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2005 DIGILAW 1164 (DEL)

India Metals v. Union of India

2005-12-16

ANIL KUMAR

body2005
JUDGMENT Anil Kumar, J. 1. This order shall dispose of respondents' objections under Sections 30 and 33 of the Arbitration Act, 1940 against the award dated 22.1.1992 by Sh. S.C. Goel sole arbitrator, .ex Chief Materials Manager (S) Northern . Railways, Baroda House, New Delhi. 2. Brieffacts to comprehend the controversies are that the respondents invited tender enquiry No. 211-S/1078/9133 due to open on 17.7.1991. Petitioner submitted his offer on 15.7.2001 at the net rate of Rs. 151.50 each for the supply of 58,100 numbers of M.S. Tie Bars (for BGCI Sleepers) to RDSO Drg. No. T. 404(M) ALT-NIL and conforming to the IRS Specification No. T-8. The offer of the petitioner was accepted and a purchase order dated 11.10.1991 was placed on him for supply of above-mentioned stores. The delivery period of the stores was till 7.6.1992 with the delivery clause as "delivery will commence after 60 days from the receipt of technically and commercially clear purchase orders by the seller and will be supplied at the rate of 10,000 numbers per month thereafter. The petitioner acknowledged the receipt of purchase order by letter dated 15.10.1991 and requested for amendment in description of stores and for issuance of sale tax 'D' form and further asked for re-fixation of delivery period. 3. The petitioner claimed for re-fixation of delivery period by their letter dated 28.5.1992 which was declined by the respondent by letter dated 3.7.1992. Petitioner again requested for reconsideration for-re-fixation of delivery period by letter dated 8.7.1992. The delivery period was extended without levy of liquidated damages and without benefit of price variation clause and petitioner was asked to give his consent by 1.9.19t12 and it was intimated that on failure of petitioner to give consent, the contract shall be cancelled without further reference. Petitioner sent his consent by letter dated 31.8.1992 and yet again by letter dated 7.9.1992 requested for extension of delivery period for 90 days and, therefore, the delivery period was extended from 7.6.1992 to 18.1.1993 without levy of liquidated damages. 4. Petitioner sent his consent by letter dated 31.8.1992 and yet again by letter dated 7.9.1992 requested for extension of delivery period for 90 days and, therefore, the delivery period was extended from 7.6.1992 to 18.1.1993 without levy of liquidated damages. 4. The petitioner firm supplied only 17428 numbers of stores out of the ordered quantity till 14.7.1993 and, failed to supply the balance quantity despite extension of delivery period, though the petitioner had informed the respondent that 10,000 number of M.S. Tie bars are lying ready and could not be dispatched because of expiry of delivery period and requested the respondent to further extend the time. The respondent, however, invoked the risk purchase and a notice was sent on 8.10.1993 to the petitioner. The petitioner participated in the risk purchase offer and sent his offer at the rate of 162.50 for the supply of the same stores. Since the material was subsequently manufactured at Bridge Workshop, Lucknow, risk purchase was not resorted to. 5. Though the risk purchase was not done nor the respondent showed that it suffered damages, a demand notice amounting to Rs. 3,83,537 was sent to petitioner on 20.9.1995 and the petitioner was informed that an amount of Rs. 1 lakhs deposited by the petitioner in the shape of bank . guarantee is lying with the respondent/objector and the petitioner was asked to deposit the balance Rs. 2,83,537. 6. That since the petitioner failed to deposit the balance of the damages as demanded by the respondent, the disputes arose between the parties entailing filing of a petition under Section 20 of Indian Arbitration Act being Suit No. 2783/95 titled Indian Metals v. Union of India which was allowed by order dated 26.11.1997 directing the respondent to appoint a sole arbitrator, a gazetted Railway officer by the General Manager, Northern Railways in terms of arbitration clause. 7. That in terms of order dated 26.11.1997 under Section 20 of the Arbitration Act, 1940 Sh. V.K. Gupta, Chief Engineer was appointed as an arbitrator vide letter dated 29.1.1998, however, on account of the transfer of the said officer a fresh arbitrator, a Gazetted Officer Sh. S.C. Goel, CMM/S, Baroda House was appointed by letter dated 11.12.2000 who entered upon reference and before whom claims and counter claims were filed by both the parties. 8. That in the meantime Sh. S.C. Goel, CMM/S, Baroda House was appointed by letter dated 11.12.2000 who entered upon reference and before whom claims and counter claims were filed by both the parties. 