Andhra Pradesh High Court - Amravati
Rashtriya Ispat Nigam Limited, Rinl, vs M/S. Mauria Udyog Limited on 6 February, 2025
Author: Ninala Jayasurya
Bench: Ninala Jayasurya
IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI
THURSDAY,THE SIXTH DAY OF FEBRUARY
TWO THOUSAND AND TWENTY FIVE
PRESENT
HONOURABLE SRI JUSTICE NINALA JAYASURYA
AND
HONOURABLE SMT JUSTICE SUMATHI JAGADAM
COMMERCIAL COURT APPEAL NO: 17 OF 2021
Between:
Rashtriya Ispat Nigam Limited, (RINL), (a Government of India
Undertaking), Visakhapatnam Steel Plant, Represented by its
Authorised Signatory, Sri A.K.Bhalla, DGM (Marketing), Now presently
Represented by its Authorised signatory, Sri Girish Kumar, S/o B.P.
Singh, Occ. DGM (Marketing), Having its Registered Office at
Administrative Building, Visakhapatnam-530 031, A.P. India.
...Appellant
AND
1. M/s. Mauria Udyog Limited, Sector-25, Sohna Road, Faridabad Rep. by
its Deputy General Manager, Mr. N.K. Surekha,
2. Smt. Kommu Suvarchala, W/o. Chiranjeevi Sastri, Hindu, Aged about.
60 years, MIG Plot No.65, Door No. 4-68-7, Lawsons Bay Colony,
Visakhapatnam.
3. Hon'ble Sri. Justice O.N. Khandelwal, Father's name not known to the
petitioner, Hindu, Aged about. 62 years. Residing at 1/17, Gomtinagar,
Lucknow-226 010.
4. Sri D. Tarakaram, S/o. D.A. Swamy, Hindu, Aged about. 61 years,
Behind Gayatri Peetham, HB Colony, Seethammadhara,
■Vj,sakhapatnam.
■V
...Respondents
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.,Appeal under Section 13 of Commercial Courts Act, R/w Section 37 of
Arbitration and Conciliation Act, 1996, against the Order passed in C.A.O.P.
No. 41 of 2018, Dated 07-01-2021 on the file of the Special Judge for Trial
and Disposal of Commercial Disputes, Visakhapatnam, setting aside the
Order dated 8-06-2018/18-07-2018 in Arbitration case, passed by the
Learned Arbitral Tribunal.
Counsel for the Appellant: Sri Vivek Chandra Sekhar S
Counsel for Respondent No.1/Claimant: Sri S Rajan
Counsel for Respondent Nos.2 to 4: -
The Court made the following:
I
APHC010143982021
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3494]
(Special Original Jurisdiction)
THURSDAY, THE SIXTH DAY OF FEBRUARY
TWO THOUSAND AND TWENTY FIVE
PRESENT
THE HONOURABLE SRI JUSTICE NINALA JAYASURYA
THE HONOURABLE SMT JUSTICE SUMATHI JAGADAM
COMMERCIAL COURT APPEAL NO: 17 OF 2021
Between:
Rashtriya Ispat Nigam Limited, (RINL) ...APPELLANT
AND
M/s Mauria Udyog Limited and Others ...RESPONDENT(S)
Counsel for the Appellant:
1. VIVEK CHANDRA SEKHAR S
Counsel for the Respondent(S):
1.SRAJAN
2
The Court made the following: (Per NJS,J)
ORDER;
The present appeal under Section 13 of the Commercial Courts
Act, R/W Section 37 of the Arbitration and Conciliation Act 1996 (for short
"the Act"), has been preferred by the appellant-petitioner aggrieved by the
Order dated 07.01.2021 in CAOP No.41 of 2018, on the file of the Court
of the Special Judge for Trial and Disposal of Commercial Disputes
Visakhapatnam, whereby the Arbitral Award dated 18.06.2018 /
18.07.2018 of the majority members was set aside in part only in respect
of the rate of interest.
2) For the sake of convenience, the appellant-Rashtriya Ispat Nigam
Limited is referred to hereinafter as "the RINL" and the 1®* respondent as
the claimant.
BRIEF FACTS:
3) RINL is a Public Sector Undertaking manufacturing steel and allied
products appointed 'the claimant' as a consignment agent under
agreement number VSP/MKTG/SY/19 of 2006-2007 dated 09.10.2009
for a period of seven years with effect from 31.03.2008 to 31.03.2015.
