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2006 DIGILAW 120 (DEL)

TAIPACK LIMITED v. RAM KISHORE AND SONS

2006-01-17

A.K.SIKRI

body2006
A. K. SIKRI, J. ( 1 ) I have heard this petition, which is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short `the Act ) challenging the award dated 16th April, 2003 passed by the arbitrator, without the assistance of the respondent No1. Notice was duly served upon the respondents and the respondent No. 1 appeared through counsel. Time was taken to file the reply. On 5th August, 2004, counsel for the respondent No. 1 stated that the reply was filed on 5th April, 2004 Since it was not on record, learned counsel was directed to take the steps for bringing the reply on record. When the matter came up for hearing on 10th November, 2004, position was same. Learned counsel for the respondent No. 1 was directed to supply the particulars regarding filing of the reply i. e. date and diary number. Needful was not done. When the matter came up for hearing on 22nd February, 2005 it was found that the reply is still not on record for want of particulars given by the respondent No. 1. Cost of Rs. 5,000/- was imposed and the respondent No. 1 was directed to take steps to get the reply placed on record. The counsel for the respondent No. 1 did not contact the registry for this purpose. Cost was also not paid. Curiously, on the next date, i. e. 22nd July, 2005 nobody even appeared on behalf of the respondent No. 1. The matter was adjourned to 25th November, 2005 since arbitration record was not received. On 25th November, 2005 also nobody appeared on behalf of the respondent No. 1 though in the meantime arbitration record was received in this court. Therefore, the court was left with no alternative but to hear the counsel for the petitioners without any reply of the respondent No. 1 on record or counsel for respondent No. 1 advancing arguments on this behalf. While reserving the orders, another opportunity was given to the parties to file the written submissions. Whereas the petitioners have filed the written submission, the respondent No. 1 has failed to to even do that. ( 2 ) TO state the facts in brief, the respondent No. 1 has been supplying the goods to the petitioners from time to time. According to the petitioners, last supply was made on 12th September, 1996. Whereas the petitioners have filed the written submission, the respondent No. 1 has failed to to even do that. ( 2 ) TO state the facts in brief, the respondent No. 1 has been supplying the goods to the petitioners from time to time. According to the petitioners, last supply was made on 12th September, 1996. However, after a delay of almost two and half years, notice of demand dated 3rd February, 1999 was sent by the respondent No. 1 to the petitioners calling upon the petitioners to pay the outstanding amount of Rs. 13,68,076/- besides interest of rs. 11,41,221/- thereon which was calculated at the rate of 24 per cent per annum and sales tax liability of Rs. 7,05,584/- was also demanded. The petitioners supplied C Forms on 12th October, 1999. Thereafter, the respondent No. 1 approached the Paper Merchant Association (Regd.), Chawri Bazar, Delhi for arbitration of the disputes on the ground that the respondent No. 1 s payments were released by the petitioners. Claim of Rs. 86,35,664/- was preferred. The respondent No. 1 stated that it was a regular member of the Paper Merchant association and the petitioners herein had agreed to the terms and conditions printed on the bills as per which, in the event of disputes, it could be settled through the means of arbitration by the Paper Merchant Association. The association appointed Mr. Krishan Lal Aneja as the arbitrator and the case was registered as 2001-002/09. Notice was sent to the petitioners. The petitioners filed reply raising the objection to the jurisdiction of the arbitral tribunal on the ground that there was no valid binding arbitration agreement between the parties. It was also submitted that the claim was time barred; it was not maintainable as same was not filed by a proper legal entity; the respondent No. 1 herein never invoked alleged arbitration clause and the petitioners had been declared a sick industrial company under Sick Industrial Companies (Special provisions) Act, 1985 (hereinafter referred to as `sica ) and, therefore, proceedings were to be stayed under Section 22 of SICA. On merits also, the claim of the respondent No. 1 herein was disputed and counter claim of Rs. 25,635. 08 paise with interest was preferred. The respondent No. 1 herein filed rejoinder thereto. ( 3 ) IT is mentioned that one of the dates of hearings was 8th March, 2003 at 4. 30pm. On merits also, the claim of the respondent No. 1 herein was disputed and counter claim of Rs. 25,635. 08 paise with interest was preferred. The respondent No. 1 herein filed rejoinder thereto. ( 3 ) IT is mentioned that one of the dates of hearings was 8th March, 2003 at 4. 30pm. The petitioner s director Mr. Pramod Chawla and his counsel reached there but were made to wait outside the office of arbitrator. When they were not called inside for almost 20 minutes and they made enquiries they learned that the petitioners were already proceeded ex parte at 4. 