Delhi District Court
Through : Sh. Yashvardhan Adv vs M/S Orient Polyfilms Pvt. Ltd on 6 November, 2019
IN THE COURT OF MS. RAVINDER BEDI:
ADDITIONAL DISTRICT JUDGE4, PATIALA HOUSE
COURTS, NEW DELHI
In the matter of :
Arbi No: 11968 of 2016
National Seeds Corporation Ltd.
Beej Bhawan, Pusa Road, New Delhi
Through : Sh. Yashvardhan Adv.
.........Petitioner
Versus
M/s Orient Polyfilms Pvt. Ltd.
A6, Sector5, Noida.
Through :Sh.Satya Prakash Gupta, Adv.
........Respondent
Date Of Filing Of Petition : 16.10.2014
Date Of Arguments : 16.10.2019
Date Of Order : 06.11.2019
Arbi No: 11968 of 2016
National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 1 of 15
ORDER
1. Present petition under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") has been filed by the Petitioner challenging the Award dated 23.06.2014 passed by Sole Arbitrator.
2. The main plea of challenge to the petition is that the impugned Award is passed after an extraordinary delay of more than 7 years of last effective hearing before arbitrator, which has rendered the Award contrary to the public policy of India as envisaged under Section 34 of the Act.
3. As per the case of the Petitioner, three Purchase Orders I.e. dated 26.11.1998, 16.12.1998 and 11.02.1999 were placed with Respondent for supply of HDPE woven bags of varying sizes valuing Rs. 15,05,062.25. Bank guarantees of Rs.1,77,650/ being 10 % of the contract value were furnished and as per terms and conditions of Tender, 90 % of the payment was to be released to party on receipt of GR notes from respective destinations of supply. Balance of 10 % was to be paid on completion of contract. The quality of bags were found to be inferior as per Sample Reports and deduction were made. Later, a penalty for late delivery was imposed as per clause 13 Section II of the Tender. As such, an amount of Rs.2,13,751.48 was deducted with further imposition of penalty of Rs. 53,837.81 and Rs. 2,801/. Due to disputes having arisen between parties, arbitral proceedings were invoked. The arbitrator after hearing the parties Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 2 of 15 passed an Award on 23.06.14 i.e. after a lapse of almost seven years from the conclusion of arbitral proceedings and erroneously allowed claims of the Respondent.
Grounds of challenge in Petition.
4. Ld. Counsel for Petitioner has challenged the Award on following grounds:
• The Award is passed after an extraordinary delay of more than 7 years of last effective hearing in arbitration. That sole Arbitrator was appointed by order dated 11.12.2002 to adjudicate upon the disputes whereas the final Award was passed after 7 years from the last arbitration proceedings and thus the same is against the public policy, principles of justice and canons of law. • The delay in passing the Award has not been satisfactorily explained by the Arbitrator, which has caused serious prejudice to the Petitioner.
• Deductions made by the Petitioner were valid and as per terms and conditions of Tender. The entire dispute revolved around execution of number of purchase orders placed by the Petitioner for supply of jute bags with the Respondent. The Award no where mentions about any details of specific date of delivery, date of inspection, schedule of delivery, test reports etc and Ld. Arbitrator did not apply his mind while passing the Award.Arbi No: 11968 of 2016
National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 3 of 15
5. Ld. Counsel for the Petitioner argues that Arbitrator failed to record submissions or provide reasons for passing the Award much less any reason for extraordinary delay in pronouncing Award. He further argues that the claims allowed by the Arbitrator are erroneous and against the Public Policy. He argues that the Arbitrator failed to appreciate test report dated 29.09.1999 adduced in evidence. The main plank of submission of Ld. Counsel is of Award being passed after a huge gap of 7 years and thus the same being against public policy and patently illegal. Reliance is placed on the following judgments :
◦ Anil Rai vs. State of Bihar (2001) 7 SCC 318 ◦ Harji Engineering Works Pvt.Ltd. vs. BHEL 2008(4) Arbi. LR 199 (Delhi) Delhi High Court.
