Delhi High Court
Pec Ltd vs M/S Badri Singh Vinimay Pvt. Ltd. And Anr on 4 August, 2025
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 24.07.2025
Judgment pronounced on: 04.08.2025
+ FAO (COMM) 192/2025, CM APPL. 44314/2025 (for stay),
CM APPL. 44315/2025 (for delay) & CM APPL. 44316/2025
(for exemption)
PEC LTD. .....Appellant
Through: Mr. Sumit Jidani, Advocate.
versus
M/S BADRI SINGH VINIMAY PVT. LTD.
AND ANR. .....Respondents
Through: Nemo.
CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
CM APPL. 44315/2025 (for delay)
1. By way of the present application filed under Section 5 of the
Limitation Act, 1963, the Applicant/Appellant seeks condonation of
delay of 81 days in filing the present appeal.
2. For the sufficient reasons stated in the application, the delay is
condoned.
3. Accordingly, the present application stands disposed of.
CM APPL. 44316/2025 (for exemption)
1. Allowed, subject to all just exceptions.
2. The application shall stand disposed of.
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 1 of 29
Signing Date:05.08.2025
19:41:30
FAO (COMM) 192/2025 & CM APPL. 44314/2025 (for stay)
1. The present Appeal under Section 37 of the Arbitration and
Conciliation Act, 19961and Section 13 of the Commercial Courts
Act, 2015 raises a challenge to the impugned Judgment dated
01.02.2025 passed by learned District Judge (Commercial Court-01),
Patiala House Courts, New Delhi in ARBTN 3047/2018 titled as PEC
Limited v. M/s Badri Singh Vinimay Pvt. Ltd. & Anr, wherein the
Arbitral Award dated 02.04.20182 has been upheld by the learned
District Judge.
PLEADINGS
2. Shorn of unnecessary details, the crux of the present Appeal
relates to Tender bearing No.PEC/PUL/DOM/TDR/XCVII/113,
which was floated by the Appellant on 27.08.2011 herein for the
purpose of lifting of various kinds of crops and lentils, including 100
Metric Tons4 of Canadian-origin Red Lentils, on the specific terms of
“as is where is basis”. It is the stated case of the Appellant that the
said tender provided for lifting of the lentils on “as is where is basis”
for the original quantity of 100 M.T., which was subsequently raised
to 300 M.T. vide Approval Letter dated 09.09.2011.
3. Respondent No. 1 emerged as the highest bidder at a rate of
Rs.25,500/- per M.T. As per the Tender terms, the material was to be
lifted from the Appellant’s godown at Kolkata on an “as is where is
basis” within a stipulated period of 30 days. However, in their
acceptance letter dated 09.08.2011, Respondent No. 1 clarified that
1
A&C Act
2
The Award
3
The tender
4
M.T.
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By:HARVINDER KAUR
BHATIA
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only “sound and good condition” cargo would be accepted.
4. Pursuant thereto, Respondent No. 1 deposited a sum of
Rs.36,45,844/- with the Appellant, inclusive of Rs.2,50,000/- as
Earnest Money Deposit5, sufficient for purchasing 110 M.T. of
cargo.
5. Disputes arose after Respondent No. 1 lifted approximately
83.94 M.T. of the lentils and alleged that the consignment was mixed
and partially damaged. A formal complaint with respect to the quality
was lodged on 02.12.2011 by the Respondent No. 1, notifying the
Appellant of their inability to take delivery of the damaged cargo and
seeking a refund of the excess amount paid. The Appellant rejected
the request, citing the “as is where is” clause in the Tender.
6. Following failed negotiations, a joint Third-Party Survey for
the inspection of the cargo, in the presence of both parties, was
conducted on 13.02.2012. As per the survey report dated 23.03.2012,
approximately 70% of the total stock was found to be in “damaged
condition”. Thereafter, Respondent No. 1 proceeded to lift only that
portion of the cargo which was found to be in “sound condition” and
eventually took delivery of 111.28 M.T., which is not disputed by
either party.
7. Respondent No. 1 thereafter raised a claim of Rs. 7,58,854/-,
which was rejected by the Appellant, who forfeited the EMD and
withheld the excess amount.
