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2005 DIGILAW 105 (PNJ)

Ganga Industries v. Food Corporation of India

2005-01-19

ASHUTOSH MOHUNTA

body2005
JUDGMENT Ashutosh Mohunta, J. - Challenge in the revision petition is to the order dated 29.5.1984 passed by Additional Senior Sub Judge, Palwal and the other dated 4.4.1985 passed by District Judge, Faridabad vide which the objections as well as the appeal filed by the petitioner against the award of the Arbitrator were dismissed. 2. Briefly, the facts of the case are that the petitioner entered into the milling contract with the Food Corporation of India (FCI, for short) for conversion of 130 tones of ar-har Dal. As per the agreement, the petitioner was to complete the entire contract to mill the dal within a period of 45 days and deliver the produce to the FCI. However, the petitioner delivered the goods after a delay of three months. Thus, due to the late delivery of the ar-har dal, the dispute arose between the parties. The matter was referred to an Arbitrator for adjudication. The Arbitrator vide his order dated 12.9.1980 passed his award in favour of the FCI. The award was sent to the trial Court for making Rule of the Court at which stage, the petitioner filed objections under Sections 30, 33 of the Arbitration Act against the said award. The objections were dismissed by the learned Additional Senior Sub-Judge, Palwal, vide order dated 29.5.1984 and the appeal against the same was dismissed by the District Judge, Faridabad vide order dated 4.4.1985. It is against these orders, the present petition was filed. 3. The sole contention of Shri Sarwan Singh, learned Senior Counsel for the petitioner is that the Arbitrator had awarded an amount in favour of the FCI without there being any evidence whatsoever with regard to the loss suffered by the FCI. It is contended that the Arbitrator has awarded the amount in favour of the FCI on the basis of Clause XX of the agreement regarding liquidated damages and amount of 2% has been awarded in favour of the FCI. It is contended that the Arbitrator has awarded the amount in favour of the FCI on the basis of Clause XX of the agreement regarding liquidated damages and amount of 2% has been awarded in favour of the FCI. Although, no evidence was led by the FCI to show as to what was actual loss suffered by them on account of detailed delivery of the Dal, the learned counsel has relied on the judgment in Union of India v. M/s. United Timber Works, 1960 PLR 710, wherein it has been held that where a party does not prove that it has actually suffered damages or loss, the making of an award by the arbitrator awarding compensation on grounds of equity for loss or profit, is a manifest error of law. 4. On the other hand, Mr. Gopi Chand, learned counsel for the FCI has argued that in the instant case, damages has been awarded on the basis of Clause XX of the condition as mentioned in the invitation of tender, which is reproduced as under :- "XX. Liquidated Damages : In the event of milling contractor failing to perform his obligations under this contract either in part or in full including his commitment to take delivery of the whole grain from the FCI and to complete the milling within the stipulated period the FCI shall have the right to recover as agreed liquidated damages on account of administrative and other expenses and inconvenience caused thereby and not by way of penalty at the rate of 2% per month or part of a month of the value of dal delivery of which has been delayed without prejudice to any other right and remedies of the Corporation." 5. On the basis of the above clause, learned counsel contends that the FCI had the right to recover the liquidated damages on account of administrative and other expenses at the rate of 2% which the Arbitrator has awarded in favour of the FCI. Apart from placing reliance on the above Clause, Mr. Gopi Chand has also drawn my attention to Section 72 of the Indian Contract Act, 1872, which is also reproduced as under:- "74. Compensation for breach of contract where penalty stipulated for. Apart from placing reliance on the above Clause, Mr. Gopi Chand has also drawn my attention to Section 72 of the Indian Contract Act, 1872, which is also reproduced as under:- "74. Compensation for breach of contract where penalty stipulated for. - When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for." 6. In terms of Section 74 of the Indian Contract Act, 1872 also the FCI was not liable to prove the actual damages suffered by it and was entitled to the awarded amount in terms of Clause XX of the agreement. 7. A perusal of Clause XX of the agreement, clearly shows that in the event of breach of contract, the FCI had the right to recover liquidated damages on account of administrative and other expenses incurred by it and not on the basis of any actual loss or damage. This clause specifically provides that the FCI shall, however, be entitled to recover the liquidated damages on account of administrative and other expenses suffered by it. Apart from the above, as per Section 74 of the Indian Contract Act, 1872, no details were to be given of the administrative and other expenses incurred by FCI. In view of the above, I find no affirmity in the orders passed by both the Courts below. Consequently, the revision is dismissed. Revision dismissed.