20pm. On the same day, the petitioners sent letter through their counsel and request was made for informing the next date of hearing. However, no reply was received. Reminders dated 27th March, 2993 and 31st May, 2003 were also sent by the registered post as well as courier requesting the arbitrator to inform the next date of hearing. No reply was received to the said reminders as well and on 8th june, 2003 to their utter surprise the petitioners received an ex-parte award dated 16th April, 2003. In these circumstances, in the present petition the award is impugned primarily on the following grounds: (a) The arbitrator has failed to give fair and sufficient opportunity of hearing to the petitioner. (b) There does not exist any arbitration agreement between the parties. (c) The claim of the respondent No. 1 is barred by limitation. (d) The award of the arbitrator is in conflict with the public policy of India. (e) The arbitrator has failed to decide the counter claim of the petitioner. ( 4 ) IN so far as ground (a) is concerned, it proceeds on the premise that the case was fixed on 8th march, 2003 at 4. 30pm which was the time informed to the petitioners. However, the impugned award states that the matter was fixed at 4pm. I have gone through the original record. Order sheet of previous dated i. e. 25th February, 2003 also mentions that the matter is adjourned to 8th march, 2003 at 4pm. Therefore, the petitioners may not be correct in submitting that the matter was fixed at 4. 30pm. ( 5 ) BE as it may, it is not denied by the respondent No. 1 that the petitioners reached there at 4. 30pm. Even if the arbitrator had proceeded ex- parte at 4. Therefore, the petitioners may not be correct in submitting that the matter was fixed at 4. 30pm. ( 5 ) BE as it may, it is not denied by the respondent No. 1 that the petitioners reached there at 4. 30pm. Even if the arbitrator had proceeded ex- parte at 4. 20pm, after proceeding ex-parte the case was simply adjourned to next date and no proceedings were held on that date except proceeding ex-parte against the petitioners herein. In such an eventuality, the learned arbitrator was supposed to inform the petitioners about the next date of hearing. Not only he did not do so, even when the petitioners sent letter on the same date i. e. 8th March, 2003, the arbitrator did not respond to the said letter. Another reminder was sent on 27th March, 2003. Both the letters were sent before passing of the award which was passed on 16th April, 2003. From the reading of these letters, it is clear that the petitioners had gone to attend the hearing and under the bona fide impression that the matter is fixed at 4. 30pm. It was, therefore, sufficient ground to set aside the ex-parte proceedings even if the hearing was fixed at 4pm and the arbitrator proceeding ex-parte at 4. 20pm. I am, therefore, of the considered view that another opportunity should have been granted by the arbitrator to the petitioners to contest the matter. ( 6 ) IT is trite law that the quasi judicial authorities are bound to observe the principles of natural justice even though the procedure contained in Code of Criminal Procedure may not strictly be applicable. The principles of natural justice are the facet of rule of law in this country and are treated as part of Article 14 of the Constitution of India. It runs into the fabric of the judicial system and, therefore, would be treated as fundamental policy of indian law. Non-compliance thereof by any arbitrator would render the award as against the public policy of India and, therefore, would be hit by Section 34 (2) (a) (ii) of the Act. In Oil and Natural Gas Corporation Ltd. Vs. Saw Pipes ltd. Non-compliance thereof by any arbitrator would render the award as against the public policy of India and, therefore, would be hit by Section 34 (2) (a) (ii) of the Act. In Oil and Natural Gas Corporation Ltd. Vs. Saw Pipes ltd. reported as (2003) 5 SCC 705 , the Supreme Court has explained the phrase public policy of India occurring in the aforesaid provision and after analyzing the available case law, summed up the position in para 31 in the following manner:"therefore, in our view, the phrase public policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the fact of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar Power Co. Ltd. Vs. General Electric Co. , 1994 Supp (1) SCC 644 it is required to be held that the award could be set aside if it is patently illegal. The result would be-award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void. " ( 7 ) THE impugned award is liable to be set aside on this short ground itself. ( 8 ) IN view of my finding on the aforesaid issue, I need not deal with other contentions raised by the learned counsel as the petition succeeds on this ground itself. " ( 7 ) THE impugned award is liable to be set aside on this short ground itself. ( 8 ) IN view of my finding on the aforesaid issue, I need not deal with other contentions raised by the learned counsel as the petition succeeds on this ground itself. The matter is accordingly remitted back to the arbitrator to decide the case after giving fresh opportunities to the parties. It goes without saying that the arbitrator shall take into consideration every submissions on the basis of which the claim of the respondent herein is contested and deal with the same appropriately in the award which he would ultimately render. The petition is disposed of. No costs. .