After the expiry of the said seven years period, RINL addressed letters
extending the consignment agency contract on certain terms and
conditions, but the claimant vide letter dated 20.02.2015, as also
subsequent communications informed 'RINL' that it would execute the
work during the extended period as per the terms and conditions of the
3
Contract dated 09.10.2009, referred to above and continued to discharge
its obligations. RINL, however, withheld an amount of f30,71,428/- from
the bills on the premise that hard standing and yard development in the
stock yard was not done till December 2008. It had also withheld 10% of
the consideration amount from March 2015 to a tune of f 1,04,62,801/- as
on December, 2016 on the premise that the difference in rates between
the existing contract and the new contract would have to be recovered.
Thus, disputes arose between the parties, which ultimately lead to
invocation of Arbitration Clause.
4) On entering reference, before the Arbitral Tribunal the claimant filed
claim statement for release of penalty amount of f30,71,428 with interest
of f?48,53,964.54 ps., at the rate of 18% p.a., from the date of recovery to
28.02.2017. The claimant also sought refund of f1,04,62,801/- deducted
from its bills during 2015-2016 and interest of ?15,97,746.31 ps., at the
rate of 18% per annum up to 20.02.2017. Subsequently, the claimant filed
an amended statement of claim, mentioning that the illegally withheld
10% of the bill amount as on 31 10.2017 is ?1,33,13,650/-. According to
the amended claim, the total amount of ^2,60,63,162 (gross, value of
unpaid invoice of f2,18,87,219/-, plus interest for delay-in payment of
invoices of f41,75,943) has to be paid to the claimant towards the unpaid
invoices and interest on the delayed payment of invoices, with further
interest at the rate of 18% per annum, till the date of Award.
4
5) RINL filed its defence statement, inter alia, contending that the
claimant being a consignment agency/contractor should fulfill its
obligations under the contract, in particular, those relating to hard
standing and basic infrastructure. With regard to conditional extensions, it
stated that nothing prevented the claimant to simply refuse to accept the
extensions. While contending that the claimant is not entitled to the
claims, muchless the interest thereon, the RINL raised a counter claim to
a tune of f 1,32,46,669/-, towards difference of rates and Rs.22,00,000/-
towards compensation.
6) The majority members of the learned Arbitral Tribunal
(Respondents 2 and 3 herein) after considering documentary evidence
vide Award dated 18.06.2018, awarded a sum of f4,29,05,335/- to the
claimant with future interest at the rate of 9% per annum from 01.07.2018
till actual date of payment to the claimant, while allowing the counter
claim partly for an amount of Rs.5,06,000/-. The 4'^ respondent passed a
separate Award dated 18.07.2018.
7) Aggrieved by the same, RINL filed CAOP No. 14 of 2018 on the file
of the Court of Special Judge for Trial and Disposal of Commercial
Disputes, Visakhapatnam under Section 34 of the Act. The learned
Commercial Court, after considering the matter, partly allowed the said
O.P., by reducing the pendent lite interest from 18% to 9% p.a.
5
Aggrieved by the order of the learned Commercial Court, RINL preferred
the present Appeal.
8) Heard Mr.S. Vivek Chandra Sekhar, learned counsel for the
appellant and Mr. S. Rajan, Learned counsel for the respondent-claimant.
Perused the material on record.
9) Learned counsel for the RINL, inter alia, contended that the learned
Commercial Court failed to appreciate that the learned Arbitral Tribunal
had not considered the contentions raised on behalf of the RINL in a
correct perspective. He contends that the learned Tribunal i.e., majority
arbitrators erred in holding that there is no new contract stipulating the
rates and observing that there is no contract at all and the learned
Commercial Court failed to appreciate these aspects. He also contends
that if the claimant was not agreeable for the revised rates, it should not
have accepted the material and that having accepted the same and
proceeded with the works, the claimant virtually accepted the offer and
that the learned Arbitral Tribunal as also the learned Commercial Court
went wrong in not considering the same in the right perspective. He
contends that the learned Commercial Court failed to appreciate that
there is no stipulation for payment of interest on delayed payments as per
the contract, but the learned Arbitral Tribunal awarded interest on delayed
payments, which is not sustainable. He submits that in fact, interest was
not claimed at the first instance, but only by way of amendment of the
claim. Making the said submissions, and that the Award to the extent as
confirmed by the Commercial Court is perverse and contrary to the public
policy of India, the learned counsel seeks to set aside the same and allow
the appeal.