8. The matter was referred to arbitration under the terms of the
Contract. Vide Arbitral Award dated 02.04.2018, the learned Sole
Arbitrator allowed the claim of the Respondent in part, directing the
Appellant to refund Rs. 5,67,864/- along with 10% interest per annum
5
EMD
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 3 of 29
Signing Date:05.08.2025
19:41:30
from 25.03.2012 till 15.07.2014.
9. Being aggrieved with the Arbitral Award, the Appellant filed an
application under Section 34 of the A&C Act before the learned
District Judge. Vide the Impugned Judgement, the learned District
Judge upheld the Arbitral Award, stating that the conclusion drawn by
the learned Sole Arbitrator is well-reasoned as per the terms and
conditions of the agreement after taking due consideration of the facts,
evidence and material on record.
10. At the outset, it needs to be noted that the learned counsel for
the Appellant has restricted his arguments only to the question as to
whether the lentils were to be accepted by the Respondents on “as is
where is basis” or not, and the other grounds which have been raised
in the Appeal, namely, that of limitation as well as that of there being
no proper authorisation for the purpose of filing of the Plaint, were
neither argued nor pressed.
11. We also consider it appropriate to record that there was no
denial of the aspect of the fact of the parties having substantially
agreed to limit the liability to only those of the goods that were of
“sound condition”.
12. The discussion in the Judgment, therefore, is restricted only to
the question of as to whether the goods were to be accepted by the
Respondents on “as is where is basis” or not. A corollary to the said
aspect would also be as to whether the Appeal as filed insisting on the
imposition of the “as is where is basis” clause, would at all be
sustainable, in view of the fact that it was subsequently agreed as
between the parties, based on a joint inspection carried out, that the
Respondents herein would only be liable to lift the Red Lentils that
were of “sound condition”.
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 4 of 29
Signing Date:05.08.2025
19:41:30
13. It is in this view of the matter that we would have to consider
the entire issue raised herein. The learned Sole Arbitrator has also
considered the entire issue from this perspective and held as follows:
” C. Contractual terms of sale of Cargo on “as is where is”
basis vis-à-vis actual Quality Standard of materials in the
cargo (ISSUE No. iii & iv)
It is the case of Respondent that the cargo was sold thru‟ an
open tender with contractual terms of delivery on “as is where
is” basis. Hence the actual quality of material in cargo is out
of question and beyond the scope of Arbitration. However the
Claimant argued that 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 be fit
for use as well as be merchandisable for further trading.
The moot question arising in this case is whether any
responsible PSU Company operating under Govt. of India can
put out for sale thru‟ 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?
It is well established and certified thru‟ a Third Party Survey
Report issued by the Surveyor nominated by the Seller himself,
that over 70% of the Red Lentil stock at the point of sale was
found to be damaged / water-damaged, thus making it unfit for
human consumption. The consumption of such poor quality of
Lentils reaching people‟s kitchen either thru‟ PDS channels or
thru‟ 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.
It is argued by the Respondent party that full care is duly taken
by them on procuring only Quality Items sourced from well
known international suppliers and thru‟ a well established
procurement system in place, in line with global norms of
Quality Checks at Source ports before Shipment followed by
monitoring of quality by checks and balances at each stage
along their Domestic Supply Chain, as per internal certified
Company Procedures. A review of the Contract Specification
agreed between Respondent (Buyer) and the overseas Supplier
(AUST GRAIN EXPORTS PTY LTD) of Import Contract
Reference PEC /PUL /2009 /LXXIII / AUSTGRAIN entered on
13.05.2009), copy filed by Respondent on 13.02.2017, reveals
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 5 of 29
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following product procurement spec.
QUOTE
ITEM: Fit for Human Consumption of New Crop (2008-09)
Red Lentils no.2
Specifications as per Annexure I (GENERAL)
RED LENTILS SHALL BE FROM NEW CROP (2008-09)
AND SHALL BE SOUND, SWEET, CLEAN, WHOLESOME,
FREE FROM MOULDS / FUNGUS, LIVE INSECTS
OBNOXIOUS SMELL, ARTIFICIAL COLOR, ADMIXTURE
OF UNWHOLESOME SUBSTANCE AND SHOULD BE OF
REASONABLE SIZE, SHAPE AND COLOUR
CHARACTERISTICS.