8. That in the meantime Sh. S.C. Goel, learned arbitrator retired from the service on 30.6.2001 on attaining the age of superannuation and an application was filed before Sh. S.C. Goel by the respondent contending that after his retirement he has ceased to have jurisdiction over the arbitration matter and as such a new arbitrator may kindly be appointed in terms of the orders of the High Court. The appointment of arbitrator was by name and not by designation. The application was contested by the petitioner and consequently the learned arbitrator continued with the arbitration proceedings and considered the claims and counter claims of the parties and gave an award dated 22.1.2002 contending that since the risk purchase tender was not finalized and the case was closed and no risk purchase order was placed nor the respondent has been able to establish that they suffered general damages amounting to Rs. 3,83,537 and, therefore, the claim for general damages of respondent was declined and the claim of the petitioner for the refund of security deposit of Rs. 11akh which was forfeited towards general damages, was allowed holding that the petitioner is entitled for the same. The petitioner was allowed interest at 12% on the same amount and another sum of Rs. 2,83,537 which was appropriated by the respondent from the other bills was also allowed with interest at 12% although the petitioner had claimed 21 %. The claim of the petitioner for loss in profit, legal cost and the respondent's claim for legal cost were rejected. 9. The petitioner filed the Suit No. 249N2002 under Sections' 14, 17 and 29 of Arbitration Act seeking direction to the arbitrator, respondent No.2 to file the award dated 22.1.2002 along with the proceedings and to make the award rule of the Court. 10. 9. The petitioner filed the Suit No. 249N2002 under Sections' 14, 17 and 29 of Arbitration Act seeking direction to the arbitrator, respondent No.2 to file the award dated 22.1.2002 along with the proceedings and to make the award rule of the Court. 10. On filing of the award and the proceedings by the respondent No.2, the respondent No.1 filed the objections under Sections 30 and 33 of Indian Arbitration Act contending inter-alia that since the arbitrator had retired from service on 30.6.2001, therefore, in view of the arbitration clause he could not continue as an arbitrator and is deemed to have vacated the office and in the circumstances continuation of the arbitration proceedings was illegal and the award given by him is void. Regarding extension of time agreed by both the parties it was contended that since the arbitrator was pressing for publishing the award on 31.12.2001 without giving any opportunity of hearing and had fixed 28th and 31st December as next dates of hearing, the extension was given by the respondent as the respondent had no other alternative. The respondents have objected to the award also on the ground that the arbitrator ignored the law and the order of the High Court directing General Manager, Northern Railways to appoint a Gazetted Officer as the arbitrator and on his retirement the arbitrator was no more a Gazetted Officer and could not continue as he became functus officio after his retirement and any proceedings conducted by him after 30.6.2001 was void ab-initio. 11. The challenge is also made on the ground that the counter claim of the respondent has been ignored though only a part material was supplied by the petitioner and the risk purchase order was issued though subsequently it was cancelled, however, as the stores were manufactured, by the respondents, they became entitled for general damages. 12. The reply to the objections were filed by the petitioner contending inter-alia that there is no error apparent on the face of the award and arbitrator did not mis-conducted himself. The petitioner contended that respondent was not entitled to general damages of Rs. 3,83,537 but even the calculations done by the respondents were wrong. The petitioner denied that on account of superannuation of the arbitrator, he is deemed to have vacated the office. The petitioner contended that respondent was not entitled to general damages of Rs. 3,83,537 but even the calculations done by the respondents were wrong. The petitioner denied that on account of superannuation of the arbitrator, he is deemed to have vacated the office. Relying on the extension of time granted On 10.7.2001, it was asserted that the time was extended by the parties by mutual consent uptil 31.12.2001 and again thereafter the time was extended and in the circumstances the respondent is not entitled to claim that the arbitrator is deemed to have vacated his office on 30.6.2001 when he retired from the service. The petitioner asserted that the respondent acquiesced in the arbitrator and can not raise any objection that he had retired on 30.6.2001. The petitioner further asserted that in any case the respondent has failed to give the basis to claim general damages of Rs. 3,83,537 and in the circumstances neither the security deposit of Rs, 1lakh could be forfeited nor the rest of the amount could be adjusted from other bills of the petitioner. The petitioner relied on JT 1997(10)SC 220, M/s. Construction India Ltd. etc. v. Secretary, Works Department, Government of Orissa and Ors; AIR 1987 Delhi 317, National Research Development Corporation v. Britelite Carbons Ltd. and 1989(1) Arbitration Law Reporter 326, Mohinder Pal Mohindra v. Delhi Administration and another to contend that the mere fact that the arbitrator continued with the arbitration proceedings though he was no longer in Government service would not mean that he had vested interest in the continuation of the arbitration proceedings and could not continue with the arbitration proceedings after entering upon reference though the arbitrator had retired from the service he could continue the arbitration proceedings. The arbitrator was appointed by name and not be designation. 