Delhi District Court
Pec Ltd vs Badri Singh Vinimay Pvt Ltd on 1 February, 2025
IN THE COURT OF ANURAG SAIN, DISTRICT JUDGE
(COMMERCIAL COURT-01), PATIALA HOUSE COURTS, NEW
DELHI
ARBTN 3047/2018
PEC Ltd.
Through its Authorized Representative
At 'Hansalaya', 15,
Barahkhamb Road
New Delhi-110001
.........Petitioner
Versus
1. M/s Badri Singh Vinimay Pvt. Ltd.
Through Its Directors
At 9/2B/1B, Gorapado Sarkar Lane
Kolkata, West Bengal-700067
2. Anil Kumar Batra
Sole Arbitrator
C/o Indian Council of Arbitration
Federation House
Tansen Marg, New Delhi-110001
.......Respondents
Date of institution : 10.07.2018
Date of reserving judgment : 28.11.2024
Date of pronouncement : 01.02.2025
JUDGMENT
1. The present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 has been filed by the petitioner for setting
aside the Award dated 02.04.2018 passed in the present matter
bearing Arb. Case No. 1973/2015 by respondent no.2/ Ld. Sole
ARBTN-3047/2018 Page 1 of 39
Arbitrator.
2. Briefly stated the facts of the case are that the petitioner is a
Public Sector Enterprise, a company within the meaning of the
Companies Act, 1956 and engaged in sourcing of various
commodities in bulk from international markets and importing
agricultural commodities including pulses and Lentils for sale in
domestic open market and respondent no.1 is a company
incorporated under the Companies Act, 1956 engaged in trading
regularly in different verities of pulses and similar commodities.
The petitioner floated a public tender on 27.08.2011 offering
various commodities for sale, including 100 MT of Red Lentils
for Canadian Origin and three competitive bids were received
from the prospective buyers out of which, respondent no.1 was
declared as the successful party being the highest bidder @ Rs.
25,500/- per MT and was awarded to buy the said 100 MT of
Red Lentils at a total consideration of Rs. 25,500/- per MT.
Subsequently, as a result of mutual consultations and negotiations
between the parties, the Order Quantity was increased from 100
MT to 300 MT as the petitioner had the extra stocks available in
their Godowns and respondent no.1 had a ready market
opportunity for trade in their further supply chain. The tender
also had a provision for submissions of EMD equivalent to 5% of
the total bid price by the successful bidder. As per the terms and
conditions of the tender, the goods were offered on ‘as is where is
basis’ which were to be lifted from the godown of the petitioner
at 3, Hyde Park, Kolkata by the successful bidder however,
ARBTN-3047/2018 Page 2 of 39
respondent no.1 while accepting the contract notified clearly vide
their acceptance letter dated 09.08.2011 that only ‘Cargo in sound
and good (fresh cargo) condition’ shall be acceptable. The
petitioner remained silent and did not respond to the said
communication dated 09.09.2011 from respondent no.1 while
accepting order. The goods were to be lifted in various lots
through transportation lorries to be arranged by respondent no.1
from the godown of the petitioner by making payments in
advance for the lots to be lifted. As per the terms and conditions
of the tender, the successful bidder was required to lift the entire
stocks within 30 days of the date of acceptance of tender, failing
which, the petitioner had the option to cancel the contract and
dispose off goods at the risk and cost of the bidder. Respondent
no.1 had made a total payment of Rs. 36,45,844/- including Rs.
2,50,000/- as EMD on various dates during the period between
23.08.2011 and 22.03.2012 which is equivalent to the value of
133 MT of Cargo (Red Lentils) whereas the lifting of only 83.94
MT of Cargo, respondent no.1 alleged the Cargo offered by the
petitioner is a mixed up cargo i.e. ‘damaged cargo mixed with
sound cargo’. Respondent no.1 withdrew his Lorries from the
warehouse site and refused to accept the cargo in ‘as offered’
condition. A complaint with respect to the quality of cargo was
made on 02.12.2011 to the petitioner. Respondent no.1 vide
communication dated 02.12.2011 notified the petitioner of their
inability to take the delivery of ‘damaged’ Cargo mixed with
‘sound’ Cargo requesting the petitioner to refund the excess
ARBTN-3047/2018 Page 3 of 39
amount paid by respondent no.1 and in response to the same, the
petitioner vide communication dated 22.12.2011 rejected the
claim of respondent no.1 with respect to the quality of cargo
saying that the original tender specified the goods to be offered
on ‘as is where as basis’. The petitioner while refusing to
consider any arguments of respondent no.1 with respect to the
damaged/mixed up/non-merchandisable condition of cargo,
declared that they would proceed to forfeit the EMD amount
deposited by respondent no.1 along with interest and warehouse
charges to be debited the account of respondent no.1. After a gap
of three to four months during which the parties could not come
to the negotiating table, the petitioner in a bid to sort out the
matter, proposed a ‘Third Party Survey’ for the Cargo to be
inspected in the presence of both parties. The actual Survey was
conducted by Surveyors M/s S.S. Developers on 13.02.2012
wherein both the parties were present and the Survey Report
dated 23.02.2012 was issued by the Surveyor nominated by the
petitioner. As per the findings of the Survey Report, it was
concluded that out of total 3178 bags of Red Lentils (each bag
containing approx. 50 kg) available in stock on 13.02.2012 at the
godown of the petitioner, as much as 2218, which is about 70%
of the stock, were found in ‘Damaged condition’ whereas
remaining 30% stock containing 960 bags were found in ‘Sound
condition’. As a result of finings of the Joint Survey, the
deliveries resumed once again from the godown of the petitioner
based upon agreement reached between the parties that only
ARBTN-3047/2018 Page 4 of 39
‘Sound cargo’ be accepted by respondent no.1. During
21.03.2012 and 24.03.2012, respondent no.1 took delivery of
three consignments weighing (1) 12.49 MT-260 bags, (2) 12.47
MT-270 bags and (3) 0.152 MT-48 bags. Total cargo delivered
and accepted by respondent no.1 in this period works out to 27.34
MT in 578 bags after which respondent no.1 refused to accept the
goods alleging the Cargo being mixed/damaged/non-
merchandisable. On 13.07.2012, respondent no.1 vide
communication dated 13.07.2012 notified the petitioner of non-
acceptance of remaining cargo and requested the petitioner for
refund of excess amount of Rs. 7,58,854/- after adjusting Rs.
49,350/- towards interest and warehouse charges. Respondent
no.1 had already taken delivery of 83.94 MT (1670 bags) of
Cargo initially before the dispute arose on 08.10.2011 and thus,
the total quantity of cargo delivered by the petitioner which was
received and duly accepted by respondent no.1 including three
consignments between 21.03.2012 and 24.03.2012 (578 bags) as
above, works out to 83.94+27.34=111.28 MT in 2248 bags. Both
the parties were in agreement on the actual quantity of cargo
lifted by respondent no.1 as 111.28 MT out of total order quantity
of 300 MT and actual payment made by respondent no.1 to the
petitioner stands at Rs. 36,45,844/- and respondent no.1 has
prayed for the refund of excess amount of Rs. 7,58,854/- against
the petitioner after adjusting the interest and warehouse charges
amounting to Rs. 49,350/- as applicable for 578 bags as per the
terms of the contract. Consequently, respondent no.1 while
ARBTN-3047/2018 Page 5 of 39
refusing to accept Cargo in ‘so offered’ condition, has sought
refund to excess amount outstanding against quantity non-
supplied/non-lifted. The petitioner while rejecting the claim of
respondent no.1 has not only forfeited the EMD amount of Rs.
