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1996 DIGILAW 41 (ORI)

ASHOK TRANSPORT AGENCY v. CENTRAL COALFIELDS LTD.

1996-02-02

D.P.MOHAPATRA

body1996
JUDGMENT D.P. Mohapatra, J. - M/s. Ashok Transport Agency, a partnership firm, has filed this appeal under Section 39(1)(vi) of the Indian Arbitration Act, 1940, challenging the order of the Subordinate Judge, Talcher, in Miscellaneous Case No. 105/87 setting aside the award of the Arbitrator. 2. The facts of the case sans unnecessary details may be stated thus : The appellant filed Money Suit No. 8 of 1984 against the Central Coal Fields Ltd., a company registered under the Companies Act, (respondent herein), for rendition of accounts against the respondent in respect of the money due to it on account of transportation of coal by the appellant from Ara and Sarubera Collieries to the nearest rail head. During the contract period of one year commencing from 30.1.1978, the appellant was to transport 4,80,000 metric tons of materials at the rate of Rs. 7.64 per metric ton. The appellant alleged that during the contract period the respondent converted the materials from metric ton to cft. and made less payment than the amount due to it under the contract; that the respondent committed breach of contract and failed to supply, the materials for transportation which caused loss to it and further on account of negligence and lapse on the part of the respondent in failure to provide loading facilities on two shift basis, the appellant also incurred huge loss because of idle wages paid to the labourers and hire charges for vehicles. The appellant alleged that on 30.1.1981 the respondent made in less payment on the open and current account between the parties. It was the further case of the appellant that there was mutual and current account between the parties maintained by the respondent and such account remain unsettled. 3. The respondent on entering appearance in the suit filed an application under Section 14 of the Arbitration Act (hereinafter referred to as "the Act") for stay of the proceeding. Subsequently, both parties stifled joint application under Section 21 of the Act for reference of the disputes to the sole arbitration of Shri Chintamani Mohapatra, a retired District Judge. In the said application, the parties prayed that details as per the plaint are to be the terms of reference to the Arbitrator. 4. Before the Arbitrator, the respondent raised various pleas including the question of limitation. In the said application, the parties prayed that details as per the plaint are to be the terms of reference to the Arbitrator. 4. Before the Arbitrator, the respondent raised various pleas including the question of limitation. Ultimately, the Arbitrator passed a reasoned award in the following terms : "After careful scrutiny of the claim, counter and exhibits filed by both the parties and taking into consideration the evidence, citations, and arguments of both the parties and their Counsel. I would allow in favour of the claimant a principal sum of Rs. 7,09,340.88 (rupees seven lakhs, nine thousand, three hundred forty and paise eighty eight only) and interest at the rate of 12% per annum on the principal of Rs. 7,09,340.88 from 1.2.1981 till the date of decree or final payment whichever is earlier. Also I would allow a sum of Rs. 3,000/- (rupees three thousand) only in favour of the claimant towards the cost of the proceedings. Future interest is at the discretion of the Court." 5. The respondent filed an application under Sections 30 and 33 of the Act assailing the award on several grounds. The learned Subordinate Judge by his order dated 4.10.1988 set aside the award on the finding that the award was vitiated due to an error of law apparent on the face of it since the claim is barred by limitation. The operative portion of the order reads : "In view of the finding that error on the point of law relating to the limitation is apparent on the face of the award and the claim is barred by limitation award is to be set aside. Hence ordered : ORDER The Misc. case is allowed on contest and award is set aside." The said order is challenged in this appeal. The respondent has also filed a cross objection under Order 41, Rule 22, Civil Procedure Code. 6. On the facts position of the case discussed above, the moot question that arises for determination is whether the learned Subordinate Judge committed an error in setting aside the award on the ground of limitation. To put it slight differently, whether he erred in holding that the claim of the appellant was barred by limitation. 6. On the facts position of the case discussed above, the moot question that arises for determination is whether the learned Subordinate Judge committed an error in setting aside the award on the ground of limitation. To put it slight differently, whether he erred in holding that the claim of the appellant was barred by limitation. In this regard, the contention of the appellant is that the learned Subordinate Judge 'had no jurisdiction to consider the correctness of the finding recorded by the Arbitrators that the suit was filed in time. The further contention is that since the claim is based on an open, mutual and current account between the parties. Article 1 of the Schedule of the Limitation Act, 1963 applies to the case and the suit is not barred by limitation. The contention of the respondent, on the other hand, is that there was no mutual, open and current account between the parties and Article 1 has no application to the case. Since the final bill in respect of Ara Colliery was paid on 12.4.1979 and security deposit was refunded on 30.4.1979, and the final bill in respect of Saruberal Colliery was paid on 19.1.1981 and security deposit was refunded on 30.1.1981, the suit filed on 30.3.1984, i.e., after three years of the last transaction, was clearly barred by limitation. 7. Before considering the point in issue, it will be convenient to notice certain undisputed facts of the case and controverted points of law. In the present case, during pendency of the suit, reference was made to the Arbitrator by consent of the parties; no particular question of law was referred but the disputes as per the plaint were a generally referred for adjudication; before the Arbitrator the defendant respondent raised the question of limitation and the Arbitrator answered the same in favour of the plaintiff appellant holding that the claim was made in time; the learned Subordinate Judge set aside the finding of the Arbitrator holding that it was vitiated by apparent error of law. It was also not disputed that since the question of limitation was not specifically referred to the Arbitrator, the finding of the Arbitrator cannot be said to be final and binding on the Court. 