13. On the pleadings of the parties, the following issues were framed on 9.9.2004:(1) Whether the award is liable to be set 'aside on the grounds as taken up by the objector in the objections? (2) Relief. 14. Since the parties agreed not to file any evidence in the form of affidavit and relied on the arbitration proceedings and the award, the matter was heard. The learned counsels for the objector/respondent and the petitioner were heard at length. The main objection of the learned counsel for the respondent No.1 Mr. (2) Relief. 14. Since the parties agreed not to file any evidence in the form of affidavit and relied on the arbitration proceedings and the award, the matter was heard. The learned counsels for the objector/respondent and the petitioner were heard at length. The main objection of the learned counsel for the respondent No.1 Mr. Aeltemesh Rain is that since the arbitrator was appointed pursuant to the direction by the Court to appoint a Gazetted Officer, Sh. S.C. Goel who was a Gazetted Officer did not continue as a Gazetted Officer after his retirement on 30.6.2001 and, therefore, could not continue as an arbitrator and the award given by him is void. 15. Perusal of the record, however, reflects that appointment of arbitrator by General Manager by letter dated 11.12.2000 is by name and• not by designation. Even after the retirement of Shri S.C. Goel, Learned Arbitrator on 30.6.2001, the respondent continued to appear before the arbitrator. The respondent not only appeared before the arbitrator but took part in the proceedings on 3.7.2001, 10.7.2001 and 22.11.2001 and even agreed to extend the time mutually with petitioner on 10.7.2001 for a period of four months up to 31.12.2001 without any protect and objection. The respondent, thereafter, again extended the time with mutual consent with the petitioner for arbitration proceedings. 16. The respondent for the first time took objection that the arbitrator after retirement on 30.6.2001 has become functus officio and could not continue the proceedings on 26.12.2001 when an application dated 19.12.2001 was filed. Even after filing this application the respondent again agreed for extension of time. Even after extension of time in December, 2001 the respondent appeared before the arbitrator on 8.1.2002 and 21.1.2002 without taking any objection that the time extended before the arbitrator was under coercion and pressure from the arbitrator that if the time is not extended he will give the award on 31.12.2001. The respondent has alleged that the time was got extended from him in December, 2001 under coercion and pressure that if the respondent did not agree for extension of time, the arbitrator will give award on 31st December, 2001 but no explanation has been given by the respondent for extending time on 10th July, 2001 for four months up to 31st December, 2001 after the arbitrator had retired on 30th June, 2001. In the circumstances the plea of the respondent that the extension of time in December, 2001 was procured from the respondent under coercion and pressure seems to be without any basis and is an after though only after the award has been given by the arbitrator rejecting the claim of the respondent for general' damages for Rs. 3,83,537. 17. The authority of a named arbitrator cannot be revoked on his retirement from the service. An official who is appointed as an arbitrator by name will continue after his retirement unless it is specifically agreed or at the time of reference it is so stipulated that after retirement, the arbitrator shall not be entitled to continue with reference. 18. In M/s. Construction India (Supra) it was held that if a named arbitrator is appointed by mutual consent, merely because the arbitrator does not hold office, he does not cease to be an arbitrator. Unless there is clear intention, spelt out in the agreement of reference to indicate that he would continue to be an arbitrator only so long as he holds a particular office, a mere reference to the office held by the arbitrator will not disqualify him from being an arbitrator if he ceases to hold that office. Similarly in National Research Development Corporation of India (Supra) it was held that where the disputes were referred to the arbitration as per the agreement and by consent of parties to the Managing Director of the company who was then in office and who entered upon the' reference, he could continue the arbitration proceedings even after his retirement from the office of the Managing Director. In Mohinder Pal Mohindra (Supra) a Single Judge of this Court had held that authority of an arbitrator cannot be revoked unless there are allegations of malafide against the arbitrator who has retired from the service and the mere fact that an official who was named as arbitrator continued with the arbitration proceedings will also not show and mean that he had any vested interest in continuation with arbitration proceedings. 