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Himachal Pradesh High Court · body

2002 DIGILAW 109 (HP)

AVINASH BAWA & CO. v. STATE OF H. P.

2002-04-16

K.C.SOOD

body2002
JUDGMENT Kuldip Chand Sood, J.—It appears, on 4th January, 1996 the Principal Chief Conservator of Forests, Himachal Pradesh, invited tenders for the sale of "Bhabber grass" which was grown in Bilaspur, Nalagarh, Nahan, Paonta Sahib and Una (Kutlehar) Forest Division. The terms and conditions for tenders were stipulated in the tender notice. M/s. Avinash Bhawa and Co., hereinafter referred to as the "claimant" were the highest tenderers. An agreement was executed between the claimant and the Government of Himachal Pradesh in the Department of Forest Farming and Conservation, hereinafter referred as "the respondent" on 24.1.1996. The estimated quantity of grass, as stated, in the agreement was 18,850 quintals. The claimant agreed and contracted to purchase the grass at Rs. 72 per quintal. The total amount of the contract value came to Rs. 13,57,200. Under the contract agreement, the purchasers were required to pay for a minimum extraction of 14,683 quintals of Bhabber grass, even if the claimants did not extract any or entire quantity of Bhabber grass. Thus, the minimum amount of Rs. 10,57,176 as royalty was stipulated to be paid to the "respondent". The royalty amount was to be paid in two equal instalments. The first instalment was payable on 29.2.1996 and second instalment on 31.3.1996. 2. The claimant paid both the instalment on 2.4.1996. After three years, on 29.5.1999, the claimant represented to the Principal, Chief Conservator of Forests that the claimants had paid the amount of Royalty in excess of the amount payable to the respondent. Claimant claimed refund of the excess amount. The plea of the petitioner did not find favour with the respondent. The dispute having been arisen between the parties was referred for arbitration. Sh. R.A. Singh, Conservator of Forests (Hqr) was appointed as sole Arbitrator to adjudicate the dispute between the parties. 3. The claimant, in his claim, before the Arbitrator, claimed Rs. 15,90,089-08 on the grounds that as per the contract agreement availability of Bhabber grass was estimated to be 18,850 quintals. However, the claimant could extract only 4000 quintals of Bhabber grass whereas he had paid royalty for minimum quantity 14683 quintals as stipulated in the agreement, and thus suffered a loss of Rs. 7,69,176. The claimant also claimed corresponding refund of sales tax amounting to Rs. 61,534.08 paid to the department and interest of Rs. 7,59,379 in all Rs. 15,90,089.08 paise. 4. The claim petition was resisted by the respondent. 7,69,176. The claimant also claimed corresponding refund of sales tax amounting to Rs. 61,534.08 paid to the department and interest of Rs. 7,59,379 in all Rs. 15,90,089.08 paise. 4. The claim petition was resisted by the respondent. The case of the respondent was that the quantity of Bhabber grass was estimated to be 18,850 quintals. However, the contractor-claimant under the Contract agreement was to pay for the minimum quantity of 14,683 quintals of Bhabber grass irrespective of the fact that quantity of the grass extracted by the claimant was less than the minimum stipulated quantity for which Royalty was paid by the claimant. 5. The arbitrator by his award dated 5.6.2000 rejected the claim of the claimant. 6. Aggrieved, the claimants firm has filed these objections under Section 34 of the Arbitration and Conciliation Act, 1996 (Act for short). The claimant prays for the setting aside of the impugned award of the Arbitrator on the grounds: (a) the award made by the arbitrator is based on surmises and conjectures; (b) the award is contrary to the evidence on record and material evidence has been ignored by the arbitrator; (c) at the time of inviting the tenders Kutlehar forest area was under the charge of the Administrator who did not allow the petitioner to extract the grass from that area; (d) the Arbitrator misinterpreted the provisions of the contract agreement to hold that the minimum royalty was to be paid irrespective of the quantity of the grass extracted by the claimant. 7. In the reply filed on behalf of the respondent-State of Himachal Pradesh, the allegations are controverted. It is stated that the Arbitrator had rightly rejected the claim of the claimant in terms of the provisions of the contract agreement read with terms and conditions of the tender notice. It is further pleaded that the award was made by the arbitrator strictly in accordance with the provisions of the Act. The following issues were settled: 1. Whether the award of the Arbitrator is liable to be set aside, as alleged? OPP 2. Relief. 