Union of India v. Navin Trading Co. — 1994 DIGILAW 196 (CAL)

Judgment : This is an application made by the Union of India for setting aside the award made and published by Late, C. R. Chaudhury, an ex-officer of the Union of India, being the award dated 5th April, 1991. By the said award the arbitrator awarded a sum of Rs. 8,61,190/- ill favour of the respondent and interest thereon at the rate of 18 percent per annum with effect from April 30, 1985 to May 30, 1989 and further interest from April 5, 1991 until the fifth day of immediately proceeding month of the date of effecting payment by the respondent to the claimant. 2. The facts of the case may be shortly summarised as follows :- On or about 26th March, 1981, tender enquiry was floated by the petitioner for supply of cast Iron Anchors. On 30th June, 1981, the respondent submitted its tender for supply of Cast Iron Anchors at the rate of Rs. 19.20 per piece with raw material assistance or @ Rs. 24.00 per piece without raw material assistance. On 30th April, 1982, the Divisional Engineer, Telegraph (S) accepted the offer of the respondent and placed an order being Purchase Order No. L-408/ P-82/Anchor/4592 for 80,000 pieces of Cast Iron Anchors at the rate of Rs. 19.20 with raw material assistance. On or about, 29th October, 1982 the total quantity under the contract was increased to 92,000 pieces instead of 80,000 pieces as originally ordered. Between 30th October, 1982 to 7th April, 1983 the respondent supplied the total quantity of 92,000 pieces of Anchors. 3. Before commencing delivery the respondent furnished bank guarantee for Rs. 51,800/- and submitted a certificate issued by the National Small Scale Industries Corporation covering Rs. 23,200/- as and by way of security deposit. The petitioner accepted the said security deposit. It is not in dispute that the respondent supplied the entire quantity of 92,000 pieces. 4. The case of the respondent is that the respondent demanded raw material assistance from the petitioner. According to the respondent the petitioner requested the respondent to supply the goods without raw material assistance assuring the respondent that supplementary bill covering difference of price may be raised later on. The contract provided in clause 14 thereof that the purchaser agreed to supply raw material assistance against the purchase order. 5. According to the respondent the petitioner requested the respondent to supply the goods without raw material assistance assuring the respondent that supplementary bill covering difference of price may be raised later on. The contract provided in clause 14 thereof that the purchaser agreed to supply raw material assistance against the purchase order. 5. On 28th March, 1984 the petitioner as per clause 12 of the contract, asked the respondent to supply further 25 percent of the total quantity i.e. 23,000 pieces. The petitioner also demanded security deposit of Rs. 23,200/-. The respondent objected to the said demand for security deposit for the increased quantity. On or about 11th July, 1984, the respondent informed the petitioner by letter of the said date, that the goods are ready for inspection. By the letter dated 17th August, 1984, the petitioner cancelled the purchase order for the additional quantity of 25 percent. On or about 12th September, 1984 the respondent without prejudice sent a Bank Guarantee for Rs. 23,200/- with request to recall the letter of cancellation. By the letter dated 19th September, 1984 the respondent requested the petitioner to accept the manufactured quantity which were ready for inspection, but the petitioner refused to do so. The petitioner returned the bank guarantee for the sum of Rs. 23,200/-. On or about 30th April, 1985 the respondent raised supplementary bill for difference of price for a sum of Rs. 4,41,600/- on account of failure on the part of the petitioner to render raw material assistance. The respondent raised another bill for compensation being the difference of value of store chargeable from the petitioner and scrap value realised from the sale of 23,000 pieces. On or about, 11th April, 1986 the respondent referred the matter to the General Manager, Telecom Stores, for arbitration and submitted a statement of Claim. However, no steps were taken by the General Manager, Telecom Stores. 6. On 5th February, 1988 the respondent filed Special Suit No.8 of 1988 in this Court. After the affidavits were filed, the matter was heard and order was made by this Court on 31st March, 1989, inter alia, for filing of the arbitration agreement and for reference of the dispute to arbitration. The General Manager, Telecom Stores was directed to take steps for appointment of arbitrator in accordance with the Arbitration Agreement within two weeks. 7. After the affidavits were filed, the matter was heard and order was made by this Court on 31st March, 1989, inter alia, for filing of the arbitration agreement and for reference of the dispute to arbitration. The General Manager, Telecom Stores was directed to take steps for appointment of arbitrator in accordance with the Arbitration Agreement within two weeks. 7. Pursuant to the said order, of this Court, the General Manager Telecom Stores appointed Mr. C. R. Chaudhury, Assistant General Manager (Retd), Telecom as the arbitrator Statements were filed before the said Arbitrator by the parties and after the matter was heard, the said arbitrator made and published his award dated 5th April, 1991. 