2,50,500/- deposited by respondent no.1 but also withheld the
excess payment made by respondent no. 1 while citing the
contract conditions in respect of clause 12 i.e. liquid damages and
clause 13 i.e. cancellation of contract.
3. It has been averred by the petitioner that the statement of claim
was filed on 25.01.2015 before the Indian Council of Arbitration
whereas the contract between the parties took place on
09.09.2011 regarding sale of 300 MT of red lentils on Canadian
Origin. Respondent no.1 was supposed to lift the entire lentils
within a period of 30 days which ended on 08.10.2011 however,
till that date, respondent no.1 lifted only 83.94 MT lentils. It has
been further averred that even as per the alleged agreement
between respondent no.1 and the so-called business entity namely
M/s Ghshiram to lift said 83.94 MT lentils claims to have been
made on 07.10.2009 which clearly implies that respondent no.1
has malafide intention from the very beginning and was not
interested to lift the lentils within the stipulated time. The dispute
was created by respondent no.1 on the last day of contract period.
It has been further averred that the alleged dispute regarding
quality of lentils was beyond the purview of the tender
document/terms of contract. It has been further averred that till
last day i.e. 08.10.2011, the red lentil was in good condition and
ARBTN-3047/2018 Page 6 of 39
hence no complaint was made prior to that date by respondent
no.1. The tender document does not talk about the quality of
lentils and it was sold on the principle of ‘as is where is basis’
only and the question of quality does not arise at all and quality
dispute is beyond tender document. It has been further averred
that the petitioner filed a detailed reply along with documents
before the Ld. Sole Arbitrator refuting the claim of the petitioner.
It has been further averred that respondent no.1 failed to lift the
cargo within the stipulated period of time despite various
reminders but forfeited the EMD amount and did not disclose this
material fact to Ld. Arbitral Tribunal in order to seek relief and
even the statement of claim of respondent no.1 was time barred
since it was filed on 25.01.2015 whereas the alleged dispute arose
on 08.10.2011. It has been further averred that respondent no.1
had also filed rejoinder to the reply of the petitioner and had also
filed certain documents which were manufactured ones and the
same were filed in order to improve upon the case. It has been
further averred that after completion of the pleadings, the issues
were framed by the Ld. Sole Arbitrator and the parties led their
respective evidence before the Ld. Sole Arbitrator and the
impugned award dated 02.04.2018, was passed by the Ld. Sole
Arbitrator vide which the Ld. Sole Arbitrator directed the
petitioner to refund to respondent no.1 a net amount of Rs.
5,67,864/- towards the excess amount lying with the petitioner
after deducting Rs. 1,91,000/- towards the loss of profit suffered
by them out of claim of respondent no.1 of Rs. 7,58,854/- and
ARBTN-3047/2018 Page 7 of 39
interest amount of Rs. 1,39,995/- on refund amount of Rs.
5,67,864/- @ 10% simple interest per annum for the period from
25.03.2012 up to 15.07.2014. The impugned Award dated
02.04.2018 passed by the Ld. Sole Arbitrator is under challenge
in the present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 filed by the petitioner.
4. Feeling aggrieved from the findings of the Ld. Sole Arbitrator,
the present petition has been filed by the petitioner on the
grounds such as the impugned award is wholly illegal being
violative of the settled legal position; Ld. Sole Arbitrator has
failed to consider the evidence and cross examination of the
parties more particularly the cross examination of the petitioner’s
witness such as RW-1 and RW-2 and given contradictory findings
on the issues involved between the parties; Ld. Sole Arbitrator
has disregarded the specific terms and conditions of contract
dated 09.09.2011 and has acted dehors the contract in respect of
the claims of security deposit; There is suppression of material
facts by respondent no.1 from Ld. Tribunal about joint inspection
report dated 23.02.2012 and EMD has already been forfeited by
the petitioner vide letter dated 19.10.2012; Ld. Sole Arbitrator
has not considered the clauses of the contract and has arrived at
an erroneous conclusion in the award on the basis of hearsay
submissions; Ld. Sole Arbitrator has failed to consider that the
statement of claim was time barred which was filed on
25..01.2015 wherein the alleged dispute arose on 08.10.2011; The
impugned award is beyond the pleadings and it also contrary to
ARBTN-3047/2018 Page 8 of 39
the admitted position of parties in the documents and the
evidence; and the Ld. Sole Arbitrator has failed to consider the
issue of ‘as is whereas basis’ and relied upon the judgments such
as Karamchand Appliances Pvt. Ltd. Vs. M/s Bharat Carpets Ltd.
& Ors, 79 (1999) DlT 44; 1999 (49) DRJ, 637, Manpreet Singh
& Co. Vs. NDMC, OMP No. 1084/2014, NDMC Vs Manju
Maini, OMP No. 631/2007, S.K. Pandey Vs. MCD, OMP NO.
310/2010 and Toyo Eng. Corp. Vs. Cimmco Birla Ltd., 109
(2004) DLT 97, 2004 (73) DRJ 758. On these premise, the instant
petition has been filed on behalf of the petitioner for setting aside
of impugned award dated 02.04.2018 passed by Ld. Sole
Arbitrator in the present case.
5. Reply to the present petition has been filed by respondent no.1
wherein respondent no.1 has averred that the scope of Section 34
of the Arbitration and Conciliation Act, 1996 is limited. The
petitioner has not sent notice as per Section 34 (5) of the
Arbitration and Conciliation Act, 1996 which is prerequisite
condition for filing the present petition. The present petition does
not reveal any of the grounds for setting aside of the impugned
award, as has been prescribed under Section 34 of the Arbitration
and Conciliation Act, 1996. On merits, respondent no.1 has
denied the averments of the petitioner as mentioned in the present
petition. Respondent no.1 was always ready and willing to lift
and take entire 300 MT of Lentils/Pules and for that respondent
no.1 made advance payment but the petitioner miserably failed to
supply good and sound quality of goods as per the agreement
ARBTN-3047/2018 Page 9 of 39
between the parties. As per the report of surveyor and his finding
about the damaged condition of goods and further sale thereof by
the petitioner at very low price clearly shows that the petitioner
knowingly and fraudulently attempted to sale rotten food items to
respondent no.1. On these premises, respondent no1. has prayed
for the dismissal of the instant petition.
6. I have heard Sh. Amitabh Kumar Verma, Ld. Counsel for the
petitioner and Sh. Santosh Kumar, Ld. Counsel for respondent
no1.