8. The affidavits were exchanged by the parties, as evidence. I have heard Mr. J.S. Bhogal, learned Senior Advocate, assisted by Ms. Priti Sethi, counsel for the petitioner-claimant and Mr. Sandeep Kaushik, learned Additional Advocate General for the respondent. 9. Whether the award of the Arbitrator is liable to be set aside, as alleged? OPP 2. Relief. 8. The affidavits were exchanged by the parties, as evidence. I have heard Mr. J.S. Bhogal, learned Senior Advocate, assisted by Ms. Priti Sethi, counsel for the petitioner-claimant and Mr. Sandeep Kaushik, learned Additional Advocate General for the respondent. 9. Under Section 34 of the Act, an award can only be set aside if it falls within the mischief of sub-sections 2(a) or 2(b) of Section 34 of the Act. Sub-sections 1 and 2 of Section 34 of the Act, which are relevant, may be reproduced for the convenience: "(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if— (a) the party making the application furnishes proof that— (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or failing such agreement, was not in accordance with this Part; or (b) the Court finds that—subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the Public Policy of India. 10. The contention of Mr. 10. The contention of Mr. Bhogal, learned Senior Counsel was that his case falls within the mischief contemplated under sub-clause 2(b)(ii) of Section 34 of the Act. The argument is that the arbitral award made by the arbitrator being without application of mind and de hors the evidence is in conflict with the Public Policy of India. 11. Mr. Bhogal, learned Senior Counsel strenuously urged that the respondent had agreed to sell the Bhabber grass to the claimant-petitioner, which was estimated to be 18,850 quintals, at the rate of Rs. 72 per quintal. The liability of the claimant, contended Mr. Bhogal, to pay the Royalty was limited to the extent of quantity of the Bhabbar Grass factually extracted by the claimant. Clauses 3, 5 and 5(a) are the relevant clauses which may be noticed: "3. That for the duration of the agreement the seller agrees to sell to the purchasers from the said areas, subject to availability of Bhabber grass estimated about 18,850 quintals (2700 qtls + 3000 qtls + 5650 qtls + 7500 qtls from Nahan/Paonta Sahib (excluding Simbal bara wild life santuary area) Bilaspur, Nalagarh (Nalagarh area) and Una (Kutlehar Forests) Forest Divisions respectively annually with right and licence to cut, collect and carry the same." 5. That the purchasers bind themselves to take over and pay for Bhabber Grass, the royalty amount of the year ending 31.3.1996 at the rate of Rs. 72 (Rs. Seventy two) only per quintal for all the grass extracted. The weighment of the Bhabber Grass will be done in the presence of the Assistant Conservator of Forests and counter checking at the check post about 10 to 15% randum checking will be done by the Conservator of Forests and Divisional Forest Officers concerned. 5(a) That first instalment of royalty amount i.e. 50% of the amount due is to be paid by the firm on or before 29.2.1996 and the remaining balance (2nd instalment) including extra amount on account of amount due on account of supply made to "BAN" making units and two cottage Small Scale.. Units located at Majra and Kala Amb is to be paid by the firm on or before 31st March, 1996: Provided further that for the purpose of contract value and pax/able royalty instalments, the quantity likely to be extracted during the year 1995-96 will form the basis for each division as under: Sr. Units located at Majra and Kala Amb is to be paid by the firm on or before 31st March, 1996: Provided further that for the purpose of contract value and pax/able royalty instalments, the quantity likely to be extracted during the year 1995-96 will form the basis for each division as under: Sr. No. Name of Division Quantity in qtls. Rate per Quintal Royalty Amount 1. Nahan/Paonta Sahib 2700 72 1,94,400 2. Bilaspur 3000 72 2,16,000 3. Nalagarh 5650 72 4,06,800 4. Una (Kutlehar) 7500 72 5,40000 18250 13,57,200 However, the purchasers will have to pay for the following minimum extraction of Bhabber grass even if they may or may not extract the quantity of Bhabber Grass from these areas: SI. No. Name of Division Quantity in qtls. Rate per qtl. Royalty 1. Nahan/Paonta Sahib 1861 72 133992 2. Bilaspur 3628 72 261216 3. Nalagarh 2277 72 163944 4. Una (Kutlehar) 6917 72 498024 14683 1057176 As the final payable royalty is to be determined on the basis of the actual extraction, the variation in payable royalty amount will be adjustable in the final 2nd instalment." (Emphasis supplied) 12. A careful reading of clause 3 shows that respondent has agreed to sell the "Bhabber Grass" to the claimant grown in the forest area division of Nahan, Paonta Sahib (excluding Simbal Bara Wild Life Santuary Area) Bilaspur, Nalagarh (Nalagarh area) and Una (Kutlehar Forests) Forest Division for a period of one year. The quantity of the grass was estimated to be 18,850 quintals (i.e. 2700 qtls in Nahan/Paonta Sahib Forest Division, 3000 qtls Bilaspur Forests Division, 5650 qtls in Nalagarh Forest Division and 7500 qtls in Una (Kutlehar) Forest Division), at the rate of Rs. 72 per quintal. The royalty amount worked out was 13,57,200. 