Indian Oil Corporation Limited vs M/S Saha Gas Traders Having Its Office At ...
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Tripura High Court

Indian Oil Corporation Limited vs M/S Saha Gas Traders Having Its Office At ... on 16 July, 2024

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                       HIGH COURT OF TRIPURA
                             AGARTALA

                            Arb. A. No.08 of 2022

Indian Oil Corporation Limited, Registered office at Indian Oil Bhavan, G-9,
Ali Yavar Jung Marg, Bandra (East), Mumbai-400051, represented by its Law
Officer and Constituted Attorney having his office at Indian Oil AOD State
Office, Noonmati, Sector-III, Guwahati-781020.
                                                      .......Appellant(s)
                         VERSUS
M/S Saha Gas Traders having its office at Haradhan Sangha, Krishnanagar,
PO-Agartala, P.S.-West Agartala, District-West Tripura, represented by its
partner Sri Ankur Saha.
                                                   ...... Respondent(s)

For Appellant(s)   :      Mr. Rajib Saha, Advocate.
For Respondent(s) :       Mr. A. Pal, Advocate.

HON'BLE THE CHIEF JUSTICE MR. APARESH KUMAR SINGH HON'BLE MR. JUSTICE S. D. PURKAYASTHA

_O_R_D_E_R_ 16/07/2024

This appeal is under Section 37(1)(c) of the Arbitration and

Conciliation Act, 1996 read with Section 13(1-A) of the Commercial Courts

Act, 2015 against the order dated 11.05.2022 passed by learned District

Commercial Court, West Tripura, Agartala in Civil Misc. (Arbitration)

No.01/2020 whereby the application under Section 34 of the Arbitration and

Conciliation Act, 1996 preferred by the respondent-contractor against the

original award dated 18.11.2019 was set aside by the learned Commercial

Court and the matter was remitted for fresh arbitration of the dispute.

[2] The controversy surrounding the present challenge is in relation to

an agreement dated 30.11.2011 whereby the appellant was required to supply

bulk LPG to the bottling plant of the contractor through tank trucks. The

contractor was required to execute the work of bottling. As per the agreement,

bulk LPG was supplied and the bottling was done in accordance thereof. In the

year 2013, some dispute and differences arose in respect of quantity of bulk

LPG. To resolve the dispute, a committee was constituted for reconciliation of

bulk LPG. The committee found shortage of domestic subsidized bulk LPG in

the bottling plant of the contractor. Thereafter, the dispute arose. Then, the

matter was referred in a writ proceeding in IA No.257 of 2016 in WP(C)

No.190 of 2015(D/O) vide order dated 07.04.2016 to an arbitrator, Hon'ble

Justice D. Biswas, a retired Judge of the Gauhati High Court.

[3] The arbitrator framed the following issues for determination:

1. Whether the arbitration proceedings is maintainable in its present form?

2. Whether the reconciliation process initiated by the claimant by constituting reconciliation committees were in breach of the terms and conditions of the contract dated 30.11.2011?

3. Whether the exercise undertaken by the claimant for reconciliation of bulk LPG stock for the period beginning 1.4.2008 to 31.10.2013 is sustainable in law and fact?

4. Whether the reduction of 0.1% of the bulk LPG allegedly received by the respondent is just and proper to compensate the loss during transit/loading and unloading?

5. Whether the claimant is entitled to any award for compensation at the commercial rate for loss of bulk LPG as prayed for in Claim No.1?

6. Whether the respondent is entitled to refund/ adjustment of security of Rs.5 lakhs given in the form of bank guarantees?

7. To what relief(s), if any, the parties are entitled in this proceedings?

8. Interest and cost.

[4] The award was delivered on 18.11.2019 in the following form:

Claim Number

Claim No. A The claimant shall calculate the value

of short/lost LPG as per observation made in Issue Nos.5, 7 and 8 in respect of transactions during the contractual period i.e. 1.11.2011 to 31.10.2013.

Claim No. B No cost is awarded.

Claim No. C The claimant would be entitled to interest at the rate of 9% per annum on the amount found payable after completion of exercise as indicated in Issue Nos.5, 7 and 8 if the respondent fails to pay the amount within 4 months 15 days from the date of award.

COUNTER CLAIM OF RESPONDENT:

As discussed in Issue Nos.7 and 8. The arbitration proceedings is terminated in the light of the decision above.

Signed copies of the award shall be forwarded to the parties as required under Section 31(5) of the Arbitration and Conciliation Act, 1996.

Details required under section 31(4) of the Arbitration and Conciliation Act, 1996:

Date of Award : 18-11-2019 Place of Arbitration : Guwahati, Assam.

