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Madhya Pradesh High Court · body

2004 DIGILAW 828 (MP)

M. P. State Electricity Board v. Mangalam Petro Chemicals

2004-10-11

SHANTANU KEMKAR

body2004
Judgment ( 1. ) THIS appeal has been filed under Section 39 (1) (vi) of the Arbitration Act, 1940 (hereinafter stated as act) against the order dated 24-7-2001 passed in Civil Suit No. 23-B/91 by the learned XII Additional District Judge, Jabalpur refusing to set aside the award dated 13-9-99 and making it a rule of the Court. ( 2. ) THE facts of the case, very briefly, are as under :the appellants invited tender for the sale of unserviceable mixed grade lubricating oil and unserviceable grease available with its various generation stores. The respondents tender was accepted. A sale order dated 16-2-94 was issued in favour of the respondent. The terms and conditions of the tender documents were incorporated in the sale order. As per Clause 3 of it the total price of the material was fixed to Rs. 6,29,181. 30 exclusive of sales tax at the rate of 12% which was to be paid by the respondent. As per the sale order the respondent was required to deposit 10% of full sale proceeds as security deposit. Earnest money was also to be deposited Rs. 5000/ -. An amount equivalent to 90% of full sale proceeds and 100% sales tax of full sale proceeds was to be deposited within 60 days in three instalments from the date of issue of the sale order. A penalty clause was also incorporated for late payment. ( 3. ) IN terms of the sale order the respondent deposited Rs. 5,78,000/-including security and earnest money. Since the entire price amount as required to be deposited under Clause 7 of the sale order was not deposited the appellants cancelled the sale order on 31-5-94 and forfeited security amount of Rs. 63,000/ -. Out of the amount deposited by the respondent, after adjusting the amount for the material supplied, the appellants refunded Rs. 58,919/- to the respondent. The respondents request for refund of the sales tax being not payable on the basis of judgment of this Court, refund of security and earnest money was also refused. ( 4. ) AGGRIEVED by this the respondent invoked the arbitration clause contained in the sale order and referred the dispute to the sole arbitrator, Chief Engineer General Stores, MPEB, Jabalpur. ( 5. ) THE appellants submitted their reply to the claims made by the respondent. ( 4. ) AGGRIEVED by this the respondent invoked the arbitration clause contained in the sale order and referred the dispute to the sole arbitrator, Chief Engineer General Stores, MPEB, Jabalpur. ( 5. ) THE appellants submitted their reply to the claims made by the respondent. The respondent, as recorded by the arbitrator in Paragraph 15 of its order dated 13-9-99 claimed for following items : (a) Earnest money - Rs. 5,000. 00 (b) Security deposit - Rs. 63,000. 00 (c) Ground Rent Deduction - Rs. 734. 15 (d) Sales Tax- Rs. 58,787. 68 Total claim amount of Rs. 1,27,162. 03 ( 6. ) AFTER considering the entire facts and circumstances of the case the arbitrator decided the dispute vide order dated 13-9-99 and allowed the claim of the respondent of Rs. 1,27,162. 03. ( 7. ) THEREAFTER the respondent submitted an application under Section 14 of the act, before the learned XII Additional District Judge, Jabalpur seeking direction to the arbitrator to file the award in the Court and prayed for making it rule of the Court. The award was filed in the Court. The appellants on being noticed filed their objection and prayed for setting aside the award. The learned Court below vide impugned order refused to set aside the award and ordered to make the award rule of Court. Being aggrieved by this, the appellants have filed the present appeal. ( 8. ) SHRI Maninder Bhatti, learned Counsel for the appellants streneously urged that in view of the various clauses of the sale order the respondent was bound to deposit the entire amount within the time frame, as accepted by him. He also drawn my attention to the clause that the sales tax was required to be paid by the respondent in addition to the agreed price. In view of the aforesaid clauses, he submitted that the arbitrator was not having jurisdiction to order for refund of earnest money and security deposited. So far as the order of refund of sales tax he contended that with open eyes the respondent having accepted to pay sales tax, he should not have been permitted to say that the sales tax was not leviable. In short his submission was that the arbitrator has exceeded in his jurisdiction and therefore, the award is liable to be set aside. In short his submission was that the arbitrator has exceeded in his jurisdiction and therefore, the award is liable to be set aside. In support of his submissions he relied on the judgments in the case of Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr. , AIR1999 SC 3627 , 1999 (3 )ARBLR350 (SC ), JT1999 (7 )SC 379 , 1999 (6 )SCALE92 , (1999 )9 SCC283 , [1999 ]supp2 SCR710 , 1999 (2 )UJ1579 (SC ), Food Corporation of India v. Surendra, Devendra and Mahendra Transport Co. , AIR2003 SC 1495 , 2003 (1 )ARBLR505 (SC ), (SCSuppl )2003 (2 )CHN111 , 2003 (1 )SCALE684 , (2003 )4 SCC80 , [2003 ] 1 SCR839 and Bharat Coking Coal Ltd. v. Annapurna Construction, AIR2003 SC 3660 , 2003 (6 )ALD85 (SC ), 2003 (3 )ARBLR119 (SC ), [2003 (4 )JCR87 (SC )], JT2003 (Suppl1 )SC280 , (2003 )3 MLJ185 (SC ), 2003 (7 )SCALE20 , (2003 )8 SCC154 , [2003 ]47 SCL259 (SC ). He further submitted that the sales tax collected from the respondent having been deposited with the Sales Tax Department, the arbitrator could not have directed the refund of the same. ( 9. ) SHRI V. R. Rao, learned counsel for the respondent has contended that on the date of hearing and even at the time of passing of the award by the arbitrator the sales tax amount collected from the respondent was not deposited by the appellants in the Sales Tax Department. He further contended that the powers and jurisdiction of the Court in such matter is limited and the appellants having failed to make out any case under Section 30 of the Act, the Court below has rightly rejected the prayer of