MYCOTOXIN INCLUDING AFLATOXIN NOT TO EXCEED
0.03 MILLIGRAMS PER KILOGRAM. RADIOACTIVE
CONTAMINATION, IF ANY, WITHIN PERMISSIBLE
LIMITS.
UNQOUTE
However to support their argument that quality of product lot
received under above shipment actually met the Contract
Specifications, the Respondent in-spite of repeated pleas by
Claimant‟s side, failed to produce any copy of “Load Port
Certificate” issued by the Inspection Authority at the time of
shipment of Lentil Stocks. It is sought to be explained by the
Respondent that all original shipping documents including
Invoices, Inspection certificates, copies of contract etc are
submitted to the Bankers for retiring of documents but it is
unbelievable or inconceivable for a PSU Company not to
retain any photocopy of Inspection / Quality Certifications of
their imports for future reference during domestic sales of
imported cargos / consignments particularly against the
backdrop of scenario where dispute was brewing over the
quality of supplies around same period. It is not clear as to
why did they chose not to produce the Load Port Certificate of
import consignment before this Tribunal to establish Quality
of actual supplies at the time of shipment. The withholding of
such crucial document having a direct bearing on the core
issue of Quality of Supplies leads to an irresistible conclusion
that the same, if produced, wouldn‟t have supported the case
of Respondent as to the soundness of the Cargo. An adverse
inference thus is raised.
As deposed by the Witnesses produced by Respondent (RW-1)
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
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 6 of 29
Signing Date:05.08.2025
19:41:30
2009. While the subject tender for Sale of Red Lentils
(received under above consignment) in Domestic market was
floated on 27.08.2011, the contract for sale (with the
Complainant party) was signed on 09.09.2011. the actual
deliveries continued until 24.03.2012 in different lots after
which the Complainant refused to accept further cargo as-
offered over a dispute in quality of supplies. It was also
deposed by the same (RW-1) witness that the left- over cargo
(after refusal by Claimants) was disposed- off to a third party
M / s Harika international thru‟ a limited tender sale at a
discounted price @ Rs. 3501/- per MT as against contracted
price @ Rs. 25500/- per MT between parties under dispute.
The fact that the left-over stocks were forced to be disposed-
off at 14% of Contract price i.e. at a discount of 86%, goes on
to prove beyond doubt that the quality of cargo was certainly
suspect and deficient to the extent of being unfit for human
consumption, otherwise there seems to be no reason as to why
the Claimant even after making an advance payment for 110
MT of cargo shall lift only 83.94 MT which they found as
acceptable and fit for further trade in the market.
The Tribunal concludes 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 procured
out of Year 2008-09 Crop of Canadian Origin but sold and
delivered in domestic market up to 24.03.2012 (corresponding
to year 2011-12) to the Claimant party and disposed-off even
later up to 01.06.2012 (corresponding to Year 2012-13) to a
third party M / s Harika International, considering the
perishable nature of edible items combined with the level of
Storage, Warehousing & Preservation practices followed by
Stockists to combat humid weather of Kolkata.
The Respondent argued that in this particular case the sale
was made thru‟ an open tender on „as- is -where is‟ basis and
they were neither concerned with the end use of the articles
nor were aware of any subsequent supply chain arrangement
or Contract of Claimant with their sub-contractors for supply
as per any grade or specification. In fact as informed by
Respondent all domestic sale of Lentils or any other
agriculture items is made thru‟ open or limited tenders on „as-
is-where is‟ basis.
On examining the tender terms & conditions it is nowhere
mentioned that the stocks under sale thru‟ tender were in fact
„available for pre-inspection‟ by bidders before putting in
their price bids. No such schedule / timeline or arrangements
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 7 of 29
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19:41:30
for making stocks available for pre-inspection is any part of
tender terms & conditions for bidding. Even the tender does
not indicate 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.
