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2007 DIGILAW 1342 (MAD)

Chairman and Managing Director Tamil Nadu Civil Supplies Corporation Ltd. Kilpauk & Another v. Jagadeesh Exports & Another

2007-04-16

S.RAJESWARAN

body2007
Judgment : This Original Petition has been filed under Sec.34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) to set aside the award dated 3. 2004. .2. The Chairman and Managing Director and the Senior Regional Manager of the Tamil Nadu Civil Supplies Corporation Ltd., are the petitioners before this court. The 1st respondent herein entered into an agreement on 11. 1999 with the petitioner’s corporation for purchase of 1653.269 M.Ts., of discoloured rice available at various regions of the corporation according to which the 1st respondent had lift the discoloured rice within the prescribed time after paying the cost. As per the agreement, the 1st respondent had to obtain permit from the authorities concerned before moving the discoloured rice. According to the petitioners, the 1st respondent has been guilty of illegally transporting the rice meant for the Public Distribution System (P.D.S) under the guise of transporting the discoloured rice. A case in Crime No. 3/2000 was registered against the 1st respondent by the Inspector of Police/Civil Supplies C.I.D., under clause 4(1) and 9(1) of the Tamil Nadu Essential Trade Articles (Regulation of Trade) Order, 1986 read with 7(1)(a)(ii) of the Essential Commodities Act, 1955. It was alleged that the rice meant for P.D.S., was illicitly transported to the Whitefield, Karnataka by misusing the documents issued to the 1st respondent by the petitioner-corporation for the purpose of release of discoloured rice. The 1st respondent was also detained under Black Marketing Act. It is the further allegation of the petitioner-corporation that the 1st respondent failed to lift the rice in spite of reminders and extension of time granted by the Corporation. As the 1st respondent violated the terms of the agreement, the corporation forfeited the Security Deposit and Earnest Money Deposit. Further, the amount paid by the 1st respondent was also retained by the Corporation for the anticipated loss and damages that could be recovered from the 1st respondent after the completion of the criminal case. Aggrieved by the forfeiture of the Security Deposit and Earnest Money Deposit and the withholding of the amount paid by the 1st respondent, 1st respondent invoked arbitration clause and the 2nd respondent was appointed as sole arbitrator. The 1st respondent made a claim of Rs. 6,95,000/- along with interest towards Security Deposit and Earnest Money Deposit and made another claim of Rs. The 1st respondent made a claim of Rs. 6,95,000/- along with interest towards Security Deposit and Earnest Money Deposit and made another claim of Rs. 11,53,000/- towards the value deposited by him for which no delivery of discoloured rice was given by the corporation. The 2nd respondent arbitrator by award dated 3. 2004 after holding that it was not proved that 1st respondent is guilty in illicit movement of rice, set aside the order of the petitioner-corporation forfeiting the Security Deposit and E.M.D., and directed the corporation to refund the amount without any interest. By the very same award, the 2nd respondent arbitrator held that the 1st respondent is entitled to the refund of Rs.11,53,000/- for which the stock was not released by the corporation. Aggrieved by the award dated 3. 2004, the corporation has filed the above O.P., under Sec.34 of the Act, 1996. 3. Heard Mr. P.S. Raman, the learned Senior Counsel appearing for the petitioner-corporation and Mr. R. Thiagarajan, learned Senior Counsel appearing for the respondents. I have also perused the documents filed and the judgments relied in by them in support of their submissions. .4. The learned Senior Counsel for the corporation submitted that the award passed by the 2nd respondent arbitrator is against public policy and also against the specific clauses contained in the agreement dated 11. 1999. He further submitted that the arbitrator’s findings that the 1st respondent is not guilty of illicit movement of rice are unwarranted when the criminal case against him is still pending. Therefore he prayed for setting aside the award dated 3. 2004. 5. Per contra, the learned Senior Counsel appearing for the 1st respondent submitted that the award passed by the 2nd respondent is not hit by public policy and the same is a reasoned one. In such circumstances, according to the learned Senior Counsel for the 1st respondent, there is no ground made out under Sec. 34 of the Act, 1996 warranting interference. He further submitted that the arbitrator’s finding that the 1st respondent is not guilty is based on the evidence let in before her and therefore there is nothing wrong in the arbitrator’s finding. 6. I have considered the rival submissions carefully with regard to facts and citations. 7. He further submitted that the arbitrator’s finding that the 1st respondent is not guilty is based on the evidence let in before her and therefore there is nothing wrong in the arbitrator’s finding. 6. I have considered the rival submissions carefully with regard to facts and citations. 