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2001 DIGILAW 40 (HP)

H. P. M. C. LTD. v. HIM FRUIT TRADERS

2001-03-23

R.L.KHURANA

body2001
JUDGMENT R.L. Khurana, J. :- The defendant Messrs Him Fruit Traders, a registered partnership firm, was appointed by the plaintiff, Messrs. Himachal Pradesh Horticultural Produce Marketing and Processing Corporation Ltd. (for short: HPMC) as its distributor for a period of five years for sale of its apple juice concentrate and other allied product within the territories of Delhi vide agreement dated 1.4.1987. Such agreement contained an arbitration clause in the following terms:- "That in case of any dispute/difference arises out of this agreement that shall be referred to the Arbitration of the sole person to be appointed by the Managing Director of the first party who be an officer of the H.P. Government not below the rank of Secretary, whose decision shall be conclusive and binding upon both the parties to the agreement. That all dispute arising out of this agreement shall be subject to the jurisdiction of Shimla Court of H.P." 2. On a dispute having arisen between the parties Mrs. Suneeta Mukherjee, an officer of the rank of Secretary to the Government of Himachal Pradesh, and the then Resident Commissioner of Government of Himachal Pradesh at Delhi, was appointed as the sole Arbitrator to go into the dispute between the parties and to make an award. The plaintiff HPMC laid a total claim of Rs. 10, 62,836/- against the defendant before the Arbitrator. A counterclaim to the tune of Rs.48, 70,034/- was preferred by the defendant. The learned Arbitrator after going into the dispute between the parties and upon consideration of the material placed before her, made an award on 10.10.1994 whereby the plaintiff, against the claim preferred by it, was awarded a sum of Rs.7,25,556/-. The counter claim preferred by the defendant was allowed to the extent of Rs.4, 01,948/-. As a net result, an award of Rs.3,23,608/- was made in favour of the plaintiff and against the defendant. 3. The award dated 10.10.1994 was filed in this court by the learned Arbitrator for being made the rule of the court and the same came to be registered as Civil Suit No.74 of 1992. Notices of the award having been filed in court for being made the rule of the court, were served on the parties. 3. The award dated 10.10.1994 was filed in this court by the learned Arbitrator for being made the rule of the court and the same came to be registered as Civil Suit No.74 of 1992. Notices of the award having been filed in court for being made the rule of the court, were served on the parties. In response to such notice, though no objections were preferred by the plaintiff to the award being made the rule of the court, the defendant preferred objections under section 30 read with section 33 of the Arbitration Act, 1940 (for short: the Act). The objections preferred by the defendant to the award allowed by a learned single Judge (P.K. Palli, J.) of this court o 14.7.1998. After setting aside the award dated 10.10.1994, the matter was remitted for fresh decision. The learned single Judge, with the consent of learned counsel for the parties, appointed Shri S.S. Thakur, the then Secretary law to the Government of Himachal Pradesh as sole Arbitrator, who was directed to make the award in the light of the observations made in the order dated 14.7.1998. The parties were directed to appear before the learned Arbitrator on 18.8.1998. 4. The learned Arbitrator entered upon the reference on 18.8.1998 and after having heard the counsel for the parties and having gone through the record of the case made his award on 29.1.1999. 5. On the basis of the claims/counter claims of the parties and the contentions raised, following issues were framed by the learned Arbitrator for determination:- 1. Whether Him Fruit Trades have furnished a security to the tune of rupees one lac as required under the agreement, if not, its effect? Onus HFT. 2. Whether Him Fruit Traders are liable for the amount mentioned in Annexure C-l and C-5 by H.P.M.C? If not, then to what amount H.F.T. is liable? Onus Both Parties. 3. Whether Him Fruit Traders are not liable for compensation/penalty claimed? Onus Parties. 4. Whether Him Fruit Traders are liable for Cold, Storage charges? Onus Parties. 5. Whether Him Fruit Traders are liable for advertisement charges? Onus Parties. 6. Whether Him Fruit Traders are liable to pay interest and at what rates? Onus HPMC 7. Whether Him Fruit Traders are entitled to a sum of Rs. 15,98,034.00 on account of rates charges in excess of ex-favtory rates (including interest) ?Onus HFT. 8. Onus Parties. 5. Whether Him Fruit Traders are liable for advertisement charges? Onus Parties. 