19. The jurisdiction which is conferred on an arbitrator is on account of the consent of the parties to the arbitration agreement. Once the parties have appeared and even consented to the extension of time, it shows acquiescence in the continued jurisdiction of the arbitrator to decide the disputes. 19. The jurisdiction which is conferred on an arbitrator is on account of the consent of the parties to the arbitration agreement. Once the parties have appeared and even consented to the extension of time, it shows acquiescence in the continued jurisdiction of the arbitrator to decide the disputes. A passage from Russell on Arbitration, 17th edition at page 215 will be relevant: "If the parties to 1hc reference either agree beforehand to the method of appointment or afterwards acquiesce in the appointment made with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence." 20. In the present case the parties continued with the arbitration proceedings even after the retirement of respondent No. 2/arbitrator on 30th June, 2001. The respondent appeared before the arbitrator without any objection on 3.7.2001, 10.7.2001 and 22.11.2001. The respondent not only appeared without any objection but also extended the time with mutual consent with the petitioner up to 31st December, 2001. The time was further extended with mutual consent in December, 2001 though at that time an application was filed contending that the arbitrator could not continue after his retirement which was, however, dismissed. The respondent on 26.12.2001 requested the Arbitrator to give certified copy of the order dated 26th December, 2001 to him so that he could approach the Court. The copy of the order dismissing the application of the respondent that the arbitrator could not function after his retirement on 30th June, 2001 was given to him, however, no proceedings against the dismissal of his application was taken by the respondent. Rather the respondent thereafter, also appeared before the arbitrator on 8th January, 2003 and 21.01.2002 which were fixed at the request of the respondent. In the circumstances the respondent is precluded from objecting to continuation of the Arbitrator with the proceedings on the ground that he had retired from his office on 30th June, 2001. It has not been pleaded by the respondent that the arbitrator had any vested interest. Even the subsequent extension of time granted by the respondent and, thereafter, appearance before the arbitrator on 8.1.2002 and 21.01.2002 goes against his plea that the arbitrator could not continue after his retirement from service on 30.6.2001. It has not been pleaded by the respondent that the arbitrator had any vested interest. Even the subsequent extension of time granted by the respondent and, thereafter, appearance before the arbitrator on 8.1.2002 and 21.01.2002 goes against his plea that the arbitrator could not continue after his retirement from service on 30.6.2001. The objection to the award on this ground is, therefore, rejected. 21. Next the respondent has challenged the award on the ground that the arbitrator has not considered the relevant provisions of IRS conditions of contract and has mis-conducted in ignoring the counter claim and evidence of the respondent and the award is based on no evidence and the inference drawn are contrary to the material on record. The learned counsel has very emphatically contended that the arbitrator has mis-conducted on facts and law and his findings are liable to be set aside. 22. The respondent has not been able to point the relevant provisions of RS conditions of contract which have been be reached and which have not been taken into consideration. Regarding findings' of facts and law, it is settled that this Court will not reverse the findings of facts for the reason that, in the opinion of the Court, the Arbitrator reached wrong conclusions or failed to appreciate the facts. In Hindustan Iron Co. v. K. Shashikant & Co., AIR 1987 SC 81 the Apex Court had held that the award of the Arbitrator ought not to be set aside for the reason that, in the opinion of the Court, the Arbitrator reached wrong conclusions or failed to appreciate the facts. This well settled proposition of law was reiterated in the decision of the Apex Court in Coimbatore District Podu Thozillar Sangam v. Balasubramania Foundary & Ors., AIR 1987 SC 2045 where it had been opined that it is only an error of law and not a mistake of fact committed by the arbitrator which can be adjudicated in the application/objection before the Court. If there is no legal proposition either in the award or in any document annexed with the award which is erroneous and the alleged mistakes or alleged errors, are