7. Ld. counsel for the petitioner has argued that the impugned award
is against the facts as well as against the law and has been passed
by the Ld. Arbitrator without application of mind and the award
is a non-speaking award. It has been further argued that the
impugned award is based on surmises and conjectures and it has
been passed without considering the documents on record and is
against the public policy. On these premise, Ld. Counsel for the
petitioner prayed that the impugned award be set aside.
8. On the other hand, Ld. Counsel for respondent no.1 has argued
that the objections are not maintainable as the award has been
passed by the Ld. Arbitrator after considering the material on
record and it does not suffer from any infirmity or illegality as
alleged by the petitioner. The objections are without any merits
and are liable to be dismissed.
9. Before deciding the validity of the impugned Award, it is relevant
to observe that the scope of inquiry in Section 34 of the
Arbitration and Conciliation Act, 1996 proceedings is restricted
ARBTN-3047/2018 Page 10 of 39
to consideration whether any one of the grounds mentioned in
Section 34 (2) of the Arbitration and Conciliation Act, 1996
exists for setting aside the Award. The scope of the interference
by the court under Section 34 (2) of the Arbitration and
Conciliation Act, 1996 has been time and again restricted in
catena of judgments by the Hon’ble Superior Courts and it has
been held that in proceedings under Section 34 of the Arbitration
and Conciliation Act, 1996, the re-appreciation of the facts,
evidence or interpretation of the terms of contract is not
permissible. What is permissible is, if there is a patent illegality,
apparent error on the face of the record, perversity in the Award
or misconduct by the Ld. Arbitrator.
10.Section 34(2) of the Arbitration and Conciliation Act, 1996 reads
as under:-
“34.Application for setting aside arbitral award-(1)Recourse to a
court against an arbitral award may be made only by an application
for setting aside such award in accordance with sub-section (2) and
sub-section (3).
(2)An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the
law for the time being in force; or
(iii) the party making the application was not given proper notice of
the appointment of an arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or
ARBTN-3047/2018 Page 11 of 39
not falling within the terms of the submission to arbitration, or it
contains decisions on matters beyond the scope of the submission to
arbitration;
Provided that, if the decisions on matters submitted to arbitration can
be separated from those not so submitted, only that part of the
arbitral award which contains decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure
was not in accordance with the agreement of the parties, unless such
agreement was in conflict with a provision of this Part from which
the parties cannot derogate, or, failing such agreement, was not in
accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 – For the avoidance of any doubt, it is clarified that an
award is in conflict with the public policy of India, only if,– (i) the
making of the award was induced or affected by fraud or corruption
or was in violation of Section 75 or Section 81; or (ii) it is in
contravention with the fundamental policy of Indian law; or (iii) it is
in conflict with the most basic notions of morality or justice.
Explanation 2.– For the avoidance of doubt, the test as to whether
there is a contravention with the fundamental policy of Indian law
shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by the
Court, if the Court finds that the award is vitiated by patent illegality
appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of
ARBTN-3047/2018 Page 12 of 39
an erroneous application of the law or by re-appreciation of evidence.
(3) An application for setting aside may not be made after three
months have elapsed from the date on which the party making that
application had received the arbitral award or, if a request had been
made under section 33, from the date on which that request had been
disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented
by sufficient cause from making the application within the said
period of three months it may entertain the application within a
further period of thirty days, but not thereafter.”
11.Normally, the general principles are that Arbitrator is a Judge of
the choice of the parties and his decision, unless there is an error
apparent on the face of the award which makes it unsustainable,
is not to be set aside even if the court as a court of law would
come to a different conclusion on the same facts. The court
cannot reappraise the evidence and it is not open to the court to
sit in appeal over the conclusion of the arbitrator. It is not open to
the court to set aside a finding of fact arrived at by the arbitrator
and only grounds on which the award can be cancelled are those
mentioned in the Arbitration Act. Where the arbitrator assigns
cogent grounds and sufficient reasons and no error of law or
misconduct is cited, the award will not call for interference by the
court in exercise of the power vested in it. Where the arbitrator is
a qualified technical person and expert, who is competent to
make assessment by taking into consideration the technical
aspects of the matter, the court would generally not interfere with
the award passed by the arbitrator.
ARBTN-3047/2018 Page 13 of 39
12.The Hon’ble Supreme Court of India in a case titled as Associate
Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has
held that the interference with an arbitral award is permissible
only when the findings of the arbitrator are arbitrary, capricious
or perverse or when conscience of the Court is shocked or when
illegality is not trivial but goes to the root of the matter. It is held
that once it is found that the arbitrator’s approach is neither
arbitrary nor capricious, no interference is called for on facts. The
arbitrator is ultimately a master of the quantity and quality of
evidence while drawing the arbitral award. Patent illegality must
go to the root of the matter and cannot be of trivial nature.
13.The Hon’ble Supreme Court of India in a case titled as
Ssangyong Engineering & Construction Co. Ltd. vs. National
Highways Authority of India, 2019 SCC OnLine SC 677 has held
that under Section 34 (2A) of The Act, a decision which is
perverse while no longer being a ground for challenge under
“public policy of India”, would certainly amount to a patent
illegality appearing on the face of the award. A finding based on
the documents taken behind the back of the parties by the
arbitrator would also qualify as a decision based on no evidence
inasmuch as such decision is not based on evidence led by the
parties and therefore would also have to be characterized as
perverse. It is held that a finding based on no evidence at all or an
award which ignores vital evidence in arriving at its decision
would be perverse and liable to be set aside on the ground of
patent illegality.
ARBTN-3047/2018 Page 14 of 39
14.The Hon’ble High Court of Delhi in a case titled as J.K. Kashypal
Vs. M/s M.G. Capital Services and another (2002) II AD, (Delhi)
363 has held :-
“that the objections are to be examined on the parameters given in
section 34 of the Act and observed in the following words:
“Furthermore the objections are to be examined on the touch stone of
Section 34 of the Arbitration and Conciliation Act, 1996 and such a
contention raised by the petitioner is not covered by any of the
provisions contained in Section 34 of the said Act. The Arbitrator
was the best judge to adjudicate upon the merits of the case and this
court is not supposed to fathom the mind of the Arbitrator or to arrive
at its own conclusion on merits or to sit as an Appellant Authority
over the findings of the Arbitrator.”
15.In a case titled as Himachal Joint Venture Vs. Panilpina World
Transport (India) Pvt. Ltd. Reported in 2008 (3) Arbitration Law
Reported 497, a Division Bench of the Hon’ble High Court of
Delhi has held that :
“When the view taken by the Arbitrator is a plausible view, it is not
permissible for the court to interfere with the Arbitrator’s view
merely because another view of the matter is possible. It is not
permissible for the Court to re-appreciate the evidence placed before
the Arbitrator. It is well-settled that the Arbitrator is the best judge of
the quality as well as quantity of evidence and it will not be for the
Court to take upon itself task of being a Judge of the evidence before
the Arbitrator.
