Heavy Engineering Corporation Limited v. Footwear And Footwear
1997-04-15
P.K.DEB
body1997
DigiLaw.ai
Judgment P.K.Deb, J. 1. This appeal has been preferred under Sec. 39 (vi) of the Arbitration Act, 1940, by the above named defendant-appellant against the order dated 6.11.93 passed by the Sub-Judge, 1st, Ranchi, in Miscellaneous Case No. 3 of 1989, whereby the award published by the Arbitrator has been aside on the move being made by the Respondent No. 1 under Sec. 30 of the Arbitration Act. 2. The admitted facts of the case are that the claimant respondent No. 2 was carrying on business in proprietorship in the name and style of M/s. Footwear and Footwear for the manufacture of safety boots and safety shoes. The appellant defendant Heavy Engineering Corporation (hereinafter referred to as H.E.C.) invited a tender for supply of ten thousand pairs of safety shoes of particular specification and against that tender, the claimant had submitted its rate and after negotiation respondent No. ls tender was accepted and the rate of each pair of shoes was fixed at Rs. 34.70 paise. As per the terms of the agreement and the supply order, it was agreed upon that the payment of bills would be made by the Corporation within ten days from the date of each supply of each consignment. It is also admitted case that the claimant supplied about 2370 pairs of shoes out of which payment was made only in respect of 600 pairs of shoes. Immediately after supply of first lot of shoes, the H.E.C. changed their decision for change in the specification of the shoes and no further supply of shoes were taken from the claimant and started making ways and means for frustrating the contract and ultimately, cancelled the same. Only to frustrate the contract, the H.E.C. was pointing out defect in the shoes and rejected the shoes supplied by the claimant- respondent, although respondent No. 2 was agreeable to rectify the defects, if they really exist and ordered for purchase of the goods at the risk of the respondent No. 1 from other sources. 3. The dispute arose between the parties and ultimately, in Misc. Appeal No. 72 of 1980, it was directed by this Court that the dispute must be agitated in terms of the arbitration as per the agreement and all disputes must be referred to the Arbitrator by the H.E.C. Hence, in this way, arbitration proceeding started. 4.
3. The dispute arose between the parties and ultimately, in Misc. Appeal No. 72 of 1980, it was directed by this Court that the dispute must be agitated in terms of the arbitration as per the agreement and all disputes must be referred to the Arbitrator by the H.E.C. Hence, in this way, arbitration proceeding started. 4. Before the Arbitrator, the main contention of the claimant-respondents was that the contract was rescinded motivatedly and in a pre-planned manner and during the course of arbitration proceeding, at the instance of the claimant respondents, the administrative file of the H.E.C. was called for perusal of different nothings, resolution etc. of the H.E.C. regarding the contract works. Xerox copies of different nothings in the file were also supplied to the claimants-respondents at the instance of the Arbitrator. After hearing the parties, the Arbitrator had passed the award itemwise but which giving any reasons for arriving at his decision. Dispute No. 1 was whether the H.E.C. was justified in cancelling the contract for the undelivered and unaccepted quantity and resorting to risk purchase of 2000 pairs of shoes ? The award was passed on that dispute in the following manner: "H.E.C. is justified in cancelling the contract for the undelivered and unaccepted quantity but it is not justified in resorting to risk purchase." Dispute No. 2 is with regard to taking of delivery of the 1660 pairs of leather sole safety shoes by the H.E.C. lying ready in the factory of the claimant-respondent. Award was passed that the H.E.C. was not obliged to take delivery of the shoes. Dispute No. 3 was with respect to fresh inspection of safety shoes by outside agencies which has already been inspected and rejected by H.E.C.L. The award was given in negative holding that the H.E.C. is not required to go for fresh inspection of safety shoes by outside agencies. Dispute No. was with regard to placing of fresh orders on the claimants- respondent on their revised rates with revised specification. The said dispute has also been decided in negative. Regarding the payment of shoes which had already been supplied by the claimants-respondents to the tune of Rs. 20,400.00 has been allowed by the Arbitrator and all other disputes regarding compensation of semi-finised, un-finished shoes lying in the factory of the claimants were also answered in negative.