It is argued by the Claimant that since the different lots of
bags of Lentils were stocked in such a manner that it was
virtually impossible to assess the exact quality or grade of it
was virtually impossible to assess the exact quality or grade of
item on each side therefore in their Acceptance Letter dated
09.09.2011 addressed to Respondent they mentioned that
„Only Good Quality (Fresh stocks) shall be acceptable‟. While
it is anybody‟s guess as to what is the „Good‟ quality of Lentils
but it is assumed that both Supplier and Bidder being in same
trade 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. In view of
above the Claimant after lifting of 83.95 MT of Lentils (out of
110MT already paid for) refused to accept further supplies
which were deficient in quality, making it unfit for human
consumption and which they could not trade further in the
market. Initially the Claimant flagged the problem of
unacceptable quality of stock by on 08.10.2011 through
informal discussions and interactions with Respondent at
various levels and later he formalized his complaint by issuing
a letter dated 02.12.2011 communicating their concern on
quality of Cargo as-offered and non-acceptance of available
stocks. Therefore it is established that the Complaint was
made within 4 weeks of Contractual period ending 08.10.2011
as also agreed by the Respondent. Even if the formal written
complaint is delayed in a bid to resolve the issue thru‟ mutual
negotiations, it does not render their issue of deficient quality
of stocks as frivolous or non maintainable or beyond the
contractual terms.
In the factual matrix of Case at hand, the decisions in Case
No. 1, 2, 3, 4, 5 of Delhi High Court (as per list filed by
Respondent) viz (S.No.1)1999 (49) DRJ, CA No. 446/97 in CP
50/84 of Karamchand Appliances Pvt ltd v/s Bharat Carpets &
Others decided on 06.05.1999, (S.No. 2) 2014 Law Suit (Del)
3751 of Manpreet Singh & Co. v /s North Delhi Municipal
Corporation decided on 12.09.2014 (S.No. 3) 165 (2009) DLT
76 of NDMC v / s Manju Maini OMP No. 631 of 2007 decided
on 06.10.2009 (S.No. 4) 189 (2012) DLT 476 of S.K. Pandey v
/ s MCD & Others OMP 310 of 2010 decided on 13.01.2012
(S.No. 5) 109 (2004) DLT 97 of Toyo Engineering Corpn v/s
CIMMCO Birla Ltd OMP 392/2002 dated 11.12.2003, have no
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Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 8 of 29
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relevance in as much as the facts are distinguishable. Unlike
the present case involving perishable commodity admittedly
meant for human consumption, the above cases wherein the
contractual terms spoke of “as is where is basis” related to
immovable properties and assets which were open for pre-
inspection.
In view of the foregoing, this Tribunal rules that Respondent
cannot force the Complainant to accept the „damaged‟ Cargo
which makes Respondent liable to refund to excess amount
lying with them out of the advance payment made by claimant
for the un-lifted Cargo. As would be seen from the discussions
in context of ISSUE No. v & vi which follow under next para,
the condition of “As is Where is” stood diluted, and would
pale in to irrelevance, by subsequent conduct of both parties
agreeing to resolve the disputes on the basis of Third Party
Survey.
D. Third Party Survey of stocks and its impact on the
consequent delay in lifting of cargo by the Complainant:
(ISSUE No. v & vi)
The Respondent having been faced with the prospect of pile of
unsold stocks tried to persuade the Complainant by offering
the acceptable quality by sorting out good lots out of available
stock. In this connection the Respondent mooted the idea of
fresh Inspection of stocks in presence of both parties thru‟ a
Third Party Surveyor to be deputed at their own cost in order
to salvage the situation. Both parties have agreed to the
proposal of joint inspection. Although the actual date of
inspection of stocks by Third Party Surveyor remained a
matter of debate as both parties have filed Surveyor‟s report
on different dates in their respective pleadings, but
interestingly the contents and figures in both the reports are
similar in nature and content. During cross- examination of
witnesses on both sides it was not established and agreed by
both parties that the actual Survey / Inspection took place on
13.02.2012 in presence of representatives of both parties and
the report dated 23.02.2012 issued by the Third Party Survey
revealed following results:
STOCK SOUND DAMAGED REASONS
AVAILABL CONDITION
E
3178 Bags 960 Bags 2218 Bags Damaged /
Water
Damaged
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 9 of 29
Signing Date:05.08.2025
19:41:30
The mutual agreement by both parties for undertaking Joint
Inspection under Third Party Surveyor implies (a) that the
results of Joint Survey shall be binding w/o any further
questions on Condition of stock on either side and Only Cargo
found of „Sound Condition‟ during said Survey shall be lifted
by the Claimant, and (b) that the delay in lifting of goods by
claimant due to above arrangement shall be condoned by the
Respondent thus giving go-bye to the terms of „delivery within
30 days” as well as the sale condition of “as-is-where is
basis‟.