◦ Bhogi Lal Purshotam vs. Chimanlal Amritlal AIR 1928 Bom 49 ◦ Kunwar Singh and ors vs. Sri Thakurji Maharaj 1995 Supp (4) SCC 125 ◦ BWL Ltd. vs. UOI and anr. FAO (OS) 398/2012 ◦ Kanhaiyalal and ors vs. Anupkumar and ors (2003) 1 SCC 430
6. Per contra, Ld. Counsel for the Respondent submits that the Award is a well reasoned Award and it is not open for the court to sit as a court of appeal over the decision of Arbitrator. Ld. Counsel submits that Petitioner failed to submit any documentary proof of the actual losses suffered by it due to quality deviations and deductions made by petitioner therefore were illegal. Ld. Counsel has placed reliance upon following Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 4 of 15 judgments to buttress his submissions :
• Maula Bux vs. Union of India ARI 1970 page 1955 • Rampur Distillery and Chemical Company AIR 1973 page 1908 • Surender Kumar Sole Prop. Vs. UOI and anr. Decided on 01.10.1993 by Delhi High Court.
• NHAI Vs. Progressive Constructions ltd. decided on 03.04.2017 by Delhi High Court • State of Kerela Vs. M/s United Shippers AIR 1982 Kerela 281
7. Ld. Counsel for respondent submits that Arbitrator rightly awarded an amount which was deducted by the Petitioner due to late delivery of bags. Ld. Counsel argues that the facts of Harji Engineering Works Pvt. Ltd. vs. BHEL (supra) relied by the Petitioner are not applicable to the present set of facts. Similar is with respect to the Judgment in BWL Ltd. (supra) wherein no written arguments were filed. In present case, both parties had filed their written submissions and the Award was passed by Arbitrator only after appreciation of entire evidence and written submissions. Ld. Counsel has taken me through the Arbitral Award to contend that the Arbitrator has considered all aspects of the disputes having arisen out of the contract including technicalities of the matter. It is argued that the amounts awarded under claims are based on well founded reasons and are in accordance with the contractual provisions.
Arbi No: 11968 of 2016National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 5 of 15
8. I have heard Ld. Counsel Sh. Yashvardhan for the Petitioner, Ld. Counsel Mr. Satya Prakash Gupta for the Respondent and perused entire record in the light of relevant statutory provisions of the 'Act'. The prime objection forwarded by the Petitioner is that the Award is not sustainable since it is against Public Policy of India as it is passed after a huge gap between last date of hearing and the date on which it is passed.
9. Law is not more res integra in respect of the fact that the Award should be made and published within a reasonable time. In case there is a delay, the same should be explained and the abnormal delay caused in the same without any satisfactory explanation causes prejudice to the other side.
10. At the same time, settled position in respect of the challenge under Section 34 of the Act as it stands crystallized today is that the findings of fact as well of law of the arbitrator/Arbitral Tribunal are ordinarily not amenable to interference under Section 34 of the Act. It is only where the finding is either contrary to the terms of the contract between the parties or exfacie perverse that interference by Courts becomes necessary.
11. In BWL Ltd. vs. UOI and anr. FAO (OS) 398/2012 is was observed that :
".........Now, the learned Arbitrator Shri A.K.Jain has evinced his supine negligence and indifference to the matter Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 6 of 15 evidenced by the fact that after concluding hearing on October 06, 2004, he sat over the matter for nearly three years. On September 14, 2007, he listed the matter for clarification and after deferring the matter on various dates, reclosed the matter after obtaining clarifications on February 16, 2008, and pronounced the award after nearly two years and seven months thereafter on September 21, 2010 and September 23, 2010.
7. What faith would one have in such an arbitrator? What would be the use to remit a part of the award to the same arbitrator whose past conduct does not inspire confidence of doing speedy justice?
8. Human memory is short. We are doubtful whether substantive hearings which were concluded on October 06, 2004 and the meagre clarificatory hearings which were concluded on February 16, 2008 left sufficient imprints on the minds of the learned Arbitrator to have remembered the arguments and pronounce the award(s) on September 21, 2010 and September 23, 2010.