8. It was, inter alia, submitted on behalf of the Union of India before this Court, that the respondent was given raw material assistance which according to the petitioner was apparent from the letter dated 30th November, 1982 written by the petitioner. No copy of the said letter is annexed to the petition or the affidavit-in-reply. The other two letters which were relied upon by the petitioner in respect of the aforesaid contentions are the letters dated 20th December, 1982 issued by the Steel Authority of India Limited and another letter dated 29th January, 1983 written by the Assistant General Manager, Telecom to the Steel Authority of India Limited which according to the petitioner were placed before the arbitrator and which according to the petitioner shows that raw material assistance was given to the petitioner in respect of the aforesaid contract. Letter of the Steel Authority of India Limited dated 20th December, 1982 refers to the petitioner's letter bearing Ref: L-446/P-82/Socket/4630/10 dated 30th November, 1982. The said letter on the face of it refers to supply of socket and not Anchors. This letter by itself from contents refers to the supply under some other contract and not the contract for supply of Anchors. The letter dated 29th January, 1983 issued by the Assistant Genera] Manager (Telecom) also does not refer to the contract which is the subject matter of these proceedings. 9. This letter by itself from contents refers to the supply under some other contract and not the contract for supply of Anchors. The letter dated 29th January, 1983 issued by the Assistant Genera] Manager (Telecom) also does not refer to the contract which is the subject matter of these proceedings. 9. It is to be noted, that in the counter statement filed on behalf of the petitioner, before the arbitrator a copy whereof is annexed to the affidavit-in-opposition, it was stated as follows:- "The contentions of the firm is not tenable as they have supplied the ordered quantity without raw material assistance on their own interest and have never prayed for the cancellation of the Purchase Order before supplying the stores without raw material assistance." Even in the affidavit-in-reply affirmed by R. N. Bandhapadhaya on 18th February, 1994, in the present proceedings it is stated as follows: "I say that the respondent supplied the ordered quantity without raw material assistance on their own interest and it never prayed for cancellation of the purchase order before supplying the stores without raw material assistance." 10. The submission on behalf of the petitioner, is contrary to the case made out before the arbitrator as also the affidavits filed on its behalf before this Court. 11. The learned Counsel appearing on behalf of the Union of India submitted that even though the case of the petitioner in the counter statement before the arbitrator was that the supply was made without raw material assistance, yet it was the duty of the arbitrator to look into the two letters dated 20th December, 1982 and 29th January, 1983 and to hold that the same related to this contract and that raw material assistance was in fact given. It is to be noted that in all other correspondences which is annexed to the petition and written by the petitioner the reference no. of the contract is given and the words Anchors is also there. The contract No. is given in the purchase order as also in the letters dated 24th June, 1984, 29th October, 1982 and 21st June, 1984 which are annexed to the petition. On the face of it also, the letter dated 20th December, 1982 refers to a different contract and supply of socket and not Anchors. Similarly, the letter dated 29th January, 1983 also does not refer to the contract for supply of Anchors. 12. On the face of it also, the letter dated 20th December, 1982 refers to a different contract and supply of socket and not Anchors. Similarly, the letter dated 29th January, 1983 also does not refer to the contract for supply of Anchors. 12. The arbitrator in' his award has stated that he has considered all the relevant documents and papers submitted by the parties as well as the submissions of the parties. I am unable to accept the submissions made on behalf of the petitioner that the arbitrator failed to consider or take into account the said two letters dated 20th December, 1982 and 29th January, 1983. The case of the petitioner before the arbitrator was that the respondent supplied the goods without raw material assistance. Even in the affidavit-in-reply affirmed in this proceeding, the case of the petitioner is that the respondent supplied the goods without raw material assistance. 13. The said two letters which are annexed to the petition do not by themselves show that the same related to the contract which is the subject matter of this proceeding. I am unable to hold that the arbitrator did not consider the said two documents or the submissions of the parties. It is difficult, for me to accept the submissions made on behalf of the petitioner that inspite of common case of the parties, the arbitrator had the duty to hold that raw material assistance was in fact given. As already stated, above, the said two letters by themselves do not show that the same related to the contract which is the subject matter of this proceeding. 