The decisions of Supreme Court reported in Case No. 6, 7, 8
(as per list filed by Respondent) (S.no:6) 2010 / 10 SCC /677
of Ritesh Tewari &Anr v / s State of U.P & others (S.No.7) AIR
1987/SC 2179 of Vinod Kumar Arora v / s Smt. Surjit Kaur
C.A No. 1635 of 1985, decided on 17.07.1987, (S.No.8) AIR
2001/ SC / 1684 of Atul Castings Ltd. v/s Bawa Gurvachan
Singh C.A No. 2900 of 2001 decided on 20.04.2001, as relied
upon by the Respondent are in-applicable here. The Claim is
based upon the dispute legitimately raised and properly set-
out to which there was no reasonable or fair response. The
facts on which the Claim is founded pertain to the period
anterior to the lodgment of the Claim.
In view of above, this Tribunal rules that
I. The Claimant cannot go back on their commitment
to lift 382 bags which they refused to lift in-spite of
agreement for lifting of 960 bags identified as „Sound
Condition‟ Bags during Joint Survey. The Respondent in
this case needs to be compensated for the loss of profit due
to un-lifted 382 bags of „Sound Condition‟.
II. The time taken for the Joint Survey and lifting of
578 Bags in „Sound Condition‟ which were lifted by
Claimant 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 Respondent on this account.
E. Claims: (ISSUE No. vii, viii, ix)
III. The Claimant has filed a claim of Rs. 7,58,854/- as
principal sum and excess amount including EMD lying
with the Respondent for the goods not delivered. Since the
Claimant couldn‟t lift the cargo due to a major quality
issue the said amount is due to be refunded by Respondent
but after deducting the loss of profit suffered by them on
account of 382 Bags un-lifted post acceptance by
Claimant as above. The loss of profit may be fixed @Rs.
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
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19:41:30
10,000/- per MT on 19.10 MT (382×50 Kg per bag)
totaling a net loss of Rs.1,91,000/-. Thus the net amount
which becomes payable by Respondent under above claim
of the Claimant works out to Rs. 5,67,854/-.
IV. The Claimant has also filed a claim of Rs.
18,00,000/ – against Loss of profit due to non-delivery of
goods. The Contract does not provide for any such
Consequential damages claim. This is only an assumed
loss without any basis and is of the nature of
Consequential damages, it cannot be granted. Moreover
in the face of finding above goods as of un -acceptable
quality within initial 4 weeks itself, the Claimant had all
the opportunity to resort to procurement of commodity
from alternative sources. Therefore no such relief is
granted to the Claimant.
V. The Claimant has further claimed Rs. 12,16,749/- as
interest charges @ 24% per annum on the Principal
Amount as above till the date of 15.07.2014 on which they
lodged their Claim to ICA for arbitration. Though the
Claimant needs to be given some relief due to above
Principal Amount lying with Respondent since 24.03.2012
when the last consignment was delivered / lifted by them,
but the rate of interest claimed by them is not founded on
any contractual terms, it is very high and unreasonable.
VI. Since the dispute has arisen out of a commercial
transaction, bearing in mind the RBI rates, this Tribunal is
inclined to grant a simple interest @ 10% per annum to
the Claimant against Respondent for the period
25.03.2012 to 15.07.2014 on aforesaid Principal Amount
of Rs. 5,67,854/- and also for the future till realization.
F. The Award: (ISSUE No. x)
In the light of above Tribunal Awards the Claim as under to
the Claimant against the Respondent:
VII. Refund by the Respondent to the Claimant, of net
amount of Rs.5,67,864/- towards the excess amount
lying with Respondent after deducting Rs. 1,91,000/-
towards the loss of profit suffered by them out of
Claimant‟s claim of Rs.7,58,854/ – as above.