only mistakes off act and if the award is made fairly, after giving adequate opportunity to the parties to place their grievances in the manner provided by the arbitration agreement, the award is not amenable to corrections of the Court. Similar opinions were expressed in Indian Oil Corporation Ltd. v. Indian Carbon Ltd., (1988) 3 SCC 36 ; Jawahar Lal Wadhwa & Anr. v. Haripada Chakroberty, (1989) 1 SCC 76 ; Puri Construction Pvt. Ltd. v. Union of India, (1989) 1 SCC 411 ; M/s. Sudarsan Trading Co v. Government of Kerala & Anr., (1989) 2 SCC 30; Food Corporation of India v. Joginderpal Mohinderpal & Anr., AIR 1989 SC 1263 holding that a plausible view taken by the Arbitrator was not open to Court interference. In Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar & Anr., AIR 1987 SC 2316 the Court held that if the reasons appear per se to be not unreasonable and irrational the Court ought not to re-appreciate the evidence. In Hind Builders v. Union of India, AIR 1990 SC 1340 the Court cautioned that where two views were possible it could not be predicated that there was an error apparent on the face of the award. In Bijendra Nath Srivastava v. Mayank Srivastava & Ors. AIR 1994 SC 2562 the view expressed was that the reasonableness of reasons given by the arbitrator was not open to challenge and that the proper approach would be for the Court to support the award. Similarly, in Hindustan Construction Co. Ltd. v. Governor of Orissa & Ors., AIR 1995 SC 2189 it was reiterated that the Court cannot re-appreciate the material on the record. In Trustees of the Port of Madras v.. Engineering Constructions Corporation Ltd., (995) 5 SCC 531 the decision of a Division Bench of the High Court of Madras, which had reversed the Award on a question of fact and not on a question of law, was set aside by the Supreme Court. After considering its previous decisions, the Apex Court in B.V. Radha Krishna v. Sponge Iron India Ltd., (1997) 4 SCC 693 again held that the Court could not substitute its own view in place of that of the Arbitrator. In Army Welfare Housing Organisation v. Gautam Construction & Fisheries Ltd. (1998) 7 SCC 290 the Court declined to vary an award for the reason that without re-appreciating evidence it would not be possible to fault the quantum awarded towards anticipated expenses. 23. Regarding rejection of the claim of the respondent fro general damages of Rs. In Army Welfare Housing Organisation v. Gautam Construction & Fisheries Ltd. (1998) 7 SCC 290 the Court declined to vary an award for the reason that without re-appreciating evidence it would not be possible to fault the quantum awarded towards anticipated expenses. 23. Regarding rejection of the claim of the respondent fro general damages of Rs. 3,83,537 the arbitrator has concluded that though the risk purchase tender was invited due on 3.11.1993 and the petitioners were informed and they even took part, however, the risk purchase tender was not finalized and the case was closed and no risk purchase order was placed therefore, no amount could be recovered from the petitioner. Though the respondent had manufactured the store items in its workshops, however, no damages has been established nor any evidence has been led that on account of the stores being manufactured the respondent has suffered general damages of Rs. 3,83,537. The learned arbitrator categorically held that the respondent in case of default in supply could either resort to 'risk purchase act or penalize for late/delay deliveries. The respondent, however, adopted the first course that is he invited risk purchase which was not finalized and was later on dropped and closed as there was no demand for the balance tie bars to be procured from the trade. In the circumstances it was held that the question of adopting penalty through general damages rather did not arose in terms of condition No. 12 and, therefore, the action of the respondent in recovering any penalty as general damages was not correct. 24. No fault can be found with the reasoning and decision of the arbitrator nor it can be said that the arbitrator has mis-conducted himself or with the proceeding or there is any error apparent on the face of the award dated 22.1.2002. This Court will not re-appreciate the evidence and reverse the findings of facts as plausible view taken by the Arbitrator is not open to Court interference. In the circumstances, the objections raised by the respondent against the award dated 22nd January, 2002 by respondent No. 2 Shri S.S. Gael are without any merit and are dismissed. CS(OS) No. 249A/2002 Since the objections of the respondents have been dismissed, the award dated 22nd January, 2002 is made rule of the Court. The petitioner shall be entitled for pendente lite and future interest @ 9% per annum. CS(OS) No. 249A/2002 Since the objections of the respondents have been dismissed, the award dated 22nd January, 2002 is made rule of the Court. The petitioner shall be entitled for pendente lite and future interest @ 9% per annum. Parties are however, left to bear their own costs. Decree sheet be drawn accordingly.