8. The question of limitation has been discussed in the award by the Arbitrator under Issue No. 2. It was also not disputed that since the question of limitation was not specifically referred to the Arbitrator, the finding of the Arbitrator cannot be said to be final and binding on the Court. 8. The question of limitation has been discussed in the award by the Arbitrator under Issue No. 2. The reason for the finding is stated as follows : "... Though the claimant had all along been raising his point of difficulty and claiming to be compensated for the wrong done by the respondent, they have not taken any heed to the claimant's claim, rather towards the later part of the contract they not only wanted to accuse the claimant, but also they did not pay anything beyond what they considered to be correct. Therefore, the contract can be said to be mutual and open and the claimant having filed a petition for Arbitration and when he got no relief, he filed a case and while the case was pending, both the parties filed a petition for appointing an Arbitrator to decide the disputes between them before the Subordinate Judge, Talcher. On that light and considering all evidence, arguments and citations, I think that the claim is within the limitation ........" From the above observations it is clear that the Arbitrator was of the view that the claim was based on a mutual and open contract since the appellant had been raising grievances to which the respondent had paid no heed and given after issuing notice for appointment of an Arbitrator it got no relief and that the reference to Arbitrator was made with consent of both the parties. The learned Subordinate Judge referring to the facts and circumstances appearing from the evidence placed before the Arbitrator and referring to the case laws cited before him held that in the circumstances there was no question of any mutual and open account between the parties for the reason that the dealings do not indicate independent obligation on both sides and there was no mutuality in the dealing between the parties. He, therefore, held that the Arbitrator committed an error of law which was apparent from the award in recording the finding that the claim of the plaintiff appellant was within time. 9. I will take up the question relating to jurisdiction of the court first. He, therefore, held that the Arbitrator committed an error of law which was apparent from the award in recording the finding that the claim of the plaintiff appellant was within time. 9. I will take up the question relating to jurisdiction of the court first. The Supreme Court in the case of Thawardas Pherumal and another v. Union of India ( AIR 1955 SC 468 ), ruled that an Arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable, he is a Tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not, he can be set right by the Court provided his error appears on the face of the award. The Court observed that the single exception to this is when the parties choose specifically to refer a question of law as a separate and distinct matter; is no specific question of law is referred, either by agreement or by compulsion, the decision of the Arbitrator on that is not final however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. The Apex Court further observed that the parties who made a reference to arbitration have the right to insist that the Tribunal of their choice shall decide their dispute according to law; so before the right can be denied to them in any particular matter, the court must be very sure that both sides wanted the decision of the Arbitrator on a point of law rather then that of the courts and that they wanted his decision on that point to be final and when a question of law is the point at issue, unless both sides specially agree to refer it and agree to be bound by the Arbitrator's decision, the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The Supreme Court in the Case of M/s. Alopi Parshad & Sons Ltd. v. Union of India ( AIR 1960 SC 588 ), held that the award of an Arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by the Arbitrators, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous. Reliance was placed on AIR 1923 P.C. 66. Therein the court further observed that if, however, a specific question is submitted to the Arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad on its face so as to permit of its being set aside. In such a case, the decision being of Arbitrators selected by the parties to adjudicate upon those questions, the award will bind the parties. A similar view was taken by the Supreme Court in the case Union of India v. A.L. Rallia Ram (AIR 1963 SC 1605), wherein the court while holding that wrong or right the decision so binding, if it be reached fairly after giving adequate opportunity to the parties to place their grievances in the manner provided by the Arbitration agreement, observed that it is now firmly established that an award is bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there is found some legal proposition which is the basis of the award and which is erroneous. The court further observed that this rule does not apply where question of law are specifically referred to the Arbitrator for his decision; the award of the Arbitrator on those questions is binding upon the parties, for by referring the specific questions the parties desire to have a decision from the Arbitrator on those questions rather than from the court, and the court will not, unless it is satisfied that the Arbitrator had proceeded illegally, interfere with the decision. In the case of Continental Construction. Co. Ltd. v. State of Madhya Pradesh ( AIR 1988 SC 1166 = 1988 (1) Arb. In the case of Continental Construction. Co. Ltd. v. State of Madhya Pradesh ( AIR 1988 SC 1166 = 1988 (1) Arb. LR 400), the Apex Court negatived the argument on behalf of the appellant that since specific issues were framed and referred by the District Judge to the Arbitrator, the same had been answered by a non-speaking award, there was no mistake of law apparent on the face of record and the District Judge erred in setting aside the award by looking into the terms of the contract which, it was submitted, neither formed part of the award nor appended to it. The court held