the appellants. In support of his contention he relied on the judgments in the cases of Tarapore and Company v. Cochin Shipyard Ltd. , Cochin and Anr. AIR1984 SC 1072 , (1984 )2 Complj1 (SC ), 1984 (1 )SCALE411 , (1984 )2 SCC680 , [1984 ]3 SCR118 , The State of Madhya Pradesh and Ors. v. Babulal Pathak AIR1974 MP 179 and Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd. , Indore AIR1967 SC 1030 , 1967 (0 )BLJR353 , [1967 ]1 SCR105. AIR1984 SC 1072 , (1984 )2 Complj1 (SC ), 1984 (1 )SCALE411 , (1984 )2 SCC680 , [1984 ]3 SCR118 , The State of Madhya Pradesh and Ors. v. Babulal Pathak AIR1974 MP 179 and Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd. , Indore AIR1967 SC 1030 , 1967 (0 )BLJR353 , [1967 ]1 SCR105. He further contended that the clauses of the sale order being unreasonable, the arbitrator has committed no error in passing the award in favour of the respondent. The appellants had no stock of material to supply to the respondent as per the sale order. The respondent having deposited the huge amount was entitled to receive the materials for the price paid but the same was not supplied and therefore the action on the part of the appellants being unreasonable, the same has been correctly dealt with by the arbitrator. ( 10. ) AS per the arbitration clause the powers of the arbitrator were wide enough. The arbitration clause reads as under : "clause 19 : All disputes and differences arising out of the sale whatsoever shall be referred to sole arbitration of Addl. C. E. (Gen. Stores) MPEB, Jabalpur, whose decision will be final and binding. " This clause empowers the arbitrator to decide all disputes and differences out of the sale whatsoever thus the scope of arbitrator was wide enough. ( 11. ) SECTION 30 of the act, deals with grounds for setting aside the award. So while dealing with the prayer for setting aside an award, the parameters mentioned in the aforesaid section are to be kept in mind. The award can not be set aside except on one or more grounds mentioned therein. In the present case the contentions of the appellants is that the arbitrator exceeded in his jurisdiction in holding that the sales tax is not leviable. On perusal of the award I find that this contention is not correct. What the arbitrator has directed is that since the sales tax recovered from the respondent has not been deposited with the Sales Tax Department, the amount so collected but not deposited was directed to be paid back to the respondent. On perusal of the award I find that this contention is not correct. What the arbitrator has directed is that since the sales tax recovered from the respondent has not been deposited with the Sales Tax Department, the amount so collected but not deposited was directed to be paid back to the respondent. It is not disputed before this Court also that when the matter was heard by the arbitrator and even when the arbitrator had passed the award, the sales tax amount was not deposited by the appellants with the Sales Tax Department. In this view of the matter, it can not be held that the arbitrator exceeded in his jurisdiction in directing the appellants to refund the said amount. ( 12. ) THE other submissions made on behalf of the appellants that the respondent had not deposited the amount of the price as per the clauses, and therefore violated the various clauses contained in the sale order and as such the arbitrator should not have allowed refund of the earnest money and the security amount, is also having no merit. The arbitrator on examination of the various clauses found that the appellant were not justified in cancelling the contract, because in spite of receiving substantial amount from the respondent the material to that extent was not supplied by the appellants. Since the material was not available with the appellants and they were not in a position to supply the material the arbitrator held that the respondent was not required to deposit more money. ( 13. ) IN case of Bharat Coking Coal Ltd. v. Annapurna Construction (supra) the Supreme Court has held that the role of arbitrator is to be arbitrate within the terms of contract he has no power apart from that the parties have given him under the contract. If he has travelled beyond the contract he would be acting without jurisdiction whereas if he has remained inside the parameters of the contract, his award can not be questioned on the ground that it contains an error apparent on the face of the record. In case of Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr. (supra) referred to by learned Counsel for the appellants lays down that the decision of the arbitrator on the question of law not referred is not final. In case of Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr. (supra) referred to by learned Counsel for the appellants lays down that the decision of the arbitrator on the question of law not referred is not final. The award can be set aside if the arbitrator acts beyond his jurisdiction. It has been further held that to find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. Whether the arbitrator has acted in excess of jurisdiction what has to be seen whether claimant could raise a particular claim before the arbitrator. If there is specific term in the contract or the law which does not permit or give the arbitrator the powers to decide the dispute raised by the claimant or there is specific bar in the contract to the raising of the particular claim then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction. ( 14. ) CONSIDERING the arbitration clause as referred to above and the legal position in my opinion the arbitrator has decided the matter well within his jurisdiction and also in correct perspective. Thus the learned Court below has correctly rejected the objection and passed the order making the award rule of Court. The prayer of the learned Counsel for the respondent to award interest from the date of award till payment can not be accepted since no such prayer was made before the arbitrator as is clear from the Paragraph 15 of the award and no cross-objection has been filed. ( 15. ) ACCORDINGLY, this appeal fails and is dismissed. No order as to costs.