16.In a case titled as N.H.A.I. V. U.T.D. Cementation India Ltd.,
(2015) 14 SCC 21, Hon’ble Supreme Court of India has observed
as follows:
“It is thus well settled that construction of the terms of a contract is
ARBTN-3047/2018 Page 15 of 39
primarily for an arbitrator to decide. He is entitled to take the view
which he holds to be the correct one after considering the material
before him and after interpreting the provisions of the contract. The
Court while considering challenge to an arbitral award does not sit in
appeal over the findings and decisions unless the arbitrator construes
the contract in such a way that no fair-minded or reasonable person
could do.”
17.In a case titled as Delhi Airport Metro Express Pvt. Ltd. Vs.
Delhi Metro Rail Corporation Ltd. in CA No.5628/2021 decided
on 09.09.2021, the Hon’ble Supreme Court of India has observed
as follows :
“23. For a better understanding of the role ascribed to courts in
reviewing arbitral awards while considering applications filed under
Section 34 of the 1996 Act, it would be relevant to refer to a
judgment of this Court in Ssangyong Engineering and Construction
Company Limited v. National Highways Authority of India (NHAI)
wherein R.F. Nariman, J. has in clear terms delineated the limited
area for judicial interference, taking into account the amendments
brought about by the 2015 Amendment Act. The relevant passages of
the judgment in Ssangyong (supra) are noted as under:− “34. What is
clear, therefore, is that the expression “public policy of India”,
whether contained in Section 34 or in Section 48, would not mean
the “fundamental policy of Indian law: as explained in paras 18 and
27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC
49: (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian
law would be relegated to “Renusagar” understanding of this
expression. This would necessarily mean that Western Geco [ONGC
v.Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12] expansion has beendone away with. In short, Western Geco
[ONGC V. Western Geco International Ltd., (2014) 9 SCC 263 :
ARBTN-3047/2018 Page 16 of 39
(2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate
Builders {Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2
SCC (Civ) 204], would no longer obtain, as under the guise of
interfering with an award on the ground that the arbitrator has not
adopted a judicial approach, the Court’s intervention would be on the
merits of the award, which cannot be permitted post amendment.
However, insofar as principles of natural justice are concerned, as
contained in Sections 18 and 34(2) (a) (iii) of the 1996 Act, these
continue to be grounds of challenge of an award, as is contained in
para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3
SCC 49 : (2015) 2 SCC (Civ) 204].
35.It is important to notice that the ground for interference insofar as
it concerns “interest of India” has since been deleted, and therefore,
no longer obtains. Equally, the ground for interference on the basis
that the award is in conflict with justice or morality is now to be
understood as a conflict with the “most basis notions of morality or
justice”. This again would be in line with paras 36 to 39 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2
SCC (Civ) 204], as it is only such arbitral awards that shock the
conscience of the court that can be set aside on this ground.
36.Thus, it is clear that public policy of India is now constructed to
mean firstly, that a domestic award is contrary to the fundamental
policy of Indian law, as understood in paras 18 and 27 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2
SCC (Civ) 204], or secondly that such award is against basic notions
of justice or morality as understood in paras 36 to 39 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2
SCC (Civ) 204].
Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section
48(2)(b)(ii) was added by the Amendment Act only so that Western
ARBTN-3047/2018 Page 17 of 39
Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC
263 : (2014) 5 SCC (Civ) 12], as understood in Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
204], and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an
additional ground is now available under sub−section (2−A), added
by the Amendment Act, 2015, to Section 34. Here, there must be
patent illegality appearing on the face of the award, which refers to
such illegality as goes to the root of the matter but which does not
amount to mere erroneous application of the law. In short, what is not
subsumed within” the fundamental policy of Indian law”, namely, the
contravention of a statute not linked to public policy or public
interest, cannot be brought in by the backdoor which it comes to
setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-appreciation of
evidence, which is what an appellate court is permitted to do, cannot
be permitted under the ground of patent illegality appearing on the
face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate
Builders V. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204],
namely a mere contravention of the substantive law of India, by
itself, is no longer a ground available to set aside an arbitral award.
Para 42.2 of Associate Builders (Associate Builders V. DDA, (2015)
3 SCC 49: (2015) 2 SCC (Civ) 204), however, would remain, for if
an arbitrator gives no reasons for an award and contravenes Section
31(3) of the 1996 Act, that would certainly amount to a patent
illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act
really follows that is stated in paras 42.3 to 45 in Associate Builders
[Associate Builders V. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ)
ARBTN-3047/2018 Page 18 of 39
204], namely, that the construction of the terms of a contract is
primarily for an arbitrator to decide, unless the arbitrator construes
the contract in a manner that no fair−minded or reasonable person
would; in short, that the arbitrator’s view is not even a possible view
to take. Also, if the arbitrator wanders outside the contract and deals
with matters not allotted to him, he commits an error of jurisdiction.
This ground of challenge will now fall within the new ground added
under Section 34(2−A).
41. What is important to note is that a decision which is perverse,
as understood in paras 31 and 32 of Associate Builders [Associate
Builders V. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], while
no longer being a ground for challenge under “public policy of
India”, would certainly amount to a patent illegality appearing on the
face of the award. Thus, a finding based on no evidence at all or an
award which ignores vital evidence in arriving at its decision would
be perverse and liable to be set aside on the ground of patent
illegality. Additionally, a finding based on documents taken behind
the back of the parties by the arbitrator would also qualify as a
decision based on no evidence inasmuch as such decision is not
based on evidence led by th parties, and therefore, would also have to
be characterized as perverse.”
18.I have examined the Award dated 02.04.2018 in question,
arbitration proceedings and also given due consideration to the
facts and pleadings of the case, written submissions along with
citations filed by the parties as well submissions put forth by the
respective Ld. Counsels for the parties and the relevant legal
position.
19.The cause of dispute between the parties before the Ld. Sole
Arbitrator was that as per the agreement between the parties,
ARBTN-3047/2018 Page 19 of 39
respondent no.1 had to lift certain cargo material consisting of
Red Lentils of Canadian origin from the godown of the petitioner
located at 3, Hyde Road, Kolkata however, as alleged by
respondent no.1, the quality of goods was not in conformity with
the terms of contract and thereby respondent no.1 was unable to
lift the entire quantity of goods as per the agreement, which
resulted in a dispute between the parties. The petitioner has
rejected the claim of respondent no.1 on the grounds that the
goods were contracted to be lifted on ‘As is where is basis’ and
forfeited the earnest money deposit (EMD) deposited by
respondent no.1 against performance of contract.
20.It is apparent from the record that the major dispute between the
parties is on the quality of cargo offered, the applicability of the
tender clause of sale of goods on ‘As is where is basis’ Vs
respondent no.1 Conditional Acceptance of Contract on the basis
of ‘Only Sound and Good (fresh cargo) Condition’ to be
accepted.