7. the learned Senior Counsel for the corporation relied on the decisions reported in AIR 1954 S.C. 397 (M.S. Sherief V. State of Madras) and AIR 1971 S.C. 1244 (M/s. Karamchand v. Union of India) to contend that decisions of the civil courts are binding on the criminal court and the converse is not true. Therefore, the learned Senior Counsel for the corporation submitted that the findings given by the 2nd respondent arbitrator with regard to the 1st respondent’s role in the illicit movement of rice would adversely affect the pending criminal case initiated against the 1st respondent. The learned Senior Counsel relied on the decision reported in 2003 (5) SCC 705 (ONGC Ltd. V. Saw Pipes Ltd.) to contend that the phrase “public policy of India” should be given a wider meaning and the court can set aside the award if it is against the public policy. The learned Senior counsel for the corporation further submitted that the award passed in favour of the 1st respondent who was arrested for the criminal case which is pending and who was also detained under the Black Marketing Act is to be set aside on the ground that the award is against the interest of India and also against justice and morality. 8. I am unable to accept the submissions made by the learned Senior Counsel for the corporation. 9. It is settled law that the decisions of the civil court are binding on the criminal courts. The 2nd respondent-arbitrator had gone into the question of the culpability of the 1st respondent in the criminal case on the basis of the materials available since that was projected as a main ground for forfeiture of the Security Deposit and E.M.D., and also for withholding the amount deposited by the 1st respondent. Therefore, I do not find any illegality in the findings of the arbitrator in this regard. Further, arbitrator is not a civil court and in fact the arbitral tribunal shall not be bound by C.P.C. 1908 and Indian Evidence Act, 1872. Therefore, I do not find any illegality in the findings of the arbitrator in this regard. Further, arbitrator is not a civil court and in fact the arbitral tribunal shall not be bound by C.P.C. 1908 and Indian Evidence Act, 1872. Hence the submissions made by the learned Senior Counsel for the petitioners to set aside the findings of the 2nd respondent/arbitrator in this regard are not well founded. Notwithstanding the findings of the 2nd respondent/arbitrator, if enough materials are available before the criminal court against the 1st respondent, it is very well open to the criminal court to proceed against the 1st respondent in accordance with law. 10. The 2nd respondent arbitrator while dealing with the first claim under the heading forfeiture of Security Deposit/E.M.D., found that Earnest Money Deposit and Security Deposit were forfeited on the following three grounds namely- “ I. Not lifted the total quantity of allotted discoloured BR @ rice Kuruvai ’97 within the time granted i.e. Up to 12. 2000 and hence performance was not satisfactory as per clause 22(ii) II. Violated condition 15 by lifting discoloured rice of 326.705 MTS of Kuruvai ’97 without movement authorization of TSO, Mayiladuthurai. III. The claimant was detained under EC Act for having committed illicit movement. Thus violated clause 21 & 22 (ii) of agreement (P125-130, EXC2).” 11. Insofar as the first ground of unsatisfactory performance is concerned, the 2nd respondent/arbitrator after going through the relevant clauses in the agreement and the documents filed by the parties held that the question of performance not satisfactory does not arise at all. Insofar as the violation of condition 15 by 1st respondent by lifting discoloured rice without movement authorization, the 2nd respondent/arbitrator found that no evidence was let in by the corporation to raise this ground. Similarly, from the materials produced before her, she found that the 1st respondent had not involved in the illicit movement of tendered rice. 12. The above reasons given by the 2nd respondent/arbitrator on the basis of the evidence adduced before her cannot be easily interfered with by this court under Sec.34 of the Act, 1996 and therefore I do not interfere with the award of the arbitrator directing the corporation to refund the E.M.D., of Rs.2 Lakhs and S.D., of Rs.4,95,000/-without any interest. 13. The above reasons given by the 2nd respondent/arbitrator on the basis of the evidence adduced before her cannot be easily interfered with by this court under Sec.34 of the Act, 1996 and therefore I do not interfere with the award of the arbitrator directing the corporation to refund the E.M.D., of Rs.2 Lakhs and S.D., of Rs.4,95,000/-without any interest. 13. For the second claim of refunding the amount for non-release of balance quantity of tendered rice, the 2nd respondent/arbitrator found that the agreement itself was not yet terminated as per clause 28 of the agreement and the corporation was not able to prove that the 1st respondent is guilty in the illicit movement of rice departmentally, ordered the corporation to refund the total amount deposited by the 1st respondent for releasing the balance quantity of rice. She further referred to clauses contained in the agreement and held that nowhere in the agreement, the amount deposited for release of stock has to be retained or withheld for criminal misconduct etc., and therefore the result of the criminal case has nothing to do with the departmental action. The 2nd respondent has also observed that if proved guilty, the 1st respondent would be punished under the provisions of the I.P.C. 14. Thus a well considered award has been passed by the 2nd respondent arbitrator on the basis of evidence adduced before her and I hardly find any ground under Sec.34 of the Act, 1996 to interfere with the same. 15. In the result, the O.P., is dismissed. No costs.