The said dispute has also been decided in negative. Regarding the payment of shoes which had already been supplied by the claimants-respondents to the tune of Rs. 20,400.00 has been allowed by the Arbitrator and all other disputes regarding compensation of semi-finised, un-finished shoes lying in the factory of the claimants were also answered in negative. The dispute No. 7 is very important wherein the dispute was with regard to the cancellation of the contract by the H.E.C. as to whether it was pre-planned, motivated, illegal and arbitrary or not: Negative award was given in the following manner: "Cancellation of the contract by the H.E.C. was not pre-planned, motivated, illegal and arbitrary." Then, the award was filed in Arbitration (title) suit No. 145 of 1988 for making a rule of the court and the petitioner filed objection under Sec. 30 of the Arbitration Act challenging the legality and validity of the Award filed by the Arbitrator and prayer was made for setting aside the same. Notice was served upon the claimants on 30.1.89 by the court and the award was filed when the claim of the petitioner was amounting to Rs. 5,85,102.77 only. Various grounds were taken in the petition filed under Sec. 30 of the Arbitration Act. The main ground was that the Arbitrator mis-conducted himself and proceeded illegally in giving the impugned award. There was gross error apparent on the face of the award as the learned Arbitrator did not consider the notings and various decisions of the H.E.C. before cancelling the contract. Admitted fact remainsthat as per specification the claimants supplied some lots of shoes and some payments were made and it was stopped on the ground that the shoes were not as per the specification and that the employees of the H.E.C, for whom the shoes were ordered, had denied to take those shoes. Very specification of the lather sole of the shoes were considered to be not proper and, as such, various meetings were made and resolutions were taken and then ultimately, it was decided that the contract should be rescinded to and the cancellation was made on the simple ground that the claimants failed to supply the goods as per the terms of the agreement and also as per specification.
On the other hand, claimants plea is that the payment of the shoes supplied by the claimants had not been paid within the specified period and, as such, the claimants had stopped supplying of further lots of shoes, although those were lying in his factory for the purpose of delivery. As the payment was not made, those had not been supplied and it was contended by the claimants from the very beginning that the contract was rescinded to on a pre-planned motivated way and the plea of non-supply of lots of shoes was only plea for pleas sake for rescinding the contract. Various decisions of the H.E.C. and the resolutions taken were also placed before the Arbitrator to show that the H.E.C. had cancelled the contract motivatedly and in a pre- planned manner only for the reason that the employees of the H.E.C. were not agreeable to take the shoes as per the specification made by the H.E.C. authorities. Specifications were resolved to be changed and according to the claimants, on change of the specification, opportunities ought to have been given to the petitioner during the subsistence of his contract regarding his option to supply the goods as per the subsequently charged specification arrived at by the authorities of the H.E.C. Learned court below considered all pros and cons of the matter in dispute and on going though the materials on record came to the finding that the Arbitrator mis-conducted himself in not considerating the vital documents regarding the decision of the H.E.C. authorities and resolutions thereof regarding cancellation of the contract and according cancellation of the contract and accordingly to him, if those had been considered in their proper perspective then the Arbitrator ought not to have arrived at the decision that the contract was cancelled legally by the H.E.C., rater non-consideration of those documents has negatived the legitimate claim of the claimants that the cancellation was arbitrary and it was done motivatedly in a pre-planned manner. 4.
4. It may be mentioned here that the file produced by the H.E.C. at the initiation of the claimants had been returned back to the H.E.C. and that file did not become a part of the arbitration proceeding and, such returning was behind the back of the claimants without his knowledge and at the time of passing the award, the file relating to the cancellation of the contract was not before the Arbitrator and, as such, he had arrived at a wrong decision. A petition was moved by the claimants for such summoning the Arbitrator to the court to justify the allegation of the claimants-respondent that the files were not before the Arbitrator at the time of preparing the award and the circumstances in which he had returned the file to the H.E.C. behind the back of the claimant when those files had been called for use in the arbitration proceeding at the initiation of the claimants. Such prayer of the claimants was allowed and summons were issued to the Arbitrator for his examination before the court below. Against that order, H.E.C. came up before this Court in C.R. No. 468 of 1990 (R). This said revision petition was disposed of after hearing both the parties vide order dated 8.1.91 allowing the revision petition and setting aside the order of the lower court. It was specifically observed by this Court that summons were issued to call for the Arbitrator to give evidence as to in what circumstances, he ignored the relevant documents and returned those documents behind the back of the petitioner. But as normally, the Arbitrators are not called for adducing evidence except in exceptional circumstances, the revision petition was allowed and the order of summoning the Arbitrator was set aside. In the last portion of the order of the revision petition, it was observed by this Court in the following manner: "Having considered the facts and circumstances of the case, the impugned order passed by the learned Sub-judge, Ranchi, is accordingly set aside and this revision petition is allowed. However, the court below may consider the consequences that may arise for calling the documents and returning back the same by the Arbitrator, if permissible in law." Thus, liberty was given to the lower court to consider the circumstances regarding calling of the documents from the H.E.C. by the Arbitrator and returning the same before Arbitrators award was passed.