21.In the present case, respondent no.1 has refused to accept the
cargo in ‘as offered’ condition and claimed for refund of excess
amount outstanding against quantity non-supplied/non-lifted
whereas the petitioner has rejected the said claim and not only
forfeited the EMD amount of Rs. 2,50,500/- deposited by
respondent no.1 but also withheld the excess payment made by
respondent no.1 as per Clause 12 of the agreement qua liquidated
damages and Clause 13 of the agreement qua cancellation of
contract which are reproduced as under:-
ARBTN-3047/2018 Page 20 of 39
“Clause 12-Liquidated Damages:-
In case the successful bidder fails to lift the stock within the
stipulated period of 30 days consecutive days, godown rent for a
minimum period of one month @ Rs. 140 PMT per month, 12% pa
interest and any other charges will be charged from the successful
bidder. After one month, PEC will be free to rescind the contract and
dispose off the cargo at the risk and cost of bidder without assigning
any written/verbal notice to the successful bidder for making
payment and/or lifting the cargo. In addition, Bid Bond will be
forfeited’.
Clause 13-Cancellation Contract:-
‘If the Buyer fails to lift the goods within specified delivery period
for reasons other than Force Majeure, the Seller shall be entitled at
his option to cancel the contract and recover the damages besides
forfeiture of Bid Bond. The Seller shall not be liable to any risks and
costs, whatsoever, consequent upon such cancellation of contract’.
22.In this case, following issues were framed by the Ld. Sole
Arbitrator:-
(i) Whether the Claim was preferred within the limitation
period?
(ii) Whether the claim was preferred on behalf of the claimant’s
company with proper authorization?
(iii) Did the Joint Survey of the Cargo by both parties along with
Third party Surveyor amount to giving a go-bye to the contracted
delivery terms of ‘as is where is basis’? What is the effect of
consequent delay in lifting of goods on the terms related to forfeiture
of EMD ?
(iv) Whether the Claimant is entitled to seek any relief over the
contracted term of ‘as is where is’ basis ?
ARBTN-3047/2018 Page 21 of 39
(v) Was the Claimant not under an obligation to lift 960 bags of
Red Lentils on the basis of Surveyor’s Report?
(vi) Did the Respondent fail in putting-up the Contracted goods in
a deliverable state or in delivering sound quality goods thereby
committing breach of terms of contract ?
(vii) Whether the Claimant is entitled to a claim of Rs. 7,58,854/-
along with interest thereof for the sum paid in excess of the value of
goods lifted ?
(viii) Whether the Claimant is entitled to claim of Rs. 18,00,000/-
along with interest thereof for any loss in profit due to non-delivery
of goods?
(ix) Whether the Claimant is entitled to claim interest @ 24% or
any other rate on the aforesaid sums?
(x) Relief ?
23.Issue no. (i) Whether the Claim was preferred within the limitation
period?
24.In the present case, respondent no.1 has filed the statement of
claim before ICA on 24.02.2015 and a dispute over the quality of
goods arose on 08.10.2011. The record shows that the parties
were in constant dialogue to resolve the dispute through mutual
negotiations and as mutually agreed by the parties, joint survey of
cargo was conducted on 13.02.2012 and as observed by the Ld.
Sole Arbitrator, the real break up between the parties came up as
late as 24.03.2012 when respondent no.1 refused to take delivery
of remaining 382 bags out of 960 bags admittedly of acceptable
quality as identified during joint survey of stocks. Ld. Sole
Arbitrator also observed, while confirming from the records of
ARBTN-3047/2018 Page 22 of 39
ICA that respondent no.1 vide notice dated 24.07.2014 under
Section 21 of the Indian Arbitration and Conciliation Act, 1996 to
the Council had already invoked Arbitration as per the contract
terms notwithstanding the actual statement of claim filed with the
Council on 24.02.2015 and thereby observed that the cause of
action to raise the dispute for the arbitration proceedings thus,
arose in the wake of impasse created after the joint survey and
disinclination of respondent no.1 to take delivery of suspect cargo
on 24.03.2012.
25.The Hon’ble Supreme Court of India in a case titled as Geo
Miller and Co. Pvt. Ltd. Vs. Chairman, Rajasthan Vidyut
Utpadan Nigam Ltd. [(2020) 14 SCC 643] has held in Paras 28
and 29 as under:-
“28. Having perused through the relevant precedents, we agree that
on a certain set of facts and circumstances, the period during which
the parties were bona fide negotiating towards an amicable
settlement may be excluded for the purpose of computing the period
of limitation for reference to arbitration under the 1996 Act.
However, in such cases the entire negotiation history between the
parties must be specifically pleaded and placed on the record. The
Court upon careful consideration of such history must find out what
was the “breaking point” at which any reasonable party would have
abandoned efforts at arriving at a settlement and contemplated
referral of the dispute for arbitration. This “breaking point” would
then be treated as the date on which the cause of action arises, for the
purpose of limitation. The threshold for determining when such a
point arises will be lower in the case of commercial disputes, where
the party’s primary interest is in securing the payment due to them,ARBTN-3047/2018 Page 23 of 39
than in family disputes where it may be said that the parties have a
greater stake in settling the dispute amicably, and therefore delaying
formal adjudication of the claim.
29. Moreover, in a commercial dispute, while mere failure to pay
may not give rise to a cause of action, once the applicant has asserted
their claim and the respondent fails to respond to such claim, such
failure will be treated as a denial of the applicant’s claim giving rise
to a dispute, and therefore the cause of action for reference to
arbitration. It does not lie to the applicant to plead that it waited for
an unreasonably long period to refer the dispute to arbitration merely
on account of the respondent’s failure to settle their claim and
because they were writing representations and reminders to the
respondent in the meanwhile.”
26.In the present case, statement of claim was filed by respondent
no.1 before ICA on 24.02.2015 whereas the dispute over the
quality of goods arose on 08.10.2011. Thereafter, as is apparent
from the record, the parties were in constant dialogue to resolve
the dispute through mutual negotiation and a joint survey of
cargo was conducted on 13.02.2012, as mutually agreed by the
parties. As per the record, during joint survey of stocks, out of
960 bags, 382 bags were found and identified to be acceptable
quality but on 24.03.2012, respondent no.1 refused to take
delivery of 382 bags. Moreover, though respondent no.1 has filed
the statement of claim before ICA on 24.02.2015 however, as per
record of ICA, respondent no.1 had already invoked arbitration
vide notice dated 24.07.2014 under Section 21 of the Indian
Arbitration and Conciliation Act, 1996 to the Council. In the
present case, the entire history of the negotiation between the
ARBTN-3047/2018 Page 24 of 39
parties has been specifically pleaded and placed on record and the
Ld. Sole Arbitrator has considered such history while observing
that the joint survey of cargo, as mutually agreed by the parties,
was conducted on 13.02.2012 and found that the real breaking
point as 24.03.2012 when respondent no.1 refused to take the
delivery of admittedly acceptable quality of 382 bags out of 960
bags as found and identified during joint survey of stocks and this
‘breaking point’ was treated as the date on which the cause of
action arises for the purpose of limitation and this has led the Ld.
Sole Arbitrator to the irresistible conclusion that the statement of
claim was within three years from 24.03.2012 and the court also
does not find in infirmity in the same and thus, no interference is
called for.
27.Issue (ii) Whether the claim was preferred on behalf of the claimant’s
company with proper authorization?
28.Claim petition before the Ld. Sole Arbitrator was filed by Sh.
Sunil Kumar Singh, representative of respondent no.1 and the Ld.