14. The petitioner relied on the judgment reported in (1) AIR 1975 Supreme Court 1259, I. P. Poulose v. State of Kerala & Another. In the said judgment the Supreme Court, inter alia, held that it comprises legal misconduct which is complete if the Arbitrator on the face of the Award arrives at a inconsistent conclusion even on his own finding or arrives at a decision by ignoring material documents which throw abundant light on the controversy to hold a just and fair decision. It was sought to be submitted that the Arbitrator ignored the two documents to arrive at a just decision to resolve the controversy between the parties. It was sought to be submitted that the Arbitrator ignored the two documents to arrive at a just decision to resolve the controversy between the parties. It was also sought to be submitted that even if the department did not produce those documents, it was a duty of the Arbitrator to get hold of all the relevant documents including the two documents in questions. So far as the facts of this case are concerned. The two documents were produced before the Arbitrator and there is no reason to hold that the Arbitrator did not consider the same. As I have already stated the case of the petitioner before the Arbitrator was that the supplies were made without raw material assistance. Furthermore, the two documents do not by themselves show that any raw material assistance was given with reference to the contract in question. I do not find that the aforesaid judgment applies to the facts and circumstances of the instant case. 15. The next point urged on behalf of the petitioner is that the claim of the respondent as made before the Arbitrator was in any event barred by limitation. The submission is that the special suit was filed on 5th February, 1988. The letter of cancellation of the contract is dated 17th August, 1984. In this connection, it is to be noted that by letter dated 11th March, 1986, the respondent referred the disputes to the General Manager Telecom Stores, Posts & Telegraph Department, for arbitration and filed a statement of claim. It appears, however, that the General Manager, did not take appropriate steps to proceed with the arbitration. It was under those circumstances that an application was made under Section 20 of the Arbitration Act to this Court. Once the reference was made it cannot be said that the limitation could still go on running as against the respondent. Furthermore, from Clause 10 of the contract it appears that the payments were to be made only to the extent of 95% of the value of the goods supplied on proof of despatch. Once the reference was made it cannot be said that the limitation could still go on running as against the respondent. Furthermore, from Clause 10 of the contract it appears that the payments were to be made only to the extent of 95% of the value of the goods supplied on proof of despatch. The balance 5% was to be paid after the receipt of the Stores by the consignee in good condition and on the release of bill copy payable challan duly certified and acknowledged by the consignee to the firm who was to then prefer the Bill for balance amount by the paying authority allowing the Bill copy payable challan for payment. These are questions of fact as to on which the date of balance of the 5% payments were made to the respondent. No facts have been placed even before this Court as to when final payment for the particular Bill or particular supplies were made. Furthermore, even the dates of part payment of 95% payment have also not been placed before this Court. Even according to the petitioner the Arbitrator did not accept the plea of limitation. Furthermore, no case was made out that the claim was barred by limitation on the date when the reference was originally made by letter dated 11th March, 1986. Once the reference was made the question of limitation running thereafter could not arise. It is only after demand for arbitration is made that the application under Section 20 of the Arbitration Act, can be made. The limitation is to be counted from the date the demand for arbitration is made. In this case the demand for arbitration was made on 11th March, 1986. It is not the case of the petitioner that the claims were barred by limitation on 11th March, 1986. 16. The point of limitation was raised before the Arbitrator and it is apparent that the arbitrator did not accept that the claims the respondent were barred by Limitation, since he made an award in favour of the respondent. 17. The respondent relied on the judgment of the Supreme Court reported in (2) AIR 1975 Supreme Court. 230, N. Chellappan v. Secretary, Kerala State Electricity Board and Another. 17. The respondent relied on the judgment of the Supreme Court reported in (2) AIR 1975 Supreme Court. 230, N. Chellappan v. Secretary, Kerala State Electricity Board and Another. In the said case the Supreme Court held that where the Arbitrator awarded a sum to the contractor on account of certain claims made by the contractor after considering the argument of the bar for disallowing it, but without expressly adverting to the question of limitation the Award is not vitiated on account of any mistake or error apparent on the face of the Award. The Supreme Court held that the Arbitrator was not bound to give a reasoned Award and if in passing the Award he makes the mistake of law or of fact, that is no ground for challenging the validity of the Award. It is only when the erroneous proposition of law is stated in the Award and on the face of the award there is error apparent that the award can be set aside or remitted on account of error of law apparent on the face of the Award. In the premises, it cannot be said that the instant award is vitiated by any error apparent on the face of the award or that the Arbitrator was bound to give any reason on the point of limitation. 18. It is to be noted that no point has been taken in the petition before this Court, that the arbitrator had no jurisdiction or that the claim was barred by Limitation. 