However, the court below may consider the consequences that may arise for calling the documents and returning back the same by the Arbitrator, if permissible in law." Thus, liberty was given to the lower court to consider the circumstances regarding calling of the documents from the H.E.C. by the Arbitrator and returning the same before Arbitrators award was passed. Learned court below on perusal of the file, which was called for, had come to the decision that the learned Arbitrator had mis-conducted himself is not considerating those vital documents. He has discssed elaborately the different notings, resolutions and the correspondences of the officials inter se of the H.E.C in the file whereby it could be found that there was a good case of the claimant regarding his allegation of cancelling the contract motivatedly and in pre-planned manner and hence the petition filed under Sec. 30 of the Arbitration Act was allowed and the operative part of the order is in the following manner: "This appears to be error on the face of the award, therefore, I find and hold that the Arbitrator has committed mistake by not considering the material facts referred before him. Accordingly, I find and hold that the Arbitrator has committed the misconduct and submitted the award against the material facts. Accordingly, the award submitted by the Arbitrator is set aside and Miscellaneous case is allowed." This finding has been challenged in this Miscellaneous Appeal by the H.E.C. as mentioned above. Mr. Kameshwar Prasad, appearing for and on behalf of the appellants by referring to different findings of the Apex Court submitted that the learned court below has committed error of law in setting aside the award. His submission is that it has now become settled principle of law that while deciding the petition under Secs. 30 and 33 of the Arbitration Act, the Court cannot sit as appellate court to find out the defects in the Award. The Court should proceed with a pre-conceived mind that the award is legal proper and unless it could be shown on the face of the award that there is error on the face of it the courts are slow in interfering with the Award. This submission of Mr. Kameshwar Prasad is perfectly legal and proper.
The Court should proceed with a pre-conceived mind that the award is legal proper and unless it could be shown on the face of the award that there is error on the face of it the courts are slow in interfering with the Award. This submission of Mr. Kameshwar Prasad is perfectly legal and proper. A court of law can not sit as an appellate court to find out the defects of the award, but if a vital document, which is necessary for arriving at a just decision, has been ignored by the Arbitrator then definitely, the procedure adopted by the Arbitrator should be construed as commission of mis-conduct. In this connection, reference may be made to the decision of the Apex Court as , K.P. Poulose V/s. State of Kerala and Anr. . In this case, it was held that if the Arbitrator ignores the material documents then he should be held to have misconducted the arbitration proceeding itself. 5 Mr. A. Sahay, appearing for and on behalf of the claimants-respondents has submitted by referring to a case as , Union of India V/s. Jain Associates and Anr. that the circumstances in the case very well reveal that the Arbitrator had not applied his mind as he failed to consider the relevant aspects of the disputes and in case of non- application of mind of non-speaking award, it is not possible to separate the grains from chaff i.e. the bad portion from the good portion and then whole of the award should be set aside. According to him, the present award and the relevant document was not there before the Arbitrator at the time of passing the award which specifically infers that there was non-application of mind by the Arbitrator and non-consideration of a relevant document would definitely, be construed as mis-conducting the arbitration proceeding. 6. On the other hand Mr. Kameshwar Prasad, submits that the award being a non-speaking one, it is not possible to read with the mind of the Arbitrator as the matter was in dispute and those documents had been called for and the parties has submitted on those documents then it should be construed that the Arbitrator had considered those documents. Regarding taking back of the documents, it is submitted by Mr.
Regarding taking back of the documents, it is submitted by Mr. Kameshwar Prasad that while those documents were taken back by the H.E.C. then the photostat copies/xerox copies of those documents were placed in the arbitration proceeding itself and, therefore, it can be said that the Arbitrator had no scope to apply his mind on those documents. On going through the file of arbitration proceeding, I do not find anywhere that the xerox copies of the office notes were there before the Arbitrator while taking back the administrative file of the H.E.C, rather xerox copies were supplied to the claimants at their initiation and written argument was also placed on the basis of those documents. Thus, it is the submission of Mr. Kameshwar Prasad that when written argument was there from the side of the claimants mentioning the relevant nothing/resolutions of inter se correspondences of the Officers of the H.E.C. in the administrative file, then there is no scope to infer that the Arbitrator did not consider those aspects while passing the award taking up the worst case that the file was not before him. I am not convinced with such submission of Mr. Kameshwar Prasad. It is true that the claimants were harping on the point that the cancellation of the agreement/contract was a pre-planned and motivated one and in support of that, they had called for the file of the H.E.C. and they had submitted on those nothings. But for convicting himself by the Arbitrator on those submission, he must have to see the files in original, but that has not been done as the file had already been returned and the file was not before the Arbitrator when he passed the award. 7. Let us take the other aspect of the matter. The argument between the parties was that in case of cancellation of the agreement for breach of terms of the supply, then the H.E.C. is not debarred to purchase the goods from the open market or from other suppliers at the risk purchase of the claimants. It cancellation of the agreement/contract by the H.E.C. was found to be proper on breach of terms and conditions of the agreement then it would naturally follow from the terms of the agreement that the H.E.C. would be at liberty to purchase the goods at the risk of the claimants. Here, in the present case.