9. Justice should not only be done but should also appear to have been done. Justice delayed is justice denied.
10. This was so observed by the Supreme Court in various decisions. Even when Judges have pronounced judgments after reserving them for more than six months the same Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 7 of 15 have been set aside by the Supreme Court requiring the matter to be heard afresh and redecided. The decisions are: a. Anil Rai v. State of Bihar (2001) 7 SCC 318; b. Kanhaiyalal & Ors. v. Anupkumar & Ors. (2003) 1 SCC 430; c. Bhagwandas Fatechand Daswani & Ors. v. HPA International & Ors. (2000) 2 SCC 13; and d. Kunwar Singh & Ors. v. Sri Thakurji Maharaj 1995 Supp (4) SCC
125.
11. With respect to arbitration, a learned Single Judge of this Court, in the decision reported as 153 (2008) DLT 489 Harji Engineering Works Pvt. Ltd. v. BHEL, set aside an award which was pronounced after three years of the last hearing holding that such an award would be against the public policy of India......"
12. In Harji Engineering Works Pvt. Ltd. vs. BHEL 2008 (4) Arb. LR 199 it was observed that :
"16. The Act based on UNCITRAL Model Law seeks to ensure fast and quick disposal and curtail delays (See, Sections 4,12,13,16, 23 and 34(3) of the Act). Commercial arbitration process should be efficient and disputes decided expeditiously for trade and commerce Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 8 of 15 to prosper and grow. Contractual rights and obligations to have meaning should be enforced. Delay defeats justice and encourages breaches. Arbitration proceedings must be held with reasonable dispatch and promptness. Arbitration proceedings are encouraged because they are speedy alternative to court adjudication. Its primary objective is fast and quick disposal of disputes between parties without delays normally associated with court proceedings. Arbitration implies timeous decisions and promptitude. It is policy of law that arbitration proceedings should not be unduly prolonged. Arbitration proceedings, therefore, are expected to be prompt.
17. ....
18. ....
19. ....
20. It is natural and normal for any arbitrator to forget contentions and pleas raised by the parties during the course of arguments, if there is a huge gap between the last date of hearing and the date on which the award is made. An Arbitrator should make and publish an award within a reasonable time. What is reasonable time is flexible and depends upon facts and circumstances of each case. Is case there is delay, it should be explained. Abnormal delay without Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 9 of 15 satisfactory explanation is undue delay and causes prejudice. Each case has an element of public policy in it. Arbitration proceedings to be effective, just & fair, must be concluded expeditiously. Counsel for the Respondent had submitted that this Court should examine and go into merits and demerits of the claims and counter claims with reference to the written submissions, claim petition, reply, document etc. for deciding whether the award is justified. In other words, counsel for the Respondent wanted the Court to step into the shoes of the Arbitrator or as an appellate court decide the present objections under Section 34 of the Act with reference to the said documents. This should not be permitted and allowed as it will defeat the very purpose of arbitration and would result into full fledged hearing or trial before the Court, while adjudicating objections under Section 34 of the Act. Objections are required to be decided on entirely different principles and an award is not a judgment. Under the Act, an Arbitrator is supposed to be sole judge of facts and law. Courts have limited power to set aside an award as provided in Section 34 of the Act. The Act, therefore, imposes additional responsibility and obligation upon an Arbitrator to make and publish an award within a reasonable time Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 10 of 15 and without undue delay. Arbitrators are not required to give detailed judgments, but only indicate grounds or reasons for rejecting or accepting claims. A party must have satisfaction that the learned Arbitrator was conscious and had taken into consideration their contentions and pleas before rejecting or partly rejecting their claims. This is a right of a party before an Arbitrator and the same should not be denied. An award which is passed after a period of three years from the date of last effective hearing, without satisfactory explanation for the delay, will be contrary to justice and would defeat justice. It defeats the very purpose and the fundamental basis for alternative dispute redressal. Delay which is patently bad and unexplained, constitutes undue delay and therefore unjust...."