Signed on this 18th day of November, 2019 at Guwahati.

[5] The matter was thus brought under Section 34 of the Act of 1996

before the leanred commercial Court in Civil Misc. (Arbitration) No.01/2020

by the contractor/respondent. Learned commercial Court referred to certain

decisions on the scope of Section 34 of the Act of 1996 and also dealt with the

grounds of challenge raised by the contractor/ respondent herein in the

following manner:

"6. In the light of the principles as referred to above, we may proceed to consider the question that has been raised for and on behalf of the petitioner.

At the outset lets have a reference to the remedies granted by the Arbitral Tribunal. The Arbitrator has granted remedies under claim No.A as under:

"The claimant shall calculate the value of short/ lost LPG as per observation made in issue No.5, 7 and 8 in respect of transactions during the

contractual period, i.e., 1.11.2011 to 31.10.2013."

The remedies so granted further leads us to have a reference to the findings arrived at while deciding the issue Nos.7 and 8 as under:

"In view of the decisions in the forgoing issues, the claimant would be entitled to recover the value of the short LPG at domestic rate after adjustment of the amount, if any, found due to the respondent including security deposit and other unpaid bills. The total amount payable on account of loss of LPG shall be ascertained after verification of the wrong entries in the receipt- quantity and challan-quantity as admitted by C.W.2 in his cross-examination. The respondent shall also intimate the claimant in details the entries of mismatch between the receipt quantity and the dispatch quantity within a period of 15 days from the date of award. The claimant shall, within next one month, complete the process of verification, if necessary after hearing the respondent and thereafter, issue notice to the respondent to pay the amount found payable after adjustment of the security deposit and the amount of unpaid admissible bills. The respondent shall, within next three months of receipt of such notice, pay the amount to the claimant failing which the claimant will be entitled to interest at the rate of 9% per annum from the date of award. So far the cost of litigation is concerned, having regard to the dispute and the circumstances of the proceedings, the Tribunal directs the parties to bear their respective cost".

7. An arbitration award or arbitral award is a determination on the merits by an Arbitration Tribunal in an arbitration, and analogous to a judgment in a court. Similarly the arbitrator is a professional who help the parties in the dispute to arrive at the final harmonious settlement. Although arbitration award are characteristically an award of damages against a party, the Tribunals usually have a range of remedies that can form a part of the award namely, (i) The Tribunal may order payment of a sum of money (conventional damages); (ii) The Tribunal may make a declaration as to any matter to be determined in the proceedings; (iii) Order a party to do or refrain from doing something (injunctive relief) amongst others as the facts and circumstances of a particular or given situation requires. In the case at hand what surfaces is that the arbitrator while passing the award had left some exercise to be done by the parties and thereby the parties were entrusted with the duty to calculate the amount to be paid by the petitioner herein. The award, however, totally silent as to disagreement, if any, between the parties with the amount to be calculated. This circumstances leads us to have a reference to Section 26 of the Arbitration Act which empowers the Arbitral Tribunal-(i) to appoint one or more experts to report to it on specific

issues to be determined by it; (ii) Require a party to give the expert any relevant information or to produce, or to provide access to, any relevant document goods or other property for his inspection. But instead of taking recourse to section 26 of the Arbitration Act, the Arbitral Tribunal has directed the calculation of the amount due to be done by the parties. If there is any disagreement between the parties on the amount to be calculated, the situation shall render the award inexecutable. In the case of Delhi Airport Metro Express Pvt. Ltd. VS Delhi Metro Rail Corporation Ltd. (Supra) the Hon'ble Supreme Court in para 26 of its judgment has held that - " If an arbitral award shocks the conscience of the court, it can be set aside as being in conflict with most basic notions of justice." Regard being had to such circumstances I am of the considered opinion that the award so passed by the Arbitral Tribunal stands liable to be set aside."

[6] To the mind of the learned commercial Court, the learned

arbitrator had instead of adjudicating on the claims in a determinative manner

left some exercise to be done by the parties to calculate the amount to be paid to

the contractor. The award was silent as to the disagreement, if any, between the

parties with the amount to be calculated. The learned commercial Court held

that if the dispute fell in the area of experts, the learned arbitrator could have

resorted to Section 26 of the Arbitration Act, which empowers the arbitral

tribunal to seek the assistance of experts on specific issues to be determined. In

the absence of an award determining the liability of the parties, the award

remains inexecutable. As such, it was not a true determination on the dispute

between the parties. The learned commercial Court was of the view that it fell

in the category of Clause (ii) and (iii) of Section 34(2)(b) being in

contravention with the fundamental policy of Indian law and in conflict with

the basic notions of morality of justice. As such, the matter was remitted for

fresh arbitration of the dispute. Being aggrieved the corporation is in appeal.