VIII. An interest amount of Rs. 1,30,995/- on above
Refund amount of Rs. 5.67.864/- @ 10% simple interest
per annum for the period from 25.03.2012 up to
15.07.2014 i.e. the date of lodging Claim with ICA (total 2
years 112 days).
IX. The Claimant shall be paid the Refund amount plus
Interest charges as above within 90 days of date of Award.
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 11 of 29
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19:41:30
X. The Respondent is also held liable to pay to the
Claimant pendente lite Simple Interest @ 10% per annum
on the above Principal Amount of Rs. 5,67,864/- (apart
from Interest Charges of Rs. 1,30,995/- as above)
computed up to the date of Award and of the future till
realization.
XI. Both parties are liable to bear their respective
share of Arbitration cost and expenses, including
additional charges, if any, to be recovered by ICA on
account of prolonged proceedings in the Case, in
accordance with ICA Rules of Arbitration and
Conciliation, amended from time to time.
XII. The claimant will be entitled to enforce the Award
only after satisfying the claim of ICA towards its dues.
After issuing several reminders during proceedings, the
Respondent was directed vide Order Sheet dated 09. 01.
2018 to clear their dues towards ICA on or before
16.01.2018. Since the Respondent has failed to abide by
the set direction, the Claimant is hereby called upon to
pay the same for and on behalf of the Respondent, as a
precondition to its right to enforce the Award, with liberty
to recover the said amount along with the Amount payable
under the Award from the Respondent in execution
proceedings in accordance with Law.”
(Emphasis supplied)
14. The said Award came to be challenged by the Appellant herein
by way of an application dated 09.07.2018 under Section 34 of the
A&C Act, seeking to set aside the Award dated 02.04.2018 passed by
the learned Sole Arbitrator. The learned District Judge, after having
heard the parties and considering the Award as well as the pleadings
and the documents, held as follows:
“18. I have examined the Award dated 02.04.2018 in question,
arbitration proceedings and also given due consideration to
the facts and pleadings ofthe case, written submissions along
with citations filed by the parties as well submissions put forth
by the respective Ld. Counsels for the partiesand 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, respondent no. l had tolift certain cargo material
consisting of Red Lentils of Canadian origin from the godown
of the petitioner located at 3, Hyde Road, Kolkata however, as
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
FAO (COMM) 192/2025 Page 12 of 29
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19:41:30
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 tobe lifted on „As is
where is basis‟ and forfeited the earnest money deposit(EMD)
deposited byrespondent 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 the 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 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: –
“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 risk 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 Claims were preferred within the
limitation period?
(ii) Whether the claim was preferred on behalf of the
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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 terms of „as is where is‟ basis?
(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 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 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.
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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, 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,
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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
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. l and
the Ld. Sole Arbitrator has observed that Sh. Sunil Kumar
Singh, being one of the Directors of respondent no. l 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 in fact enjoy the confidence of his
management and was duly authorized to deal with the subject
arbitration case and during pendency of 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
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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 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 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 terms 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 search 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 Lentil Stock
before the Tribunal to establish quality of actual supplies at
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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
0.09.2011 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 up to 01.06.2012 (corresponding to
year 2012-13) to a third party M/s Harika International,
considering the 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
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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 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 within the four corners of Section 34 (2) of
the Arbitration and Conciliation Act, 1996.
32. 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 contractual 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
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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 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 in spite
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. 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
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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 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 no1 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
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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 sincethe dispute has arisen out of a commercial
transaction, bearing in 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 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
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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 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 am of the view that the arbitration award being a
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reasonedone 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 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
petitionunder Section 34 of the Arbitration and Conciliation
Act, 1996is dismissed. No order as to cost.”
