deposit security of Rs.5 lakh in addition to the earnest

money. The same was paid by way of a cheque but was dishonoured. Other

installments were also not paid, nor any response was given to various

notices issued by the respondent. A criminal complaint under Section 138 of

the Negotiable of Instruments Act, 1881 was also instituted. Finally the

arbitration proceedings were initiated for recovery of amount of Rs.26.01

lakhs on account of loss suffered by the respondent-HAFED due to non-

compliance of the terms and conditions of the agreement and tender notice

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by the appellants.

2(ii) During the arbitration proceedings, no written statement of

defence was submitted though the representative of the appellants appeared

before the Arbitral Tribunal and made verbal submissions. Accordingly, the

arbitration proceedings concluded in favour of the respondent-HAFED. The

award was accordingly passed in favour of the respondent-HAFED and

against the present appellants and the claim was accepted in toto.

2(iii) Aggrieved by the award, a petition under Section 34 was

preferred by the appellants, which was also dismissed by the Court of

learned Additional District Judge, Kaithal, stating that since the appellants

had not bothered to file any written statement of defence, no fault could be

found with the award. Aggrieved by the said decision, the present appeal

has been preferred.

3. We have heard learned counsel for the appellants.

4. Sh. Lekh Raj Sharma, learned counsel representing the

appellants submitted that proper opportunity was not granted by the

Arbitrator to the appellants and that the claim put forth by the respondent-

HAFED was granted without delving into the issue.

5. Learned counsel submitted that though the appellants did not

participate in the arbitration proceedings, inasmuch, as no written statement

of defence was submitted, submissions were duly made before the

Arbitrator, but the Arbitrator did not consider the matter from the correct

perspective.

6. We have considered the submissions made by learned counsel

for the appellants and have also perused the paper-book. The record was not

summoned, for no written statement of defence was submitted by the

appellants and even the respondent had examined only one witness, as is

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apparent from the award.

7. Before considering the issue on merits, it would be essential to

state that the position of law is by now well settled that while dealing with a

petition under Section 34 of the 1996 Act, the Court concerned does not sit

in appeal over the arbitral award and may interfere on merits on the limited

grounds provided in Section 34 (2)(b)(ii) of the 1996 Act, i.e. if the award is

against the public policy of the India. As per the legal position clarified by

the Hon'ble Apex Court, prior to the amendment to the 1996 Act in 2015, a

violation of Indian public policy, in turn, includes a violation of the

fundamental policy of Indian law, a violation of the interest of India, conflict

with justice or morality, and the existence of patent illegality in the arbitral

award. Additionally, the concept of the "fundamental policy of Indian law"

would cover compliance with statutes and judicial precedents, adopting a

judicial approach, compliance with the principles of natural justice, and

Wednesbury reasonableness. Furthermore, "patent illegality" itself has been

held to mean contravention of the substantive law of India, contravention of

the 1996 Act, and contravention of the terms of the contract. In any case,

interference in an arbitral award would not entail a review of the merits of

the dispute and would be limited to situations, where the findings of the

Arbitrator are arbitrary or perverse or when the conscience of the Court is

shocked, or when the illegality is not trivial but goes to the root of the

matter. An arbitral award, however, may not be interfered with, if the view

taken by the arbitrator is a possible view based on facts. Reference in this

regard can be made to the judgments of Hon'ble Apex Court in the case of

Associate Builders vs. DDA, (2015) 3 SCC 49, ONGC Ltd. vs. Saw Pipes

Ltd., (2003) 5 SCC 705, Hindustan Zinc Ltd. vs. Friends Coal

Carbonisation (2006) 4 SCC 445 and McDermott International vs. Burn

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Standard Co. Ltd., (2006) 11 SCC 181.

8. After the 2015 amendment, this position stands somewhat

modified and it was held by the Supreme Court in the case of MMTC vs.

M/s Vedanta Ltd., 2019 AIR SC 1168 as under:

"It is relevant to note that after the 2015 amendments to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

12. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.

13. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. However, this question has been addressed by the Courts in terms of the construction of the contract between the parties, and as such it can be safely said that a review of such a construction cannot be made in terms of reassessment of the material on record, but only in terms of the principles governing interference with an award as discussed above.

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14. It is equally important to observe at this juncture that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is within the arbitrator's jurisdiction to consider the same. (See McDermott International Inc. v. Burn Standard Co. Ltd. (supra); Pure Helium India (P) Ltd. v. ONGC, 2003(4) RCR (Civil) 791: (2003) 8 SCC 593, D.D. Sharma v. Union of India, (2004) 5 SCC 325).

9. Reverting to the case in hand, admittedly, the appellants did not

submit any written response to the claim submitted by the respondent-

HAFED and only made oral submissions. The respondent-HAFED, on the

other hand, examined its District Manager Sh. V.P. Malik as a witness and

evidence by way of an affidavit was submitted. The learned Arbitrator

awarded the claim of recovery of Rs.26.01 lakh and accepted the claim in

toto. In the considered opinion of this Court, the Arbitrator did not commit

any illegality in doing so, especially, once the claim was not opposed in any

manner and further, the respondent was able to prove its case through

evidence of its District Manager.

10. The petition under Section 34 of the 1996 Act was also,

therefore, rightly rejected by the Court of learned Addl. District Judge,

Kaithal. It was contended before the said Court that no opportunity of

hearing was given to the appellants, leading to the violation of the principles

of natural justice. It was also submitted that the respondent-HAFEd had

failed to deliver the paddy for milling as per the terms of the agreement

dated 01.10.2016 and, therefore, there was no fault on the part of the

appellants. The Court concerned duly took note of the fact that no written

statement of defence had been filed before the Arbitrator, as a result of

which the claim was accepted. It was held that ample and proper

opportunity of hearing had been granted to the appellants and, therefore,

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there was no violation of the principles of natural justice. Accordingly, the

petition under Section 34 of the 1996 Act, as also objections filed to the

execution were rightly dismissed.

10(ii) This Court does not find any reason to interfere in the decision

taken on the petition under Section 34, as also in the award in view of the

judgments referred to in the preceding paragraph, as also in view of the fact

that the appellants did not even bother to contest the claim of the respondent

by filing written statement of defence or leading evidence. Once neither the

written statement of defence was filed, nor any evidence was led, no

illegality was committed in considering the claim of the respondent, the

evidence led by it and accepting the same, of course upon finding the same

to be meritorious.

11. In view of the aforesaid, we find the appeal to be totally devoid

of merit and accordingly dismiss the same.

             (ARUN PALLI)                      (VIKRAM AGGARWAL)
                 JUDGE                                 JUDGE



05.04.2024
vcgarg
             Whether speaking/reasoned:                    Yes/No
             Whether reportable:                           Yes/No




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