6. Whether Him Fruit Traders are liable to pay interest and at what rates? Onus HPMC 7. Whether Him Fruit Traders are entitled to a sum of Rs. 15,98,034.00 on account of rates charges in excess of ex-favtory rates (including interest) ?Onus HFT. 8. Whether Him Fruit Traders are entitled to discount @ 4% on the sale of goods to the tune of Rs. Two lacs against the material supplied to M/s. Texco India Ltd.? Onus HFT. 9. Whether Him Fruit Traders are entitled to their claim of Rs.3,5O,OOO.OO on account of discount entitled under the agreement due to direct sale of apple products by H.P.M.C. with effect from 1.4.1987 to date ?Onus HFT 10. Whether Him Fruit Traders are also entitled to special discount of Rs.4,75,000.00 to be paid by H.P.M.C. due to the bulk-purchases of Apple Juice Concentrate? Onus H.F.T. 11. Whether Him Fruit Traders are entitled to a sum of Rs. 10,02,000.00 as a Trading Loss sustained by them due to withholding payment by H.M.P.C. ? Onus HFT. 12. Whether Him Fruit Traders is entitled to a discount of Rs. 1,45,000.00 against sales made in various Kiosks in Delhi? Onus HFT. 13. Whether Him Fruit Traders are entitled to a sum of Rs.8, 50,000.00 on account of sale of Apple-Tapple to unauthorised persons by H.P.M.C.? Onus HFT. 14. Whether Him Fruit Traders is entitled to service charges to the tune of Rs.2,50,000.00 for supply of goods to various Kiosks on behalf of H.P.M.C.?Onus HFT. 15. Relief/Award. 6. The learned Arbitrator held issues No. 1,7,8,9,10,11,12 and 14against the defendant and issues No. 2 to 6 in favour of the plaintiff. Issue No. 13 was found by the learned Arbitrator in favour of the defend at. Consequent upon such findings the following sums were awarded in favour of parties in respect of their claims/counter claims:- Issue No. Amount awarded in favour of plaintiff. Amount awarded in favour of defendant. 1. - - 2. Rs.6,29,926.00 - 3. Rs. 74,452.50 - 4. Rs. 20,678.00 - 5. Rs. 500.00 - 7. - - 8. - - 9. - - 10. - - 11. - - 12. - 13. - Rs.24,555.08 14. - - Total Rs.7,25,556.50 Rs.24,555.08 7. Amount awarded in favour of defendant. 1. - - 2. Rs.6,29,926.00 - 3. Rs. 74,452.50 - 4. Rs. 20,678.00 - 5. Rs. 500.00 - 7. - - 8. - - 9. - - 10. - - 11. - - 12. - 13. - Rs.24,555.08 14. - - Total Rs.7,25,556.50 Rs.24,555.08 7. After adjusting the amount payable to the defendant under issue No.13, the plaintiff was held entitled to a total sum of Rs.7,01,001.42, which was rounded off to Rs.7,01,000.00. In view of the findings recorded under issue No.6, the plaintiff was granted interest on the awarded amount at the rate of 18% per annum with effect from 28.8.1992, that is, the date of the commencement of arbitral proceedings, till the date of realisation of the amount. 8. The learned Arbitrator on 1.2.1999 filed his award dated 29.1.1999 in this court for being made the rule of the court. Notices of the award having been filed in court were issued to the parties. No objections were preferred by the plaintiff to the award being made the rule of the court. The defendant has objected to the award being made the rule of the court by filing objections under sections 30 and 33 of the Act inter alia, on the grounds that the Arbitrator has misconducted himself and the proceedings; that the learned Arbitrator was required to record the reasons for his conclusions and in the absence of such reasons the award is bad; and that the award is otherwise bad and liable to be set aside. It has been averred that the learned Arbitrator was having a bisased attitude against the defendant and has acted as an agent of the plaintiff. The award is contradictory and contrary to the evidence coming on record. The terms of the contract have been misconstrued and ignored. The directions of the court contained in the order dated 14.7.1998 passed in Civil Suit No.74 of 1992 while setting aside the earlier award have not been complied with. 9. The objections are being resisted and contested by the plaintiff. It has been pleaded that the learned Arbitrator, in making the award, has neither misconducted himself nor the proceedings. The Arbitrator has acted within his jurisidction and has assessed and appreciated the evidence in the legal perspective. There is no error on the face of the award and that the award is perfectly legal and valid. It has been pleaded that the learned Arbitrator, in making the award, has neither misconducted himself nor the proceedings. The Arbitrator has acted within his jurisidction and has assessed and appreciated the evidence in the legal perspective. There is no error on the face of the award and that the award is perfectly legal and valid. The Arbitrator was not obliged to give reasons for his conclusions. The reasons have, otherwise, been given by the learned Arbitrator for his conclusions. The learned Arbitrator did not act in a biased manner. The reading of the award shows the mind of the Arbitrator as to on which basis he has acted in making the award. The plaintiff has, accordingly prayed that the award dated 29.1.1999 be made a rule of the court by passing a decree in accordance thereof. 