Sole Arbitrator has observed that Sh. Sunil Kumar Singh, being
one of the Directors of respondent no.1 company, directly
looking after day to day operations during execution of contract
in question, was having due authority and mandate from their
Board/Management to deal with the case and the text of the
affidavit filed by respondent no.1 leaves no ambiguity that Sh.
Sunil Kumar Singh at the time of filing claim petition did infact
enjoy the confidence of his management and was duly authorized
to deal with the subject arbitration case and during pendency of
ARBTN-3047/2018 Page 25 of 39
the case, a fresh resolution was made on 10.05.2016 which
further corroborated by re-affirmation of his nomination by
respondent no.1 company’s board. While deciding this issue, Ld.
Sole Arbitrator has observed that the case of respondent no.1
cannot be thrown out of window due to any deficiencies in the
extract of Board Resolution submitted earlier as resolution dated
10.05.2016 not only reiterates the resolution of 19.02.2011
conferring the authorization and clarifying the act of omission of
Serial number of Resolution, but also has the effect of ratifying
all acts done in its terms and found the claim petition
maintainable. While deciding this issue, Ld. Sole Arbitrator has
given reasoned finding and the court does not find any infirmity
in this regard. Moreover, in view of the provisions of Order 29
Rule 1 of CPC any Principal Officer of the corporation who is
able to depose the facts of the case, is competent to sign and
verify the pleadings on behalf of the corporation. In case RFA
174/2007 titled as Kingston Computers I P. Ltd. versus State
Bank of Travancore decided on 12.08.2008, the Hon’ble Delhi
High Court in para 26 observed that:-
“26. Suffice would it be to state that in law, the Secretary, Director
or a Principal Officer of a company would be treated as duly
authorized to institute suit on behalf of a company. This flows out
from a bare reading of Order 29 Rule 1 of the Code of Civil
Procedure as as further explained in the decision in United Bank of
India‘s case.”
29.Issues (iii) Did the Joint Survey of the Cargo by both parties along with
Third party Surveyor amount to giving a go-bye to the contracted delivery
terms of ‘as is where is basis’? What is the effect of consequent delay in
ARBTN-3047/2018 Page 26 of 39
lifting of goods on the terms related to forfeiture of EMD ? And (iv)
Whether the Claimant is entitled to seek any relief over the contracted term
of ‘as is where is’ basis ?
30.Before the Ld. Sole Arbitrator, the moot question has arisen as to
whether any responsible PSU Company operating under
Government of India can put out for sale through an open public
tender such huge quantities (300 MT in this case) of ‘damaged’
commodity of edible nature like ‘lentils’ which is essentially a
human consumption item and forms a critical component of
staple diet for people at large. While deciding this question, Ld.
Sole Arbitrator has observed that over 70% of the Red Lentil
stock at the point of sale was found to be damaged/water-
damaged, as has been established and certified through a Third
Party Survey Report issued by the Surveyor nominated by the
Seller himself thus, making it unfit for human consumption
thereby consumption of such poor quality of Lentils leading
people’s kitchen either through PDS channels or through
urban/semi urban ‘Kiryana stores’ which has not only lost its
nutritional value but also poses a grave threat to the general
public health and well-being. The ‘Red Lentils’ being an item of
edible nature for human consumption is legitimately expected to
meet certain minimum standards of quality level which has to be
fit for the use as well as be merchandisable for further trading and
Ld. Sole Arbitrator has observed that during arbitral proceedings,
the petitioner has failed to produce the ‘Load Port Certificate’
issued by the Inspection Authority at the time of shipment of
ARBTN-3047/2018 Page 27 of 39
Lentil Stock before the Tribunal to establish quality of actual
supplies at the time of shipment and withholding of such critical
document having a direct bearing on the core issue of quality of
supplies, leads to an irresistible conclusion to the Ld. Sole
Arbitrator that if the same was produced, the same would not
have supported the case of the petitioner as to the soundness of
the cargo and an adverse inference was thus, raised by the Ld.
Sole Arbitrator in this regard. Ld. Sole Arbitrator has discussed
the evidence of RW-1 who deposed that the import contract with
their suppliers (in Canada) was signed on 07.05.2009 and the
actual shipment of cargo was effected during period between
May 2009 and September 2009 while the subject tender for sale
of Red Lentils (received under the consignment) in domestic
market was floated on 27.08.2011, the contract for sale with
respondent no.1 was signed on 09.09.2011 and the actual
deliveries continued until 24.03.2012 in different lots after which
respondent no.1 refused to accept further cargo as-offered over a
dispute in quality of supplies. Ld. Sole Arbitrator has concluded
that even if the quality of imported Lentils met its import contract
specifications at the time of shipment, there are strong reasons to
infer of cargo having been damaged/water-damaged/infested, as
it was produced out of year 2008-2009 Crop of Canadian Origin
but sold and delivered in domestic market up to 24.03.2012
(corresponding to year 2011-12) to respondent no.1 and disposed
off even later upto 01.06.2012 (corresponding to year 2012-2013)
to a third party M/s Harika International, considering the
ARBTN-3047/2018 Page 28 of 39
perishable nature of edible items combined with the level of
Storage, Warehousing & Preservation practices followed by
Stockists to combat humid weather of Kolkata.
31.The petitioner has raised the issue before the Ld. Sole Arbitrator
that all domestic sale of Lentils or any other agriculture items is
made through open or limited tenders on ‘as is where is basis’
and the Ld. Sole Arbitrator while examining the tender terms and
conditions, has observed that it is nowhere mentioned that the
stocks under sale through tender were in fact ‘available for pre-
inspection’ by bidders before putting in their price bids and no
such schedule/timelines or arrangements for making stocks
available for pre-inspection is any part of tender terms and
conditions for bidding and even the tender does not indicate that
the condition of cargo or any caution to the prospective bidders
that the cargo is mixed-up of various grades or being unsuitable
for human consumption. There is acceptance letter dated
09.09.2011 address to the petitioner where it has been mentioned
that ‘Only Good Quality (Fresh Stocks) shall be acceptable
however, Ld. Sole Arbitrator has observed that since both the
supplier and the bidder being in same trade and assumed that they
know as to what is Normal or Acceptable quality of Lentils which
is not only fit for human consumption but also merchandisable
for further trade in the market. The Ld. Sole Arbitrator has
observed that the petitioner cannot force respondent no.1 to
accept the ‘damaged’ cargo which makes the petitioner liable to
refund the excess amount lying with them out of the advance
ARBTN-3047/2018 Page 29 of 39
payment made by respondent no.1 for the un-lifted cargo and the
condition of ‘as is where is basis’ stood diluted and would pale
into irrelevance. Ld. Sole Arbitrator has given his reasoned
findings only after correctly interpretating the contract and
considering the pleadings, documents while deciding the issues.
The court also finds that the challenge in the present petition is on
substantive questions of facts which is not permissible under law.