13. Clauses 5 and 5(a) of the contract agreement, clearly stipulated that the royalty amount, at the rate of Rs. 72/per quintal, shall be paid to the respondents in two instalments. The first instalment was to be paid on 29.2.1996 and remaining amount on or before 31.3.1996. Proviso to clause 5(a) covenants that the claimants will have to pay minimum royalty for 18,850 quintals of Bhabber grass at the rate of Rs. 72 per quintal, even if the claimant does not extract any Bhabber grass or extract lesser quantity thereof from the areas mentioned below: SI. No. Name of Division Quantity in qtls. Rate per qtl. Proviso to clause 5(a) covenants that the claimants will have to pay minimum royalty for 18,850 quintals of Bhabber grass at the rate of Rs. 72 per quintal, even if the claimant does not extract any Bhabber grass or extract lesser quantity thereof from the areas mentioned below: SI. No. Name of Division Quantity in qtls. Rate per qtl. Royalty 1. Nahan/Paonta Sahib 1861 72 133992 2. Bilaspur 3628 72 261216 3. Nalagarh 2277 72 163944 4. Una (Kutlehar) 6917 72 498024 14683 1057176 14. It may further be noticed that the final royalty was to be worked out and determined on the basis of actual extraction, if extracted more than the minimum quantity stipulated. The variation in payable royalty amount was to be adjusted in the second and final instalment. 15. The tender notice, Annexure-IV and mark Ex. D-III by the Arbitrator, by which the sealed tenders for the disposal of Bhabber Grass for the year 1995-96, in the present case were invited, clearly stipulated, in terms of Condition No. 8 of the Terms and Condition, that successful tenderer will have to pay for minimum quantity of the grass at the rate quoted by him from the various Forest Divisions. Similarly, under condition No. 10 the prospective buyers were advised to inspect the Bhabber grass growing areas in their own interest. The conditions No. 8 and 10 of the Terms and Conditions noticed may be extracted: 8. The successful tenderer will have to pay. for minimum quantity of grass at the rate quoted by him from the Forest Divisions as detailed below even if no or less grass is extracted and removed by him: Division Quantity (i) Nahan and Paonta Forest Divisions 1861 Qtls. (ii) Bilaspur Forest Division 3628 Qtls. (iii) Nalagarh Forest Division 2277 Qtls. (iv) Una (Kutlehar Forest Division 6917 Qtls. 14683 Qtls. 10. Prospective buyers are advised to inspect the Bhabber grass growing areas in their own interest. 16. A combined reading of Tender Notice and terms and conditions, specially condition Nos. (ii) Bilaspur Forest Division 3628 Qtls. (iii) Nalagarh Forest Division 2277 Qtls. (iv) Una (Kutlehar Forest Division 6917 Qtls. 14683 Qtls. 10. Prospective buyers are advised to inspect the Bhabber grass growing areas in their own interest. 16. A combined reading of Tender Notice and terms and conditions, specially condition Nos. 8 and 10 makes it clear that the successful tenderer was required to pay for minimum quantity of grass at the rate quoted by the tenderer from the various Forest Divisions detailed in the tender notice and in the agreement, even if no or less grass was extracted and removed by the successful tenderer and if the tenderer extracted more than the minimum quantity then he was liable to pay on the quantity factually extracted by him. 17. It is true that the respondent had estimated the quantity of the grass, under the Contract Agreement, to be 18850 qtls but then this was only an estimate and as per condition No. 10 the prospective buyers were advised to inspect the Bhabbar Grass growing areas in their own interest. It was open to the tenderers not to bid if tenderer thought that Bhabber Grass available was less than the minimum quantity for which they were liable to pay. 18. The Arbitrator was right in observing that it was the responsibility of the claimants firm to satisfy itself about the availability of the grass before tendering or signing the agreement deed. The Arbitrator also observed that though the claimant represented to the Divisional Forest Officer concerned on April 24, 1996 making a grievance that claimants firm was not being allowed to export the grass from Nalagarh Forest Division but never even whispered that the quantity of Bhabber Grass available in the Forest Divisions including the Kutlehar Forest Division of Una was much less than estimated by the Department. 