19. The next question that was sought to be urged on behalf of the petitioner was that the petitioner act d within its rights in cancelling the order for the increased quantity of 23,000 pieces which was placed by letter dated 28th March, 1984. The said order for additional quantity was in terms of Clause 12 of the original Purchase Order. The said order for further quantity was cancelled by the petitioner by letter dated 17th August, 1984. Security deposit on account of the contract was furnished to the petitioner at the time when the original order was placed. Whether the petitioner was entitled to further security deposit or not was a question which was raised before the Arbitrator. The said order for further quantity was cancelled by the petitioner by letter dated 17th August, 1984. Security deposit on account of the contract was furnished to the petitioner at the time when the original order was placed. Whether the petitioner was entitled to further security deposit or not was a question which was raised before the Arbitrator. The respondent at first opposed that the petitioner could demand further secured deposit inter alia on the ground that they had already furnished sufficient security, and that the contract became operative and on the basis thereof the increased quantity was ordered as per clause 12 thereof. The respondent offered further security, after the letter dated 17th August, 1984 cancelling the increased quantity was issued, by respondents letter dated 19th September, 1984. All these questions were argued before the Arbitrator and the Arbitrator gave his decision after considering the same. It is to be noted that an Award made by the Arbitrator cannot be set aside simply on the ground that the decision of the Arbitrator on any question of law or of fact is erroneous. The Court does not sit in appeal from the award of an Arbitrator. It cannot be said in the instant case, there is any error apparent on the face of the award. 20. The respondent relied on the judgment of the Supreme Court reported in (3) AIR 1963 Supreme Court 1677, Santisila Devi v. Dhirendra Nath Sen. In the said case the Supreme Court held that the award intended and purported to decide all the disputes raised for the adjudication and, therefore, the Court will assume that he has considered and disposed of every claim made or defence raised. 21. The respondents relied on the case reported in (4) AIR 1989 Supreme Court 1263, Food Corporation of India v. Jogindar Pal and Mahindar Pal And Another. In the said case, the Supreme Court held that it is not misconduct on the part of the Arbitrator to come to an erroneous decision, and whether his error is one of fact or of law and whether or not his findings of fact are supported by evidence. 22. The petitioner relied on the case reported in (5) AIR 1992 Supreme Court 232, Associated Engineering Co. v. Government of Andhra Pradesh And Another. 22. The petitioner relied on the case reported in (5) AIR 1992 Supreme Court 232, Associated Engineering Co. v. Government of Andhra Pradesh And Another. In the said case the Supreme Court held that the Arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the Award. 23. In the instant case, it cannot be said that the Arbitrator in deciding the disputes between the parties has travelled beyond the terms of the contract. The contract was originally entered into on or about 13th April, 1982. The respondent furnished security in terms of the contract and the contract became binding and enforceable. The petitioner placed the order for additional quantity in enforcing the contract. The petitioner by virtue of the contract was entitled to increase the quantity by 25%. The petitioner did increase the quantity pursuant to the terms of the contract. Once the contract has become enforceable and order is placed in enforcing the contract then could it be said that the respondent was not liable to supply the goods. Could further security deposit be demanded, if the respondent was liable to supply the additional quantity and if the petitioner ordered for supply thereof as per the terms of the original contract which was and had become enforceable? Could the respondent deny his obligation to supply the additional quantity, once the order was placed for additional quantity pursuant to the terms of the contract? Was the demand for additional security justified, after the contract had already become binding and enforceable and the original security deposit had been furnished in or about 1982 ? Who committed the breach of the contract was it the petitioner or the respondent? All these question were before the Arbitrator and the Arbitrator in his own wisdom has decided the same and has awarded damages against the petitioner. Who committed the breach of the contract was it the petitioner or the respondent? All these question were before the Arbitrator and the Arbitrator in his own wisdom has decided the same and has awarded damages against the petitioner. It cannot be said that the Award of the damages by the Arbitrator amounts to travelling beyond the bounds of the contract or that the Award is in violation of terms and conditions of the contract. 24. I am unable to accept that the Arbitrator acted arbitrarily or irrationaly or capriciously or independently of the contract. I am of the opinion that the Arbitrator was acting within the bounds of the authority given to him by the Arbitration agreement and it cannot be said that he has violated any of the terms of the contract or has acted without jurisdiction. 25. As already stated above, this Court is not entitled to and is not going into the question whether the decision of the Arbitrator was erroneous either on any point of law referred to him or any question of fact referred to him as this Court is not sitting in appeal from the Award made by the Arbitrator. In the premises, I am of the view that the application made on behalf of the petitioner, Union of India, is liable to and is hereby dismissed. The petitioner will pay the costs of this application.