[7] We have heard learned counsel for the parties and taken note of

the relevant materials placed from record. The grounds of challenge raised by

the appellant are at paragraph-9 of the memo of appeal. The appellant, besides

assailing the impugned order of the learned commercial Court on grounds of

jurisdiction, has also taken a plea that it suffers from non-application of mind

and thus suffers from illegality and perversity. The appellant had further

questioned the award on the ground that the learned arbitrator failed to consider

the fact that there is no disagreement and/ or dissatisfaction regarding the issue

of participation by both the parties in the calculation process to find out the

actual dues to be borne by the parties. The respondent-contractor in his

objection under Section 34 of the Act had also not raised any disagreement or

dissatisfaction on this issue but the learned Court had remitted the matter only

on this issue. The learned Court also failed to consider that the finding of the

learned sole arbitrator on issue Nos.7 and 8 regarding calculation of the amount

due to be done by the parties is nothing but a merger of entire finding and

outcome of the arbitral proceedings. The learned arbitrator tried to put an end

on the issue of the disputes between the parties. The learned Court failed to

consider that the arbitration is a consensual adjudication process and the Court

may interfere only if the award suffers from such errors as are provided under

Section 34 of the Act. On these grounds, the present appeal has been pressed by

the learned counsel for the appellant.

[8] Mr. A. Pal, learned counsel for the contractor/respondent on the

contrary has supported the impugned judgment. According to him, the matter

remains in the area of dispute even after conclusion of the arbitration

proceedings since no determinative finding was rendered by the learned Court

on the matter in dispute relating to the entitlement and liability of the parties in

respect of execution of the work under agreement dated 30.11.2011, is

concerned. How much of the claims were to be reduced on the basis of the

report of the committee to compensate the loss during transit/loading and

unloading in favour of the contractor was not determined. The learned arbitrator

though had framed the issue as to the entitlement of the claimant for

compensation at the commercial rate for loss of bulk LPG for claim No.1 and

as regards refund/ adjustment of security deposit of Rs. 5.00 lakhs even in the

form of bank guarantees by the respondent but the award did not determine

such claims for compensation or such value of short/lost LPG on issue Nos.5, 7

and 8 in respect of transactions during the contractual period from 01.11.2011

to 31.10.2013. Thus, the award remains an inexecutable decree. Therefore, it

shocked the conscience of the learned commercial Court. As such, it was in

conflict with the public policy of Indian. Accordingly, the impugned judgment

deserves no interference.

[9] Upon consideration of rival submissions of the parties, the

pleadings placed from record, the impugned award and the findings rendered by

the District Commercial Court, we find ourselves in agreement with the

conclusion derived by the learned commercial Court, primarily for the reason

that the proceedings for adjudication of the dispute inter parties through

arbitration did not lead to any executable award in favour of either of the

parties. The learned arbitrator left the exercise for calculation of the value of

short/ lost LPG on issue Nos. 5, 7 and 8 in respect of the transaction during the

contractual period from 1.11.2011 to 31.10.2013 to the claimant. Claim No. (C)

relating to the award of interest @ 9% per annum was made contingent upon

the amount payable after completion of the exercise as indicated in issue Nos.5,

7 and 8 and only on the failure of the respondent/contractor to pay the amount

within four months and fifteen days from the date of award. The learned

arbitrator, therefore, failed to exercise jurisdiction vested in him to determine

the dispute between the parties. The learned Commercial Court could

not have taken upon itself to modify the Award by rendering findings on the

issue left open by the learned Arbitrator. Therefore, the learned Court had no

option other than to set aside the award and remand it for fresh arbitration.

[10] As such, we do not find any reason to interfere in the impugned

judgment. Learned counsel for the parties, on instructions, have submitted that

the learned arbitrator is in a position to undertake the exercise for determination

of the outstanding issues. As such, there is no need to refer the matter to

another arbitrator.

[11] In view of the reasons recorded hereinabove, the impugned

judgment does not require any interference. The present appeal is accordingly

dismissed. It is expected that the learned arbitrator would conclude the

arbitration proceedings preferably within three months from the date of receipt

of copy of this order. Pending application(s), if any, also stands disposed of.

(S. D. PURKAYASTHA), J (APARESH KUMAR SINGH), CJ

Munna S MUNNA SAHA

Date: 2024.07.30 17:13:47 +05'30'