19. The Arbitrator noticed the grievance of the claimant that site of Kutlehar Forest Division was handed over to the claimant on 7.2.1996 after a delay of 15 days and concluded that if there was any genuine grievance because of delay in handing over the site of Kutlehar Forest Division, the claimant should have brought to the notice of the concerned Divisional Forest Officer. The claimant did not make any grievance or represented to any authority when the grass was being extracted by the claimants firm. The claimant did not make any grievance or represented to any authority when the grass was being extracted by the claimants firm. The Arbitrator in para 3.5 of the award observed: "3.5 As regards Kutlehar forests it is admitted by the claimants (Exh. C-III) that after taking over the same on 7.2.1996 by D.F.O. Una the respective sites were handed over to them. Their contention of a delay of 15 days after signing the Agreement Deed does not impress. After taking over the sites, if there was any problem regarding availability of grass or deployment of previous lessees staff, the fact should have been brought to the notice of D.F.O. Una. No such representation has been made by them either during the working period or thereafter. In addition, the firm never bothered to work the areas of Bilaspur Forest Division despite notice by D.F.O. Bilaspur as is evident from D.F.O. Bilaspur Letter No. 8505 dated 30.9.1996 to C.F. Bilaspur and copy endorsed to the firm (Annex. 10, Exh. D-IV). All this shows that the claimant firm did not execute the work in the field in right, earnest manner all over the area from where grass was to be collected." 20. In view of the provisions of the Contract Agreement and Conditions of the Tender notice, the dispute raised by the claimant was non existent and untenable. The award is well reasoned and in my view does not fall within the mischief of sub-sections 2(a), 2(b) of Section 34 of the Act. In my view, it is not open to the courts to investigate the mental process of the Arbitrator to reach his conclusions which are supported by reasons. It is also not open to the courts to substitute their own views or reasoning for the views and reasoning of the Arbitrator. 21. It is now well settled if the arbitrator travels outside the contract agreement, then he acts without jurisdiction. However, if he merely interprets the provisions of the contract agreement, as in the present case, then the award cannot be interfered with. The scope of interference with the award of the Arbitrator under Section 34 of the Act is limited and the court would stay its hands off even if the claim is unjustified. 22. In the present case, the arbitrator merely construed the provisions of the Contract Agreement and Tender Notice. The scope of interference with the award of the Arbitrator under Section 34 of the Act is limited and the court would stay its hands off even if the claim is unjustified. 22. In the present case, the arbitrator merely construed the provisions of the Contract Agreement and Tender Notice. Even if another view is possible the Court would not set aside the award, by construing the provisions of the contract agreement and tender notice differently. The apex Court in Himachal Pradesh State Electricity Board v. R.J. Shah and Company, JT 1999(3) SC 151, relying upon K.R. Raveendranathans case, 1998(9) SCC 410, observed: "it is clear that when the arbitrator is required to construe a contract then merely because another view may be possible the court would not be justified in construing the contract in a different manner and then to set aside the award by observing that the arbitrator has exceeded the jurisdiction in making the award." 23. In the present case, simply because the arbitrator construed the provisions of the agreement and tender notice not to the liking of the claimant will not make the award to be against the "Public Policy of India", as contended by learned Senior Counsel for the claimant. 24. There is no merit in the argument that the arbitral award made by the arbitrator exhibits non-application of mind or is de hors the evidence on record and, therefore, in conflict with the Fublic Policy of India. The arbitral award, as noticed earlier, is based on the interpretation of the provisions of the agreement and terms and conditions of the tender notice. 25. In the facts and circumstances of this case, I need not to go into the question as to what is the content and meaning of "Public Policy of India", for the purpose of clause 2(b)(ii) of Section 34 of the Act as the objections raised by the claimant are untenable. 26. To conclude the award is not liable to be set aside under Section 34 of the Act. The issue is accordingly answered. In result, the objections fail and are dismissed. There will be no order as to costs.