10) On the other hand, the learned counsel for the claimant made
submissions to sustain order under challenge. He contends that the
learned Arbitral Tribunal examined the claims meticulously duly
considering the material on record and by a majority Award allowed the
claims with supporting reasons, which are plausible and the learned
Commercial Court after thoroughly appreciating the matter with reference
to the provisions of the Act and settled legal position, was not inclined to
interfere with the conclusions arrived at by the learned Arbitral Tribunal
with regard to the merits of the case, except reducing the interest portion
from 18% to 9% p.a. He contends that the scope of interference by the
Appellate Court in the order passed under Section 34 of the Act, is much
more narrower and only in the event the findings recorded by the Arbitral
Tribunal are perverse, contrary to the terms of the agreement or the
Arbitral Award, is in conflict with the public policy of India, interference
may be warranted, which is lacking in the present case. Relying on the
decisions of the Hon'ble Supreme Court of India in Reliance
Infrastructure Ltd., v State of Goa\ and Bombay Slum
^ 2023 LiveLaw (SC) 416 = 2018 (9) SCC 266
7
Redevelopment Corporation Pvt Ltd., v Samir Nariain Bhojwani^,
learned counsel seeks dismissal of the Appeal. He also contended that
there is no clause in the agreement prohibiting the payment of interest
and granting of the same by the learned Arbitral Tribunal is not against
law or treated as perverse or contrary to the public policy of India.
11) On an appreciation of the rival contentions, the point that falls for
consideration is 'Whether the order under challenge warrants
interference by this Court, in the facts and circumstances of the case?'
12) Before dealing with the point for consideration, it may be
appropriate to mention that the learned Arbitral Tribunal on the basis of
the pleadings framed the following issues for adjudication:
1) Whether the stipulations contained in the Respondent's extension letters /
agreement are valid or not? Either way its effect?
2) Whether the Claimant is entitled for the claims made?
3) Whether the Respondent is entitled to the counter claims?
4) Whether the parties or either of them is entitled to interest? If so at what rate
and for which period?
5) To what relief, if any, are the Claimants or Respondents entitled to?
13) With regard to Issue No.1, the learned majority members noted the
period / dates concerning the several extensions of the existing contract
pending appointment of new consignment agency with stipulation to the
effect that the extensions of existing contract shall be till the specified
dates or till commencement of work by the new contractor, whichever is
lower with the existing rates or new contract rates, whichever is earlier(as
^ Civil Appeal No.7247 of 2024 (Supreme Court of India) dated 08.07.2024
per the respective base dates as applicable) as per the board approved
guidelines. While taking note that the claimant promptly informed that
they are giving their acceptance for extension of existing contract as per
the terms and conditions of the original contract agreement dated
09.10.2009, it recorded its conclusions that RINL, in view of a claimant's
counter offer and non-receipt of unconditional acceptance, could have
stopped sending their consignments to the claimant's yard, which was
never done and probably it suited it to save the company (RINL) from
losses on account of stoppage of their work abruptly. It had also opined
that in the offer made by RINL for extension, the consideration is quiet
uncertain, that none of the parties knew as to when and what rate will be
finalized with the new contractor and further that the offer declined by the
claimant could not take the shape of an agreement, whereas its counter
offer has been accepted by the RINL by its conduct and thus the contract
was completed. The learned Arbitral Tribunal ultimately concluded that
the stipulation contained in the RINL extension letters have no validity
and not enforceable and answered the issue in favour of the claimant
holding that the amount withheld is liable to be released.
14) In so far as the issues pertaining to the claims, as made by the
claimant and the counter claim of RINL, the learned Arbitral Tribunal dealt
with the matter elaborately and recorded a finding that RINL could not
substantiate that it suffered any kind of loss and therefore, the penalty
9
levied was baseless and the claimant is entitled for refund of the same.
In so far as the counter claims, it awarded an amount of ?5,06,000/-
(towards the loss sustained by the respondent as the claimant stopped
the work for 3 days) and so far as the claim of f 1,32,46,669 towards
lower rates quoted by the incoming consignment agency, the learned
Arbitral Tribunal held that the said claim was solely based on assumption,
as no contract came into existence and therefore the RINL is not entitled
for the same.
15) As regards, the Issue No.4 i.e., entitlement to interest, the learned
Tribunal dealt with the same item wise i.e., (i) Interest on Amount of
Penalty Deducted; (ii) Interest on withheld 10% amount from Bills; (iii)
Interest on delayed payment of invoices and (iv) Interest on unpaid
invoices and period wise. It had accordingly awarded interest on delayed
payments, pendente lite interest and future interest with detailed
reasoning and granted the following reliefs:
(1)The respondents shall pay to the claimant a sum of (Rs.4,34,11,355
minus Rs.5,06,000 = Rs.4,29,05,355) (Four Crore Twenty Nine Lakh
Five Thousand Three Flundred Fifty Five) on or before 31.07.2018.