10. On the pleadings of the parties, following issues were framed on 2.3.2000:- 1. Whether the Arbitrator has misconducted himself and the proceedings as alleged? OPD 2. Whether the Arbitrator was required to record the reason and the award is bad for being a non-speaking order? OPD 3. Whether the award is otherwise liable to be set aside as alleged? OPD 4. Relief. 11. The parties have led evidence in the form of affidavits. I have heard the learned counsel for the parties and have also gone through the record of the case. My findings on the above issues are as under: Issue No. 1. It is well settled that the jurisdiction of the court to interfere with the award of the Arbitrator is a limited one. The adjudication of the Arbitrator is generally binding between the parties and it is not Open to the court to attempt to probe the mental process by which the Arbitrator has reached his conclusion. Award of an Arbitrator can be set aside by a court only on the grounds enumerated in section 30 of the Act. It is not open to the court to re-assess the evidence to find whether the Arbitrator has committed any error or to decide the question of adequacy of evidence and the court cannot sit on the conclusion of the Arbitrator by re-examination and reappreciating the evidence considered by the Arbitrator. The Arbitrator is a creature of the agreement itself and, therefore, is duty bound to enforce the terms of the agreement and cannot adjudicate a matter beyond the agreement itself. The Arbitrator is a creature of the agreement itself and, therefore, is duty bound to enforce the terms of the agreement and cannot adjudicate a matter beyond the agreement itself. If the Arbitrator adjudicates a claim of a contractor with reference to the clauses of the agreement itself whereby the agreement gets engrafted into the award, it will be open to the court to examine those clauses of the agreement and find out the correctness of the conclusions of the Arbitrator with reference to those clauses. See: State of U.P. v. Ram Nath International Construction (P) Ltd., 1996 (1) SCC 18. 12. Dealing with the question of scope and extent of examination of the award by the court, it has been held by the Honble Apex Court in Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd., AIR 1989 SC 973, as under: "The scope and extent of examination by the Court of the award made by an arbitrator has been laid down in various decisions. It has to be noted that there is a tread in modern times that reasons should be stated in the award though the question whether the reasons are necessary in ordinary arbitration awards between the parties is pending adjudication by the Constitution Bench of the Court. Even, however, if it be held that it is obligatory for the arbitrator to state reasons, it is not obligatory to give any detailed judgment. An award of arbitrator should be read reasonably as a whole to find out the implication and the meaning thereof. Short intelligible indications of the grounds should be discernible to find out the mind of the arbitrator for his action even if it be enjoined that in all cases of award by an arbitrator reasons have to be state. The reasons should not only be intelligible but should also deal either expressly or impliedly with the substantial points that have been raised. Even in a case where the arbitrator has to state reasons, the sufficiency of the reasons depends upon the facts and the circumstances of the case. The Court, however, do not sit in appeal over the award and review the reasons. Even in a case where the arbitrator has to state reasons, the sufficiency of the reasons depends upon the facts and the circumstances of the case. The Court, however, do not sit in appeal over the award and review the reasons. The court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusion or if the award is based upon any legal proposition which is erroneous." 13. Examining the present case in the light of the above settled principles of law, it can be safely said that there has been neither misconduct of the proceedings nor any misconduct on the part of the Arbitrator. Nothing has come on the record to show that the Arbitrator was in any way, biased against the defendant or that the award has been made with a biased mind. There has been no misconstruction of any term of the contract. The learned counsel for the defendant could not point out the non-compliance of any direction(s) of this court contained in the order dated 14.7.1998. In fact a bare perusal of the said order shows that no specific direction was given to the Arbitrator while remitting the case to him. 14. On the basis of the material placed on the record, it is held that the Arbitrator has neither misconducted himself nor the proceedings. The issue ii decided against the defendant. Issue No. 2. 