that the claim of extra cost by the contractor was a general question and the District Judge rightly examined the question and found that the appellant was not entitled to claim for extra cost in view of the terms of the contract and the Arbitrator misdirected himself by not considering this objection of the State before giving the award. The court reiterated the legal position that if no specific question of law is referred, the decision of the Arbitrator on that question is not final however, much it may be within his jurisdiction and indeed essential for him to decide the question incidentally, and held that the Arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable, the Arbitrator is a Tribunal selected by the parties to decide their disputes according to law and so is found to follow and apply the law, and if he does not, he can be set a right by the court provided his error appears on the face of the award. From the authoritative pronouncements of the Apex Court in the aforementioned decisions, the position is clear that in the present case since the question of limitation was not specifically referred to the Arbitrator for decision, the court was well within its power to examine the correctness of the findings recorded by the Arbitrator in the award on that question and having held that the award is vitiated by an error apparent on the face of the record, rightly corrected the finding of the Arbitrator. 10. 10. The question that remains to be considered is regarding correctness of the finding record by the learned Subordinate Judge that the claim of the appellant was barred by limitation. As noted earlier, the finding in this regard was based on the ground that in the facts and circumstances of the case Article 1 of the Schedule of the Limitation Act has no application to the case. In the case of Hindustan Forest Company v. Lal Chand and others ( AIR 1959 SC 1349 ), the Supreme Court considering the question of mutual account under article 85 of the Limitation Act, 1908, ruled that the requirement of reciprocal demands involves transactions on each side creating independent obligations on the other and not merely transactions which create obligations on one side, those on the other being merely complete or partial discharge of such obligations. In that case the parties entered into an agreement for the supply of grain by the sellers to the buyer at the rates and times specified, the agreement stated that on the date it had been made the buyer had paid to the sellers Rs. 3,000/- and had agreed to pay a further sum of Rs. 10,000/- within ten or twelve days as advance and the balance due for the price of goods delivered after the expiry of every month. The said sum of Rs. 10,000/- was later paid by the buyer to the seller. Various quantities of goods were thereafter delivered by the sellers to the buyer and though such deliveries had not been made strictly at the times specified in the contract they had been accepted by the buyer, the buyer in his turn made various payments towards the price of the goods delivered but not month by month and had not further paid it in full. The Court held that there was no reciprocity of the dealings, there were no independent obligations and in so far as the payments had been made after the goods had been delivered, they had been made towards the prison due and were in discharge of the obligation created in the buyer by the deliveries made to him to pay the price of the goods delivered and did not create any obligation on the sellers in favour of the buyer. This Court in the case of Silla Laxminarayana v. Arjuna Goudo (AIR 1973 Orissa 134), construing the provision in Article I of the Limitation Act, 1963 held that in order to constitute a mutual account there must be a mutual credit founded on a subsisting debt on the other side or an express or implied agreement for a set-off of mutual debts. Elucidating the point, the Court observed : "... Where for instance, the dealings on either side are so independent of each other that neither party in giving credit to the other seller on the debt which he has against him, there are no mutual dealings, in other words, each party must be able to say to the other at some time or other during the period of account, I have an account against you, i.e., not merely a shifting balance but reciprocity of dealing and the right to mutual demand which form the essential ingredients of a mutual open and current account." This court placed reliance on the decision of the Supreme Court in the case of Kesharichand v. Banking Corporation ( AIR 1965 SC 1711 ). A similar view was taken by this court in the case of Attadi Yanksti v. M/s. Bharatam Ramulu and another (57 (1984 CLT 227). 11. Applying the principles enunciated by the Supreme Court and this court in the aforementioned decisions to the facts and circumstances of the case in hand, there is little scope for doubt, that Article I in Schedule of the Limitation Act, 1963 has no application to the suit. In the present case, the requirement of reciprocal demands involving transactions on each side creating independent obligations on the other is absent. More importantly the reason given by the Arbitrator in the award holding that there was a mutual account, as noted earlier, was that the appellant had been raising grievance relating to the contract to which the respondent paid no heed and even his notice for reference to arbitration brought no response is wholly irrelevant for the purpose. Therefore, the finding of the Arbitrator is vitiated by error of law apparent on the face of the award. The learned subordinate Judge was right in interfering with the said finding. 12. On the analysis and the discussions in the foregoing paragraphs the position is manifest that the order passed by the learned Subordinate Judge is unassailable. Therefore, the finding of the Arbitrator is vitiated by error of law apparent on the face of the award. The learned subordinate Judge was right in interfering with the said finding. 12. On the analysis and the discussions in the foregoing paragraphs the position is manifest that the order passed by the learned Subordinate Judge is unassailable. Since the order passed by the learned Subordinate Judge is upheld for the reasons and on the grounds discussed above it is not necessary to consider the cross objection filed by the respondent. Accordingly, the appeal and the cross-objection are dismissed, but in the circumstances of the case, without any order for costs. Appeal dismissed. *-*-*-*-*