(2) The Respondents shall pay costs to claimant by the aforesaid date.
(3) In case the Respondents fails to comply with the direction N0.1 and 2
above by the appointed date, the respondents shall be liable to pay
future interest on the sums mentioned in direction No.1 and 2 @ 9% per
annum w.e.f. 01.07.2018 till the actual date of payment to the claimant.
10
16) In the O.P., before the Commercial Court, it was, inter alia,
contended on behalf of the RINL, that that in the majority award rendered
by respondent Nos.2 and 3, they failed to appreciate the terms and
conditions stipulated in the letters awarding the agency and have
committed an error apparent on the face of the Award in observing that
there is no concluded contract at all. It was contended that the majority
award rendered by the learned Arbitrators/respondent Nos.2 and 3 is
opposed to public policy of India as there is no stipulation for payment of
interest on delayed payment as per the contract and in the absence of the
same, granting interest at the rate of 18% p.a., is contrary to law, highly
excessive and arbitrary. On the contrary, it was argued on behalf of the
claimant that RINL failed to prove any of the ingredients stipulated under
Section 34 (2) of the Act for setting aside the Award, that the interest
granted by the arbitrators, while rendering the Award is not against Law
or prohibited under Law. The Learned Commercial Court after
considering the matter with reference to the rival contentions recorded its
categorical findings in the following terms -
"22) As seen from the majority award and the minority award
rendered by the learned Arbitral Tribunal they have categorically
discussed all the submissions made by respective counsel of both
parties at length and came to a right conclusion that a new rate
offered by the petitioner i.e., Rashtriya Ispat Nigam Limited,
Visakhapatnam Steel Plant was not acceptable to the first respondent
and the new rate never came into existence by the time of completion
11
of existence period of contract. Therefore, there is no other way to go
except to adopt the old rates."
"In view of the submissions made by the respective senior counsel of
both parties as seen from the award rendered by majority arbitrators
dt. 18.06.2018 and the minority arbitrator dt. 18.07.2018 it is evident
that the learned Arbitral Tribunal after considering entire material
available on record including the documents relied upon by both
parties and in view of the submissions made by the respective
counsel of both parties in detail came to a conclusion that the terms
of the contract between the parties can be proved not only by their
words but also by their conduct. The Law is well settled that the offer
can be accepted by conduct. The general rule is that an offer is not
accepted by mere silence on the part of offeree, yet it does not mean
that an acceptance always has to be given in so many words. Under
certain circumstances, offeree's silence coupled with his conduct,
which takes the form of opposite act, may constitute an acceptance of
an agreement sub-silentio.'
17) Referring to the jurisdiction under Section 34 of the Act and the
decisions of the Hon'ble Supreme Court of India in M/s Dyna
Technologies Pvt Ltd., v M/s. Cromption Greaves Ltd.,^ McDermott
international Inc. v Burn Standard C. Ltd., and Ors.,^; Steel Authority
of India v Gupta Brothers^, the learned Commercial Court categorically
recorded its findings opining that the majority Arbitrators dealt with all the
aspects while allowing the additional claim made by the claimant during
the pendency of the arbitration proceedings and that no grounds are
made out to interfere with the Award.
^2019 see Online Se 1656
" (2006) 11 see 181
^ (2009) 10 see 63
12
18) In so far the claim for interest is concerned, the learned
Commercial Court formulated a separate point for consideration and
referring to Section 31 (7)(a) of the Act, Section 3 of the Interest Act as
also the decision of the Hon'ble Apex Court in Reliance Cellulose
Products V ONGC Ltd.,^ recorded its conclusions at para 34 of the
judgment and inter alia held that in the present case, agreement is silent
with regard to stipulation for payment of interest. However, so far as the
award of the majority Arbitrators granting interest @18% p.a., on unpaid
bills and pendent lite interest, it reduced the same to 9% p.a., holding that
awarding rate of interest at 18% p.a., is highly excessive and arbitrary.
