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2015 DIGILAW 670 (JK)

J&K SICOP Ltd. v. Mahalaxmi Fuel Products Pvt. Ltd.

2015-12-16

BANSI LAL BHAT, N.PAUL VASANTHA KUMAR

body2015
JUDGMENT : Bansi Lal Bhat, J. 1. This Civil 1st Miscellaneous Appeal is directed against the judgment dated 07.12.2004 passed by learned Single Judge by virtue whereof application filed by the appellant under Section 30/33 of the Arbitration Act was dismissed and the award was made rule of the Court. The impugned judgment is assailed on the ground that the finding of arbitrator that claim No. 1 for an amount of Rs. 7,55,108.49 had been admitted by the appellant was erroneous as, no such, admission had been made by the appellant, thus, the arbitrator had mis-conducted himself and the proceedings and the award was liable to be set aside. The impugned judgment is further assailed on the ground that there is an error apparent on the face of the award as the admitted quantity of A-Grade hard-coke supplied by the respondent and received by the appellant is 3624.52 MT and not 3969.060 MT. That the respondent was bound to supply A-Grade hard-coke without dust, free from all moisture and impurities and it had a claim of payment in regard to same which has been satisfied for an amount of Rs. 43525.67 which has been retained as per the terms and conditions of the agreement. Since the hard-coke supplied by the respondent-Company contained dust weighing 344.408 MT, appellant was within its rights to deduct payment in regard to quantum of dust from the total payment. Heard learned counsel for the parties and perused the record of writ Court. 2. Respondents offered to supply hard-coke manufactured in its Unit to the appellant-a Public Sector Company. Contractual relations were covered by the conditions incorporated in the letter of General Manager SICOP dated 06.06.1988. Supplies were made by the respondent which has not been disputed. Agreement dated 01.07.1988 was executed inter-se the parties for supply of hard-coke to various destinations in Jammu and Kashmir. Dispute arose between the parties in regard to quality and quantity of hard-coke supplied and payments made in relation to such supplies. Respondent approached this Court with an application under Section 20 of the Arbitration Act for invoking the arbitration clause contained in clause 27 of the agreement. The application was allowed vide order dated 27.07.1992 and Managing Director SICOP was appointed as sole arbitrator. Reference was made to the arbitrator in regard to disputes existing between the parties for arbitration. Respondent approached this Court with an application under Section 20 of the Arbitration Act for invoking the arbitration clause contained in clause 27 of the agreement. The application was allowed vide order dated 27.07.1992 and Managing Director SICOP was appointed as sole arbitrator. Reference was made to the arbitrator in regard to disputes existing between the parties for arbitration. The arbitrator entered upon the reference and passed the award on 28.06.1995 which came to be filed before this Court and registered as AA 154/95. Meanwhile, on the pending application of respondent this Court held that the award filed by the arbitrator was not an award in the eyes of law and the same was set aside. Arbitrator Mr. Saqib was removed and in his place retired District Judge, Mr. A.N. Saraf was appointed as sole arbitrator. The appellant assailed the aforesaid order which came to be disposed of on 10.11.1995 and with the consent of parties Shri D.C. Raina Advocate was appointed as sole arbitrator. Shri Raina published and made his award on 17.12.1997 accepting claim No. 1 of the respondent and rejecting other claims and counter claims of parties. In terms of the award claim No. 1 of respondent was allowed for an amount of Rs. 7,55,108.49 against supply of 3969.060 MT of hard-coke. The appellant filed an application under Sections 30/33 AA for challenging the award. The same was opposed by the respondent and the writ Court framed the following issues for determination. 1. "Whether the arbitrator has mis-conducted himself as well as the proceedings as alleged? OP Objector. 2. Whether there is an error apparent on the face of the award, if so, its effect OP Objector' 3. Relief." 3. On consideration of the matter the learned writ Court negated the contention of appellant that the award being based on erroneous appreciation of evidence was illegal and untenable. Appellant's application filed under Sections 30/33 of the Arbitration Act was, accordingly, dismissed and award made rule of the Court. 4. We have given our thoughtful consideration to the arguments advanced at the bar. It is not in dispute that the respondent was required to supply hard-coke to various destinations within the State on indent of SICOP. The hard-coke to be supplied was to be of A-Grade quality free from dust, moisture and impurities. Respondent supplied 3969.060 MT hard-coke, for which payments were made except for Rs. 43525.67. It is not in dispute that the respondent was required to supply hard-coke to various destinations within the State on indent of SICOP. The hard-coke to be supplied was to be of A-Grade quality free from dust, moisture and impurities. Respondent supplied 3969.060 MT hard-coke, for which payments were made except for Rs. 43525.67. Arbitrator allowed a claim for an amount of Rs. 7,55,108.49 against the supply of 3969.060 MT hard-coke which according to arbitrator had been admitted by the appellant. It is also not in controversy that the respondent had to supply A-Grade hard-coke free from dust, moisture and impurities @ Rs. 1721/- per MT ex-Kathua and Rs. 2052 per MT ex-Zainkot. Supplies were to be, received by the appellant