(Emphasis supplied)
ANALYSIS
15. It would be apposite to set out herein the scrutiny permissible
by this Court in exercise of its powers under Section 37 of the A&C
Act. It is no more res integra that the appellate power of the Court
under Section 37 of the A&C Act is limited and must be cautiously
exercised so as to not transcend beyond the limitations prescribed
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under Section 34 of the A&C Act. The Apex Court in the judgement
of MMTC Ltd. vs Vedanta Ltd.6, while dealing with the scope of an
appeal under Section 37 of the Act, observed as follows:
“14. As far as interference with an order made Under Section
34, as per Section 37, is concerned, it cannot be disputed that
such interference Under Section 37 cannot travel beyond the
restrictions laid down Under Section 34. In other words, the
court cannot undertake an independent assessment of the
merits of the award, and must only ascertain that the exercise
of power by the court Under Section 34 has not exceeded the
scope of the provision. Thus, it is evident that in case an
arbitral award has been confirmed by the court Under Section
34 and by the court in an appeal Under Section 37, this Court
must be extremely cautious and slow to disturb such
concurrent findings.”
(Emphasis supplied)
16. A three-judge Bench of the Hon’ble Supreme Court in UHL
Power Co. Limited v. State of Himachal Pradesh7 held the following:
“15. This Court also accepts as correct, the view expressed by
the appellate court that the learned Single Judge committed a
gross error in reappreciating the findings returned by the
Arbitral Tribunal and taking an entirely different view in
respect of the interpretation of the relevant clauses of the
implementation agreement governing the parties inasmuch as
it was not open to the said court to do so in proceedings Under
Section 34 of the Arbitration Act, by virtually acting as a court
of appeal.
16. As it is, the jurisdiction conferred on courts Under Section
34 of the Arbitration Act is fairly narrow, when it comes to the
scope of an appeal Under Section 37 of the Arbitration Act,
the jurisdiction of an appellate court in examining an order,
setting aside or refusing to set aside an award, is all the more
circumscribed.”
(Emphasis supplied)
17. Similar observations have been made by the Hon’ble Supreme
Court in Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice
Mills8, which reads as follows:
6
(2019) 4 SCC 163
7
(2022) 4 SCC 116
8
2024 SCC OnLine SC 2632
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“20. In view of the above position in law on the subject, the
scope of the intervention of the court in arbitral matters is
virtually prohibited, if not absolutely barred and that the
interference is confined only to the extent envisaged under
Section 34 of the Act. The appellate power of Section 37 of
the Act is limited within the domain of Section 34 of the Act.
It is exercisable only to find out if the court, exercising power
under Section 34 of the Act, has acted within its limits as
prescribed thereunder or has exceeded or failed to exercise
the power so conferred. The Appellate Court has no
authority of law to consider the matter in dispute before the
arbitral tribunal on merits so as to find out as to whether the
decision of the arbitral tribunal is right or wrong upon
reappraisal of evidence as if it is sitting in an ordinary court
of appeal. It is only where the court exercising power under
Section 34 has failed to exercise its jurisdiction vested in it by
Section 34 or has travelled beyond its jurisdiction that the
appellate court can step in and set aside the order passed
under Section 34 of the Act. Its power is more akin to that
superintendence as is vested in civil courts while exercising
revisionary powers. The arbitral award is not liable to be
interfered unless a case for interference as set out in the
earlier part of the decision, is made out. It cannot be disturbed
only for the reason that instead of the view taken by the
arbitral tribunal, the other view which is also a possible view
is a better view according to the appellate court.”
(Emphasis supplied)
18. It is with the above caveat that we would need to examine the
judgment impugned herein.
19. At the very outset, it would be necessary to set out certain parts
of the pleadings. The Appellant herein in ground F states as follows:
“F. Because the both impugned order passed by Ld. District
Judge and Award passed by the learned Arbitrator are
contrary to law and facts and more importantly are contrary
to each other. It is most humbly submitted that. Appellant PEC
Ltd. considering the perishable nature of cargo/lentil bags and
as per subsequent understanding, had given a concession to
the Respondent and agreed for a joint survey to permanently
settle the dispute of quality, despite of delay of five months in
lifting of the said cargo and original terms and conditions of
‘As is where is basis’. Respondent bothered to lift only 578
bags of red lentils out of 960 bags which were found to be in
sound condition in joint inspection and had left the balance
382 bags which were also admittedly in sound condition.”