15. The case of the defendant is that the Arbitrator was required to record the reasons for his conclusions and on his failure to do so, the award is bad and liable to be set aside. 16. The first question which arises for determination is whether the Arbitrator was required to record the reasons for his conclusions. 17. The clause pertaining to reference of dispute to arbitration as contained in the agreement dated 1.4.1987, admittedly entered upon by the parties, has been reproduced above. Admittedly, the terms contained therein do not require the Arbitrator to record his reasons. 18. It is also admitted case of the parties that in the order dated 14.7.1998 passed by this court in civil suit No.74 of 1992 remitting the dispute to the Arbitrator, there is no direction that the Arbitrator shall record reasons for his conclusion. Admittedly, the terms contained therein do not require the Arbitrator to record his reasons. 18. It is also admitted case of the parties that in the order dated 14.7.1998 passed by this court in civil suit No.74 of 1992 remitting the dispute to the Arbitrator, there is no direction that the Arbitrator shall record reasons for his conclusion. It is also not disputed that in the original order of reference of the dispute to the arbitration of Mrs. Suneeta Mukherjee, there was no stipulation and/or requirement as to his conclusions. There is also no provision in the Act making it obligatory for the Arbitrator to record his reasons in support of his award. 19. The question - whether an award passed under the provisions of the Arbitration Act, 1940, is liable either to be remitted under Section 16(1) (c) of the Act or liable to be set aside under Section 30(c) there of merely on the ground that no reasons have been given by the Arbitrator or umpire, as the case may be, in support of the award? - came to be considered by a constitution Bench of the Honble Apex Court in Raipur Development Authority v. Chok-hamal Contractors, 1989 (2) SCC 721. It was held: "It is now well settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agree-met or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpie on the face of the record on going through such reasons. The Arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made under Section 20 or section 21 or section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so." 20. The Arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made under Section 20 or section 21 or section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so." 20. In para 33 of the judgment it was further observed: "The question which arises for consideration in these cases is whether it is appropriate for tis court to take the view that any award passed under the Act, that is, the Indian Arbitration Act 1940, is liable to be remitted or set aside solely on the ground that the arbitrator has not given reasons thus virtually introducing by a judicial verdict an amendment to the Act when it has not been the law for neatly 7/8 decades. The people in India as in other parts of the world such as England, U.S.A. and Australia have become accustomed to the system of settlement of disputes by private arbitration and have accepted awards made against them as binding even though no reasons have been given in support of the awards for a long time. They have attached more importance to the element of finality of the awards than their legality. Of course when reasons are given in support of the awards and those reasons disclose any error apparent on the face of the record people have not refrained from questioning such awards before the courts. It is not as if that people are without any remedy at all in cases where they find that it is in their interest to require the arbitrator to give reasons for the award. In cases where reasons are required, it is open to the parties to the dispute to introduce a term either in the arbitration agreement or in the deed of submission requiring the arbitrators to give reasons in support of the awards. When the parties to the dispute insist upon reasons being given, the arbitrator is, as already observed earlier, under an obligation to give reasons. But there may be much arbitration in which parties to the dispute may not relish the disclosure of the reasons for the awards. When the parties to the dispute insist upon reasons being given, the arbitrator is, as already observed earlier, under an obligation to give reasons. But there may be much arbitration in which parties to the dispute may not relish the disclosure of the reasons for the awards. In the circumstances and particularly having regard to the various reasons given by the Indian Law commission for not recommending to the government to introduce an amendment in the Act requiring the arbitrators to give reasons for their awards we feel that it may not be appropriate to take the view that all awards which do not contain reasons should either be remitted or set aside. A decision on the question argued before us involves a question of legislative policy which should be left to the decision of Parliament. It is a well known rule of construction that if a certain interpretation has been uniformly put upon the meaning of a statute and transactions such as dealings in property and making of contracts have taken place on the basis of that interpretation, the court will not put a different interpretation upon it which will materially affect those transactions." 