13. Similarly, regard can be had to the Judgment in Bhagwandas Fatehchand Daswani vs. HPA International, wherein it was observed :
"3. Learned Attorney General appearing for the appellants urged that, before the High Court, the hearing of the appeal was concluded on 22 March, 1989 but the judgment was delivered on 24th January, Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 11 of 15 1994 nearly five years after the hearing was concluded, and this long delay in delivery of judgment by itself is sufficient to set aside the judgment under appeal. Learned Attorney General has also relied upon decision of the Court in the case of Kanwar Sinsk and others vs. Sri Thakurii Mahany 1995 Supp (4) SCC 125. At present, we are not deposed to go into this broad question as urged by the learned Attorney General. However, it is correct to this extent that long delay in delivery of judgment gives rise to unnecessary speculations in the mind of parties to a case. Moreover, the appellants whose appeals have been dismissed by the High Court may have the apprehension that the arguments raised at the bar have not been reflected or appreciated while dictating the judgment nearly after five years. This is fairly not disputed by learned senior counsel, Shri K. Parasaran, appearing for Respondent No. 1. We, therefore, on this short question, set aside the judgment under appeal without expressing any opinion on the merits of the case and remit the case to the High Court for deciding the appeal afresh, on merits...."Arbi No: 11968 of 2016
National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 12 of 15
14. In a recent decision in K. Dhanusekar vs. Union of India and ors ( decided on 10.09.2019 in OP No. 4 of 2015 Madras High Court) it was observed as :
".......12. In this case also on perusal of the records the Award has been passed after 3 years and 7 months. The letter issued by the Arbitrators clearly indicate that the Award dated 23.5.2014 was despatched only on 11.11.2014. There is no reasons whatsoever stated for the huge delay in passing the Award. Even the entire award do not indicate the reason for such delay. Therefore, applying the above ratio and delay in passing the award beyond three years and 7 months after completion of the hearing, which is certainly against the very Act which is required to pass the award within a reasonable time.
In the absence of any explanation or reason for the delay in passing the award, such delay in fact certainly have impact and violation of public policy of India. Therefore, the above Award cannot be sustained in the eye of law in view of the delay alone. Though, other contentions also raised with regard to the contract become frustrated and Clause 42.1 of the contract has not been considered and subsequent circular of Railways during the currency of contract has not considered, this court is of the view that since Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 13 of 15 the award itself is not in according to law and vitiated by long delay, the above aspects are kept open to be raised during Arbitral proceedings..."
15. In the light of the settled legal position thus, I observe that in present matter, Award has been passed after a considerable delay. It is pronounced on 23.06.2014 i.e. nearly after about 7 years of the final hearing took place before Arbitrator. The arbitral record shows that the Petitioner filed its written arguments on 20.02.2007. The Respondents filed their written arguments on 15.10.2006 with additional written submissions on 18.09.2007. Thereafter what happened during the interregnum period between 18.09.2007 and 23.06.2014 is inexplicable. A party must have satisfaction that Ld. Arbitrator was conscious and had taken into consideration their contentions before rejecting or partly rejecting their claims. The Award passed after a period of 7 years from last effective hearing defeats the very purpose and the fundamental basis for alternative dispute redressal. The delay is inexplicable and making such Award bad in the eyes of law.
16. For the foregoing reasons, I hold that impugned Award has been passed after huge delay from the completion of last hearing and the same is against the very object and purpose of the Act. There is no reason or explanation of such huge delay in passing the Award and a such, the same cannot be sustained in the eyes of law. It is in contravention to the very object of the Act, against the basic notions of justice being vitiated by Arbi No: 11968 of 2016 National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 14 of 15 long delay and contrary to public policy of India. Hence, no useful purpose would be served by dealing the matter on merits i.e. the contentious issues raised with respect to the contract, when the entire foundation of arbitral proceedings stands vitiated by long delay.
17. The Petition stands allowed. The proceedings initiated by Ld. Arbitrator and the impugned Award dated 23.06.2014 passed by Ld. Arbitrator is hereby set aside. Parties are left to bear their own cost.
18. File be consigned to record room after due compliance, as per rules.
(Announced in the open Court) RAVINDER BEDI
Additional District Judge04
Judge Code: DL0253
PHC/New Delhi/06.11.2019
Arbi No: 11968 of 2016
National Seeds Corporation Ltd vs. M/s Orient Polyfilms Pvt. Ltd. page no. 15 of 15