at Kathua as the Trucks for carriage of hard-coke were loaded under the direct supervision of the Officers of SICOP. The difference in price of ex-Kathua and ex-Zainkot amounting to Rs. 331/- per MT represented loading and transportation charges. It appears that the dust formation of 344.408 MT occurred during the transit and the appellant was held liable for entire supply of 3969.060 MT hard-coke. The arbitrator appears to have held the appellant liable to pay for the dust formation quantity as well, in view of the fact that the appellant had received the supply of 3969.060 MT hard-coke. It is not disputed that the amount of Rs. 7,55,108.49 awarded by the arbitrator represents the balance amount due to respondent for supply of 344.408 MT of dust formation. It is also not disputed that the supply of hard-coke had to be loaded in trucks at Kathua under the supervision of Officers of the SICOP. This condition in agreement was incorporated to ensure that the supplier-respondent adhered to the terms of the agreement in so far as the supply of A-Grade hard-coke free from dust, moisture and other impurities was concerned. 5. Once it was so, any losses occurring in transit including dust formation would be the carriers' liability and not the liability of supplier. The intervention of the supervisory staff of SICOP at the loading point at Kathua to oversee that the terms of contract in regard to supply of dust free hard-coke of A-Grade are adhered to by the respondent-supplier, would not render the respondent-supplier liable for losses occurring en route till its delivery at Zainakot. The intervention of the supervisory staff of SICOP at the loading point at Kathua to oversee that the terms of contract in regard to supply of dust free hard-coke of A-Grade are adhered to by the respondent-supplier, would not render the respondent-supplier liable for losses occurring en route till its delivery at Zainakot. Admittedly, award is non-speaking and the learned writ Court could not sit in appeal over the finding of the arbitrator, as the decision of arbitrator had a binding effect and was liable to be accepted by the parties. Dwelling upon the aspect of mis-conduct on the part of arbitrator as well as the proceedings, learned writ Court was of the view that the award could be set aside if there was an error apparent on the face of award or if the arbitrator was found to have travelled outside the agreement. It was of the view that if the reasons given for decision by the arbitrator are based upon erroneous legal proposition, it would be an error apparent on the face of award. It was further of the view that if the decision of the arbitrator was based upon the appreciation of evidence and record, it was not open to the Court to re-appreciate the evidence for coming to a different conclusion. The learned Writ Court found that the arbitrator awarded claim to the respondents saying that the quantity had been admitted by the appellant. The question regarding admission of receipt or non-receipt of 3696.060 MT was a question of fact. Since the award is non-speaking, the writ court would not probe the mental process of the arbitrator and speculate what impelled him to arrive at a conclusion. Thus, it declined to interfere with the award. 6. In K.P. Poulose v. State of Kerala and Another reported in (1995) 2 SCC 236, Hon'ble Apex Court while dealing with the scope of Section 30 of the Arbitration Act held that an award can be set aside when an arbitrator has mis-conducted himself or the proceedings. If the arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy, it would be a legal mis-conduct. 7. If the arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy, it would be a legal mis-conduct. 7. Again in State of Rajasthan v. Ferro Concrete Construction Pvt. Reported in (2009) 12 SCC 1 , the Hon'ble Apex Court held that under Arbitration Act, 1940 an award was not open to challenge on the ground that the arbitrator has reached a wrong conclusion or failed to appreciate facts. In absence of an allegation of moral mis-conduct against the arbitrator with reference to the award, the award could be challenged only on the grounds that there was legal mis-conduct on the part of arbitrator in making the award or there was an error apparent on the face of the record. Generally, Courts dis-favour interference with an arbitration award on the ground of error of law and fact on the score of mis-appreciation or mis-reading of the materials on record. However, the import and implications of "legal mis-conduct" of an arbitrator stands expanded in recent times and erroneous application of law constituting the very basis of the award and improper and incorrect findings of fact, which with closer and intrinsic scrutiny, are demonstrable on the face of material on record, have been held as legal mis-conduct rendering the award as invalid. But intrinsic re-appraisal of evidence is not permissible. Applying the dictum of Hon'ble Apex Court to the factual matrix of case in hand, it is abundantly clear that the writ Court was perfectly justified in declining to interfere with the award as the award was non-speaking and no legal mis-conduct of arbitration proceedings was demonstrable from record. The learned writ Court undertook an elaborate exercise to get at the bottom of the matter and its finding in respect of there being no error apparent on the face of the award and the record cannot be termed erroneous, much less perverse. The question of fact involved cannot be said to be based on mis-appreciation of evidence. 8. There being no scope for interference in appeal, this LPA being devoid of merit is dismissed. Registry to release the amount in favour of the respondent after due verification and identification.