21. The Apex Court proceeded to observe in para 35 of its judgment, as under:- "It is no doubt true that in the decisions pertaining to Administrative law, this court in some cases has observed that the giving of reasons in an administrative decision is a rule of natural justice by an extension of the prevailing rule. It would be in the interest of the world of commerce that the said rule is confined to the area of Administrative Law. We do appreciate the contention, urged on behalf of the parties who canted that it should be made obligatory on the part of the arbitrator to give reasons for the award, that there is no justification to leave the small area covered by the law of arbitration out of the general rule that the decision of every judicial and qasi-judicial body should be supported by reasons. But at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes. But at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes. As stated elsewhere in the course of this judgment if the parties to the dispute feel that reasons should be given by the arbitrators for the awards it is within their power to insist upon such reasons being given at the time when they enter into arbitration agreement or sign the deed of submission. It is significant that although nearly a decade ago the Indian Law Commission submitted its report on the law of arbitration specifically mentioning therein that there was no necessity to amend the law of arbitration requiring the arbitrators to give reasons. Parliament has not chosen to take any step in the direction of the amendment of the law of arbitration. Even after the passing of the English Arbitration Act, 1979, unless a court requires, the arbitrator to give reasons for the award. Vide sub-sections (5) and (6) of section 1 of the English Arbitration Act, 1979, an award is not liable to be set aside merely on the ground that no reasons have been given in support of it." 22. The question was, thus, answered in the following terms: "Having given our careful and anxious consideration to the contentions urged by the parties we feel that law should be allowed to remain as it is until the competet legislature amends the law. In the result, we hold that an award passed under the Arbitraion Act is not liable to be remitted or set aside merely, on the ground that no reasons have been given in its support except where the arbitration agreement or the deed of submission or an order made by the court such as the one under Section 20 or section 21 or section 34 of the Act or the statute governing the arbitration requires that the arbitrator, the umpire should give reasons for the award...." 23. The High Court of Delhi also in G.D. Rathi Steel Pvt. Ltd., v. Delhi Development Authority, AIR 1992 Delhi 343, has held that when the terms of the agreement requires that the award should be a reasoned one it is obligatory on the part of the arbitrator to state the reasons but it is not obligatory to give the detailed judgment. 24. Therefore, the mere fact that the Arbitrator has failed to record reasons in support of his award, would not render such award bad and liable to be set aside. 25. Even otherwise, in the present case, a persusal of the award shows that the Arbitrator has made a reasoned award by giving his findings on each and every issue. Such findings are duly supported by reasons. The issue is decided against the defendant. Issue No. 3. 26. During the course of hearing, the learned counsel for the defendant could not point out anything which would render the award bad and liable to be set aside. The issue is as such decided against the defendant. Relief. 27. . As a result of the findings recorded under issues No. 1 to 3 above, the objections preferred by the defendant, being OMP No.265 of 1999, are dismissed leaving the parties to bear their own costs. Civil Suit No. 16 of 1999. 28. Consequent upon the dismissal of the objections preferred by the defendant, the award dated 29.1.1999 is made the rule-of the court and a decree in terms thereof for a sum of Rs.7,01,000.00 is passed in favour of the plaintiff and against the defendant. The plaintiff shall further be entitled to interest on this amount at the rate of 18% per annum with effect from 28.8.1992 till the date of payment/realisation of the decretal amount. 29. No orders as to costs. -