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(Emphasis supplied)
20. The relevant portion of the Reply to the Plaint as filed by the
Appellant is also extracted as follows:
” Hence, the Claimant was to lift only the sound cargo i.e. 960
bags. As mentioned earlier, claimant was completely silent
about the joint survey to be carried out in the presence of the
claimant. Later on, the surveyors had presented its Report on
23/02/2012 which clearly shows that 960 Bags of cargo were
found to be sound and the remaining 2218 Bags were found to
be in damaged condition. It is to be noted here that there is big
difference between damaged cargo, and water damaged
cargo; As per the Respondent‟s letter dated 10/02/2012, the
Claimant was required to lift the entire cargo other than water
damaged cargo, however, the Respondent asked to lift only
those 960 bags of sound cargo leaving the entire damaged
cargo. It is once again pertinent to mention that the claimant
was supposed to leave only the water damage cargo and not
„simply‟ damaged cargo. Even then the respondent allowed
them to leave all the damaged cargo in spite of checking the
nature and level of damage.
True, Copy of Letter dated 10/02/2012 issued by PEC Ltd. to
the Claimant and the Surveyor Report dated 23/02/2012 are
annexed herewith Vide Annexure R1 and Annexure A2.
14. That the contents of Para 14 of the Claim Petition are false
and incorrect, hence denied. The Respondent denies and
disputes each and every averment except which are matters of
record. The Claimant has suppressed the material facts with
regard to the condition and the quantity of lentils bags. The
claimant has used the word, “relying on the said survey
report” which is factually wrong as the survey was conducted
in the presence of the claimant which was never disputed by
them. The Respondent, considering the perishable nature of
cargo / lentil bags, had again given a concession to the
Claimant and agreed for joint survey to permanently settle the
dispute of quality in spite of delay of five months in lifting of
the said cargo and original terms and condition of „As is
where is basis‟. Claimant bothered to lift only 578 bags of red
lentils out of 960 bags which were found to be sound in joint
inspection and had left the balance 382 bags which were also
admittedly in sound condition.”
(Emphasis supplied)
21. A reading of the afore-extracted portions would clearly indicate
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that the Appellant herein, in fact, had given up its claim of the
Respondents having to conform to the “as is where is basis” in
respect of the subject goods. The insistence of the learned counsel for
the Appellant, in this regard, seems to be completely at odds with the
express contention taken in the reply as filed before the learned
Arbitrator, as well as the Appeal filed.
22. Given the fact that it is the stated and admitted position by the
Appellant that the earlier “as is where is basis” clause now stands
substituted and is only limited to as to whether the Respondents
carried out their obligation of lifting that conformed to the stipulation
of “sound condition”, this Court is of the opinion that there is really
no requirement to get into any other aspects as raised or dealt with by
either the learned Sole Arbitrator or by the learned District Judge.
23. It is, therefore, apparent that this Court only needs to look at the
entire dispute from the narrow conspectus of as to whether the
Respondents herein have adhered to the Agreement, as now agreed
upon between the parties, which is for the supply of cargo in “sound
condition”, i.e., 960 bags.
24. The learned Sole Arbitrator examined that the delay in lifting
the cargo by the Respondent No. 1 was due to the mutual agreement
for a Third Party Joint Survey, which was proposed by the Appellant,
wherein the Parties agreed that only “sound condition cargo” would be
lifted by the Respondent No.1 and delay would be condoned, over-
riding the original delivery clause of 30 days on an “as is where is
basis”.
25. Despite the Agreement, the Respondent No. 1 failed to lift 382
bags of sound cargo, for which the Appellant suffered loss. The
learned Sole Arbitrator therefore re-calculated the profit and loss as
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accrued by the parties and directed the Appellant to re-fund
Rs.5,67,864/- along with 10% interest per annum from 25.03.2012 till
15.07.2014 as opposed to the initial claim of the Respondent No. 1.
The reasoning of learned Sole Arbitrator does not contain any
perversity, or patent illegality, nor is it against the terms of the
Contract. The learned District Judge has rightly upheld the Arbitral
Award dated 02.04.2018.
26. This Court is of the opinion that there is no requirement for any
interference with the findings of either the learned Sole Arbitrator or
that of the learned District Judge.
27. The present Appeal, along with pending application(s), if any,
stands rejected.
ANIL KSHETARPAL
(JUDGE)
HARISHVAIDYANATHANSHANKAR
(JUDGE)
AUGUST 04, 2025/rk/er/kr
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