It cancellation of the agreement/contract by the H.E.C. was found to be proper on breach of terms and conditions of the agreement then it would naturally follow from the terms of the agreement that the H.E.C. would be at liberty to purchase the goods at the risk of the claimants. Here, in the present case. Arbitrator has held that the cancellation was proper and justified i.e. on non- application for mind, he fund that the cancellation was justified as there was breach of contract from the side of the claimants and then there remains no reason why there should not be risk purchase of the claimants by the H.E.C. But that portion has been negatived in the Award itself. A prudent man can not justify such sort of finding of the Arbitrator. The terms of the contract had been negatived by the Arbitrator on the breach which the Arbitrator had definitely, no authority to do and it can said that on the face of it, illegality has been committed by the learned Arbitrator. In this connection, Mr. Kameshwar Prasad has given reference to a case as , N. Chellappan V/s. Secretary, Kerala State Electricity Board and Anr. wherein it was held that the error of law committed by the Arbitrator may not be a ground for setting aside the award, if such error of law is not apparent on the face of the award. In that case, question of limitation was not considered while passing the award. It was held by the Apex Court that "the sole Arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that no ground for challenging the validity of the award." Here the question in otherwise as discussed above.
It was held by the Apex Court that "the sole Arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that no ground for challenging the validity of the award." Here the question in otherwise as discussed above. The agreement was before the Arbitrator and the terms and conditions of breach and award was also before him and the same was in dispute before him and the same was in dispute before him while holding of it as proper and rejecting the other points without any reason definitely, can not be construed as mistake but an error on the face of the award/record as the specific issue was with respect to risk purchase and the same has been negatived holding the cancellation to be proper which a man with general prudence can not do and, as such, should be considered as an error on the face of the record. I am totally agreeing with the reasonings of the learned Sub-judge on the different nothings of the file, which was before him and, as such, I am not going to reiterate the different notings in the file. 8. Suffice it to mention the note-sheets dated 21.1.78, 20.2.78 and the notes given by the Dy. Manager on 21.6.78 by which caution was given not to take further consignments from the contractor as those would remain as dead stock as the employees demands for rubber sole shoes were conceded to which make clear that H.E.C. was making preparation to cancel the contract. From the various notings, correspondences and resolution in the administrative file of the H.E.C, on independent scrutiny, I also find that if those would have been considered in their proper perspective, then the Arbitrator could not have passed the present award holding that the cancellation of the award was not a pre-planned and motivated one. 9. Lastly, Mr. Kameshwar Prasad by referring to -- , Kanpur Nagar Mahapalika V/s. Messers Narian Das Haribansh, has submitted that limitation for fling a petition under Sec. 30 of the Arbitration Act would start from the date of notice of the aggrieved party and not from the date of notice from the court. In the present case, the learned court below has construed the calculation from the date of notice of the court.
In the present case, the learned court below has construed the calculation from the date of notice of the court. When the appellant could not prove by the cogent evidence before the court below or before this Court that the notice of the Arbitrator was received by the claimants-respondents earlier to the notice from the court, then there remains no scope but to calculate the limitation from the date of notice from the court. Hence, this submission has got no force, -- (supra) as referred by Mr. Kameshwar Prasad has got no bearing in the present case. In that case, jurisditional matter was not specifically pleaded before the Arbitrator and the same was not considered by the Arbitrator and, as such, it was held that the same can not be held as error of law. Here specific pleadings were there and the claimants case was based on the basis of the administrative file of the H.E.C. and the same ignored by the Arbitrator which apparently goes to show non-application of mind. In similar circumstances, arbitration matter was sent back to the Arbitrator again for consideration of two documents which were ignored by the Arbitrator on the face of the award by a judgment of the Calcutta High Court as reported in 1995 Supreme Court page 274, Hooghly River Bridge Commissioners V/s. Bhagirath Bridge Construction Co. Ltd.. 10. Hence, on the above discussions. I find no force in this appeal and the setting aside of the award by the learned Sub-Judge is proper and justified. Hence, the appeal is dismissed but no order as to cost.