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2021 DIGILAW 3307 (MAD)

General Manager, General Branch, Head Quarters Office, Chennai v. Radex Stationery India Pvt. Ltd. , New Delhi

2021-11-26

SENTHILKUMAR RAMAMOORTHY

body2021
JUDGMENT : (Prayer: Original Application is filed under Section 34 (2)(a)(iv), (b)(ii) of Arbitration and Conciliation Act, 1996 as amended by amendment Act 2015, to set aside the arbitral award passed by the Learned Arbitrator dated 23.02.2021 made in relation to disputes arising out of Purchase Order P.O.No.06/19/0194/1/02905 dated 25.07.2019 in so far as Claim No.1.) 1. The petitioner assails an arbitral award dated 23.02.2021(the Award). The petitioner was the respondent in the arbitral proceedings. The respondent herein, who was the claimant, made three claims. For the purposes of the present petition, claim No.1 and one of the counter claims by the petitioner herein are relevant. The 1st claim of the respondent was for a sum of Rs.56,71,791/- towards the cost of rejected/consumed papers along with interest thereon. The petitioner herein filed a counter along with a counter claim. The petitioner made a counter claim for a sum of Rs.9,66,580/- towards damages, by way of forfeiture of the security deposit, for failure by the respondent to fulfil the terms of the contract. Both parties adduced documentary evidence before the Arbitral Tribunal. The proceedings were concluded by pronouncing the Award, which is challenged herein. 2. The petitioner assails the Award on the ground that the rejection of the goods, namely, the paper supplied by the respondent was in accordance with the terms and conditions of the relevant contract. In particular, the petitioner asserts that Annexure-A of the purchase order empowers the petitioner to reject supplies which are not as per specification and which do not pass the run-ability test at the user end. The petitioner also contends that the arbitrator committed a patent illegality in directing the petitioner to withdraw the rejection advice, thereby specifically enforcing the contract. 3. Before testing the grounds of challenge of the petitioner, it is necessary to briefly set out the facts. The contract related to the supply of white security bond paper with certain characteristics as set out in the relevant tender. The respondent was required to supply about 1,22,500 kgs of the above mentioned paper. As against the contractual commitment, the respondent supplied about 59,052 kgs. On account of the failure to supply the remaining quantity of 63448 kgs, the purchase order was cancelled by communication dated 22.01.2020. In addition, the supplied quantity was also rejected by citing failure to pass the run-ability test. As against the contractual commitment, the respondent supplied about 59,052 kgs. On account of the failure to supply the remaining quantity of 63448 kgs, the purchase order was cancelled by communication dated 22.01.2020. In addition, the supplied quantity was also rejected by citing failure to pass the run-ability test. In view of the dispute that arose as a consequence, the arbitral proceedings were instituted by the respondent herein seeking the relief described above. On perusal of the Award, it is evident that the findings of the Arbitral Tribunal are recorded in paragraphs 70 to 86 of the Award. The Arbitral Tribunal took stock of the grounds of rejection of supply by setting out the said grounds at paragraph 71 of the Award. Thereafter, each ground of rejection was discussed and analysed in paragraphs 73 to 75. For instance, as regards the rejection due to the width of the paper reel, the Arbitral Tribunal recorded a finding that the petitioner herein had confirmed during the hearing that the two reels in question were consumed by it. On such basis, it was recorded that the rejection of the reels was unjustifiable. In similar fashion, other grounds of rejection were dealt with by appraising the evidence in such regard and recording conclusions thereafter. 4. The Arbitral Tribunal also adverted to Annexure –A of the purchase order which deals with rejection of supplies if not in accordance with the specifications and for not passing the run-ability test at the user end. After considering the relevant contractual clause, the Arbitral Tribunal recorded several findings. For present purposes, it is sufficient to extract, in relevant part, a few of such findings: “75.2 The above clause does not indicate that the papers will be first run on the printing machine and the ticket so produced will be again run on the dot matrix printer of the booking office to assess the performance of the paper in the run-ability test....The Booking Office is the user of ticket rolls printed by Rototmac Machine of Printing Press; hence the run-ability of ticket rolls on the dot matrix printers is directly not related to the quality of paper....” “75.5. The thickness of the paper has not been specified in the purchase order and therefore the contention of the respondent that the paper seems to be thin does not hold ground....” “75.6. The thickness of the paper has not been specified in the purchase order and therefore the contention of the respondent that the paper seems to be thin does not hold ground....” “75.6. In addition, the respondent has tried this run-ability test only in one booking office and based on that a decision has been taken for rejection of the material. As a man of common prudence, before taking a decision for rejection, they should have tried these tickets rolls in more than one booking office to come to a proper conclusion....” 5. After recording the aforesaid findings, the Arbitral Tribunal held at paragraph 75.8 that the general performance of the ticket rolls while issuing tickets from the dot matrix printer was satisfactory except as regards slight delay in stray cases. 6. On the basis of the above factual findings based on appraisal of the evidence on record, in paragraph 76.2 of the Award, the Arbitral Tribunal directed the petitioner herein to accept the supplies subject to a discount of 7.5% to compensate for the delay in issuance of tickets. As a consequence, a sum of Rs.43,10,796/- was directed to be paid towards cost of material. As regards the counter claim of the petitioner herein for forfeiture of the security deposit, such counter claim was accepted to the extent of non-supply of materials. In specific, forfeiture was accepted to the extent of Rs.5,35,501/- and rejected as regards a sum of Rs.4,31,079/-. 7. The law with regard to interference with arbitral awards is well settled. Especially with regard to appraisal of evidence, the law permits interference only if the award is based on no evidence, irrelevant evidence or by disregarding vital evidence. In the case at hand, the Award indicates beyond doubt that the Arbitral Tribunal duly considered all the reasons for rejection and recorded factual findings thereon by carefully sifting through the evidence on record. Such conclusions on the basis of a reasonable appraisal of the evidence on record do not call for interference under Section 34 of the Arbitration and Conciliation Act, 1996. Even as regards Annexure-A of the purchase order, which enables the petitioner to reject supplies, the Arbitral Tribunal engaged with the said clause and tested the applicability thereof to the facts by analysing the evidence on record. On such basis, conclusions were drawn. Once again, such conclusions do not call for interference. 8. Even as regards Annexure-A of the purchase order, which enables the petitioner to reject supplies, the Arbitral Tribunal engaged with the said clause and tested the applicability thereof to the facts by analysing the evidence on record. On such basis, conclusions were drawn. Once again, such conclusions do not call for interference. 8. Consequently, the petitioner has failed to make out a case to interfere with the Award. The petitioner was directed to pay a sum of Rs.47,41,875/- within a period of 45 days from the date of issue of the Award. In case of delay beyond the said period, the petitioner was directed to pay simple interest at the rate of 5% p.a. to the respondent herein. The petitioner is directed to comply with such Award by paying the amounts outstanding in terms thereof within a period of two months from the date of receipt of a copy of this order. 9. Accordingly, Arbitration Original Petition No.233 of 2021 is dismissed without any order as to costs.