Further, the scope and purview is limited and it does not permit
the court to replace the finding given by the Ld. Sole Arbitrator,
by its own by re-appreciating the evidence produced before the
Ld. Sole Arbitrator. Further the Ld. Arbitrator, while deciding
these issues, has discussed the scope of the contract, terms and
conditions of the agreement and the documents and only
thereafter arrived at the conclusion which in no way, can be said
to be patently illegal, irrational, arbitrary etc. It is also evident in
this case that the Ld. Sole Arbitrator, while passing the impugned
award, in interpreting the contract, had applied his mind,
discussed the issues in details and given a reasonable,
meaningful, appropriate and effective interpretation of the
contract after detailed discussion, which cannot be interfered
with. The court also finds that the Award is not only within the
confines terms of reference but also based on the terms and
conditions of the contract. The Ld. Sole Arbitrator has duly
explained the reasons for arriving at his decisions and the
petitioner herein has failed to brings its case before this court
ARBTN-3047/2018 Page 30 of 39
within the four corners of Section 34 (2) of the Arbitration and
Conciliation Act, 1996.
32. Issues (v) Was the Claimant not under an obligation to lift 960 bags of Red
Lentils on the basis of Surveyor’s Report? and (vi)Did the Respondent fail
in putting-up the Contracted goods in a deliverable state or in delivering
sound quality goods thereby committing breach of terms of contract ?.
33.The impact of Third Party Survey of cargo stocks on the
consequent delay in lifting the cargo by respondent no.1 has been
discussed by the Ld. Sole Arbitrator and observed that the
petitioner mooted the idea of fresh inspection of stocks in
presence of both the parties through a Third Party Surveyor to be
deputed at their own costs in order to salvage the situation for
which both the parties agreed to the proposal of joint inspection
and filed surveyor’s report of different dates but the contents and
figures in both the reports were similar in nature and while going
through the cross examination of witnesses from both sides, it
was observed by the Ld. Sole Arbitrator that it has been
established that actual survey/inspection took place on
13.02.2012 in the presence of representatives of both parties and
the report dated 23.02.2012 of the Third Party Survey revealed
that out of 3178 bags, 960 bags were sound condition and 2218
bags were damaged for the reasons of damaged/water damaged
and as put the mutual agreement by both the parties for
undertaking Joint Inspection under Third party Surveyor implies
(a) that the results of Joint Survey shall be binding without any
further questions on condition of stock on either side and only
ARBTN-3047/2018 Page 31 of 39
cargo found of ‘sound condition’ during said Survey shall be
lifted by respondent no.1, and (b) that the delay in lifting the
goods by respondent no.1 due to above arrangement shall be
condoned by respondent no.1 thus giving go-bye to the terms of
‘delivery within 30 days’ as well as sale condition of ‘as is where
is basis’. Ld. Sole Arbitrator observed that the claim is based
upon the dispute legitimately raised and properly set out to which
there was no reasonable or fair response and the facts on which
the claim is founded pertain to the period anterior to the lodgment
of the claim and while deciding these issues, the Ld. Sole
Arbitrator observed that respondent no.1 cannot go back on their
commitment to lift 382 bags which they refused to lift inspite of
agreement for lifting of 960 bags identified as ‘Sound Condition’
bags during Joint Survey and the petitioner in this case needs to
be compensated for the loss and profit due to unlifted 382 bags of
‘Sound Condition’ and further the time taken for the Joint
Survey and lifting of 578 bags in ‘Sound Condition’ which were
lifted by respondent no.1 beyond 08.10.2011 shall be considered
as part of extended contract originally signed/contracted on
09.09.2011 and no penalty or liquidated damages can be invoked
or claimed by the petitioner in this account. In the present case,
there is nothing on record to show that the impugned award, on
the face of it, is against the public policy or the Ld. Sole
Arbitrator has acted arbitrarily or lacked in judicial approach or
the award is against the fundamental policy of India. All the
relevant provisions of the contract were considered by the Ld.
ARBTN-3047/2018 Page 32 of 39
Sole Arbitrator. The court is of the view that the interpretation of
the contract, as provided by the Ld. Sole Arbitrator, was
reasonable and cannot be said to be perverse that no reasonable
person could have reached the same conclusion. It is well settled
law that the construction of the terms of a contract is primarily lie
with Ld. Arbitrator to decide unless the Ld. Arbitrator construes
the contract in a manner that no fair minded or a reasonable
person would; in short that the Ld. Arbitrator’s view is not even a
possible view to take. Further the petitioner has failed to explain
how the approach adopted by the Ld. Sole Arbitrator falls within
the disqualifications of Section 34 (2) (a) (iv) of the Arbitration
and Conciliation Act, 1996 as there is no averment to substantiate
the same and moreover, the same is no longer survives after the
amendment 2015 and thus, there is no occasion for this court to
interfere with the findings of Ld. Sole Arbitrator on these issues.
34.Issues (vii) Whether the Claimant is entitled to a claim of Rs. 7,58,854/-
along with interest thereof for the sum paid in excess of the value of goods
lifted ?, (viii) Whether the Claimant is entitled to claim of Rs. 18,00,000/-
along with interest thereof for any loss in profit due to non-delivery of
goods? And (ix) Whether the Claimant is entitled to claim interest @ 24%
or any other rate on the aforesaid sums?.
35.In the present case, respondent no.1 has filed the claim before the
Ld. Sole Arbitrator for Rs. 7,58,854/- as Principal sum and excess
amount including EMD lying with the petitioner for the goods
not delivered and while deciding the same, Ld. Sole Arbitrator
has observed that since respondent no.1 could not lift the cargo
due to a major quality issue, the said amount is due to be
ARBTN-3047/2018 Page 33 of 39
refunded by the petitioner but after deducting the loss of profit
suffered by them on account of 382 bags unlifted post acceptance
by respondent no.1 as above and fixed the loss of profit @ Rs.
10,000/- per MT on 19.10 MT (382×50 Kg per bag) totalling a
net loss of Rs. 1,91,000/- and thus, the net amount which
becomes payable by the petitioner under above claim of
respondent no.1 worked out by the Ld. Sole Arbitrator to Rs.
5,67,854/-. Before the Ld. Sole Arbitrator, respondent no.1 has
also filed a claim of Rs.18,00,000/- against the loss of profit due
to non-delivery of goods however, the Ld. Sole Arbitrator has
observed that the contract does not provide for any such
consequential damages and the same was without any base which
cannot be granted and no such relief was granted to respondent
no.1 as in the face of finding the above goods as of un-acceptable
quality within initial four weeks itself, respondent no.1 had all
the opportunity to resort to procurement of commodity from
alternative sources. While deciding the issues, the Ld. Sole
Arbitrator has discussed the issues in details and given a
reasonable, meaningful, appropriate and effective interpretation
of the contract after detailed discussion, which is evident in this
case and thus, the same cannot be interfered with. Ld. Sole
Arbitrator, while deciding the same, has interpreted the contract
and applied his mind and the Award is based on the terms and
conditions of the contract and no interfere is called for.
36.Ld. Sole Arbitrator while granting interest has observed that since
the dispute has arisen out of a commercial transaction, bearing in
ARBTN-3047/2018 Page 34 of 39
mind the RBI rates, the Ld. Sole Arbitrator granted a simple
interest @ 10% per annum to respondent no.1 against the
petitioner for a period from 25.03.2012 to 15.07.2014 on
Principal amount of Rs. 5,67,854/- and also for the future till
realization.
37.As per Section 31 (7) of the Arbitration and Conciliation Act,
1996, the Ld. Sole Arbitrator is competent to award interest and
further in terms of Section 3 of the Interest Act, 1978, the Ld.
Sole Arbitrator is competent to award interest at the rates
prevailing in the banking transaction. In a case titled as MSK
Projects (I) (JV) Ltd. Vs. State of Rajasthan & Anr, 2011 (8) JT
37 (SC), it has been held that the Arbitrator is competent to award
interest for the period commencing with the date of award or the
date of decree or date of realization, whichever is earlier. While
the amount of interest is a matter of substantive law, the grant of
interest for the part award period is a matter of procedure. Further
the Hon’ble High Court of Delhi in a case between the same
parties titled as M/s Wapcos Limited Vs M/s C & C Energy
Private Limited, FAO (COMM) 53/2021 dated 20.10.2022 has
held that “Insofar as the award of interest is concerned, it is now well
settled that the Arbitral Tribunal has wide discretion in awarding interest
(See: Punjab State Civil Supplies Corporation Limited
(PUNSUP) and Anr. Vs. Ganpati Rice Mills, SLP (C) 36655 of
2016, decided on 20.10.2021″. In the said case, the Hon’ble High
Court of Delhi has observed that ” In the present case, Wapcos had also
claimed interest at the rate of 18% per annum and therefore, it is not open
ARBTN-3047/2018 Page 35 of 39
for Wapcos now to contend that the said rate is exorbitant and onerous and
the Hon’ble High Court also finds no fault with the learned Commercial
Court in declining to interfere with the impugned award “. In the present
case, the Ld. Sole Arbitrator has exercised the discretion by
giving reasons that the transaction between the parties being of
commercial nature, the simple interest @ 10% per annum seems
to be reasonable in this case and therefore, the reasoning given by
the Ld. Sole Arbitrator while awarding the interest, cannot be said
to be unreasonable or perverse. In view of the same, the court
does not find any illegality or arbitrariness in the impugned
award with respect to the interest so awarded by the Ld. Sole
Arbitrator.
38.Perusal of the award reflects that Ld. Sole Arbitrator has taken
into consideration the dispute arose between the parties and the
grounds raised by the petitioner to challenge the award, are
factual in nature which have been already considered and
adjudicated in the impugned award. It is outside the scope of
Section 34 of the Act to re-appreciate the entire evidence and
come to conclusion because such an approach would defeat the
purpose of arbitration proceedings. It has been consistently held
that when a court is applying the public policy test to an
arbitration award, it does not act as a court of appeal and
consequently, errors of facts cannot be corrected. A possible view
by the Ld. Sole Arbitrator on facts has necessarily to pass muster
as the arbitrator is the ultimate master of the quality and quantity
of evidence to be relied upon when he/she delivers his/her arbitral
ARBTN-3047/2018 Page 36 of 39
award. Thus, an award based on little evidence or no evidence
which does not measure up in quality to a trained legal mind
would not be held to be invalid on this score. Once, it is found
that the arbitrator’s approach is not arbitrary or capricious, then it
is the last word on facts.
39.A bare perusal of the arbitral award shows that Ld. Sole
Arbitrator has examined all the relevant aspects of the contract,
the correspondences made by the parties, the terms of the
contract and the conduct of the parties. Ld. Sole Arbitrator has
remained inside the parameters of the contract and construed the
provisions of the contract. Ld. Sole Arbitrator while deciding the
issues, has operated within the four corners of the contract and
has not travelled beyond it. Ld. Sole Arbitrator has not decided
the issues contrary to the terms of the contract, so it cannot be
said that Ld. Sole Arbitrator misconducted himself or the
interpretation given by him is not reasonable. The petitioner has
failed to establish that Ld. Sole Arbitrator has travelled beyond
the terms of the contract.
40.Having examined the various contentions of the petitioner on the
touchstone of the parameters of interference as explicitly laid
down by the Hon’ble Supreme Court of India in several
judgments referred to above, I am of the view that the impugned
Award does not call for any interference. This Court cannot re-
appreciate evidence or interpret the Clauses of the Agreement
which the petitioner is calling upon the Court to do. The
contentions of the petitioner are thus, rejected having no merits. I
ARBTN-3047/2018 Page 37 of 39
am of the view that the arbitration award being a reasoned one
and does not suffer from any infirmity or error apparent on the
face of the record. It is not for this Court to sit in appraisal of the
evidence led before the Ld. Sole Arbitrator and this Court will
not open itself to the task of being a judge on the evidence placed
before the Ld. Sole Arbitrator which was subject matter of
dispute. In the present case, the Ld. Sole Arbitrator has
deliberated on the issues under reference which were within his
competency. There are no allegations against the Ld. Sole
Arbitrator of misconduct nor of having misconducted the
proceedings which have either been specifically alleged by the
petitioner or established. The Ld. Sole Arbitrator has duly
explained the reasons for arriving at his decisions. There is
nothing to indicate that the award violates Section 28 (3) of the
Act or that, it is in conflict with the basic notions of justice and
the fair play and fundamental policy of Indian law or in
contravention of the terms of the agreement or that it lacks
reasoning as pleaded in the petition.
41.Taking into consideration the various dates and events on record,
I am of the considered opinion that the conclusion drawn by the
Ld. Sole Arbitrator is based on sound reasons and the Ld. Sole
Arbitrator has passed the award after considering the facts,
evidence and material on record. In the impugned award, the Ld.
Sole Arbitrator has given logical reasoning in reaching the just
conclusion of the case. The award is well reasoned as per the
terms and conditions of the agreement. There is nothing on
ARBTN-3047/2018 Page 38 of 39
record to show that impugned award is against the terms of the
agreement and against the public policy. Also, there is no patent
illegality in the award. The award is a well reasoned award, based
on evidence and mathematical calculations and not only a
possible but a plausible view.
42.In view of the above discussions, the present objections petition
under Section 34 of The Arbitration and Conciliation Act, 1996
is dismissed. No order as to cost.
43.File be consigned to record room.
Digitally signed by ANURAG ANURAG SAIN (Announced in the Open Court SAIN Date: 2025.02.01 today on 01.02.2025) 16:33:23 +0530 (Anurag Sain) District Judge (Commercial Court-01), Patiala House Courts Complex, New Delhi ARBTN-3047/2018 Page 39 of 39 ARBTN 3047/18 PEC LTD Vs. BADRI SINGH VINIMAY PVT LTD 01.02.2025 Present:- None.
Vide separate judgment announced in the open court today,
the present objections petition under Section 34 of The Arbitration and
Conciliation Act, 1996 is dismissed. No order as to cost. File be
consigned to record room. Digitally
signed by
ANURAG
ANURAG SAIN
SAIN Date:
2025.02.01
16:32:58
+0530(Anurag Sain)
District Judge (Commercial Court-01),
Patiala House Courts Complex,
New Delhi/01.02.2025ARBTN-3047/2018 Page 40 of 39