19) Assailing the order of the learned Commercial Court to the extent it
is adverse to the interest of the appellant, Mr. Vivek Chandra Sekhar
advanced arguments as noted in para-9 of the order. However, the
learned Arbitral Tribunal and the learned Commercial Court thoroughly
discussed about the claimant accepting the extension of the existing
contract as per the terms and conditions of the original contract
agreement dated 09.10.2009 and continuation of consignments by the
RINL to the claimant without any demur. The majority members of the
Arbitral Tribunal on the basis of material available on record, recorded
their conclusion to the effect that the stipulation contained in the letters of
extension by the RINL are not enforceable and it acted upon the counter
offer of the claimant to continue on the existing rates by its conduct. The
(201gj.^ see 266
13
said conclusions arrived at by the learned Arbitral Tribunal, were not
interfered with by the learned Commercial Court in view of the settled
legal position that the scope under Section 34 of the Act, is limited. It is
equally settled that in an appeal under Section 37 of the Act, the scope is
much narrower.
20) In Parsa Kente Collieries Ltd., v Rajasthan Rajya Vidyut Nigam
Ltd.,^ it was inter alia contended that the interpretation by the learned
arbitrator of the clauses of the agreement was plausible and merely
because some other view was possible, the High Court is not justified in
interfering with the interpretation s/findings recorded by the sole arbitrator
and that too in exercise of power under Section 37 of the Act. Partly
allowing the said case, the Hon'ble Supreme Court of India inter alia held
that it was pure and simple case of interpretation of the agreement, which
does not involve any public policy. The Hon'ble Supreme Court of India
also referred to the earlier decisions in Mc.Dermott International Inc.,
case (4 supra) and Rashtriya Ispat Nigam Ltd., v Devan Chand Ram
Saran^ including the decision in Associate Builder v D.D.A.^ wherein it
was 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.
' (2019) 7 see 236
'(2012) 5 see 306
® (2015) 3 see 49
14
21) In so far as the contentions with regard to awarding of interest, this
Court see no reason to hold that the order of the learned Commercial
Court is perverse. In fact, it reduced the interest on unpaid bills as
awarded by the majority arbitrators @ 18% per annum to 9% p.a., holding
that the same is highly excessive and arbitrary. Though no reasons were
assigned, the learned Commercial Court in its discussion reduced the
rate of interest. Be that as it may.
22) In Reliance Infrastructures case (1 supra) the Hon'ble Supreme
court of India at para 14 inter alia held 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."
23) In Bombay Slum Redevelopment Corporation Pvt Ltd., case (2
supra) the Hon'ble Supreme Court of India after referring to the various
legal precedents including MMTC Ltd., v Vedanta Ltd.,
10
UHL Power
Company Ltd., v State of Himachal Pradesh^^ at para 16 inter alia held
thus:
"The jurisdiction of the Appellate Court dealing with an appeal under
Section 37 against the judgment in a petition under Section 34 is more
constrained than the jurisdiction of the court dealing with a petition
(2019) 4 see 163
(2022) 4 see 116
15
under Section 34. It is the duty of the Appellate court to consider
of
whether Section 34 Court has remained confined to the grounds
The
challenge that are available in a petition under Section 34.
ultimate function of the Appellate Court under Section 37 is to decide
whether the jurisdiction under Section 34 has been exercised rightly
exercise the
or wrongly. While doing so, the Appellate court can
with the
same power and jurisdiction that Section 34 Court possesses
same constraints.
court referred
24) In the light of the expression of the Hon'ble Supreme
on the touch
to above, this Court considering the matter in its entirety and
stone of Section 34 of the Act holds that the learned Commercial Court is
well within its jurisdiction and was right in its approach , the order under
no interference
challenge is well within jurisdiction and as such warrants
by this Court in the appellate jurisdiction under Section 37 of the Act. The
point is accordingly answered against RINL - Appellant.
25) In the result, the Appeal is dismissed. No order as to. costs.
26) Consequently, the Miscellaneous Applications pending, if any, shall
also stand dismissed.
Sd/- S.V.S.R.MURTHY
JOINT regis;frar
//TRUE COPY//
SE OFFICER
To,
1. The Special Judge for Trial and Disposal of Commercial Disputes,
Visakhapatnam, Visakhapatnam district
2. M/s. Mauria Udyog Limited, Sector-25, Sohna Road, Faridabad Rep. by
its Deputy General Manager, Mr. N.K. Surekha,
3. Smt. Kommu Suvarchala, W/o. Chiranjeevi Sastri, Hindu, Aged about.
60 years, MIG Plot No.65, Door No. 4-68-7, Lawsons Bay Colony,
Visakhapatnam.
4. Hon'ble Sri. Justice O.N. Khandelwal, Hindu, Aged about. 62 years,
Residing at 1/17, Gomtinagar, Lucknow-226 010.
5. Sri D. Tarakaram, S/o. D.A. Swamy, Hindu, Aged about. 61 years,
Behind Gayatri Peetham, HB Colony, Seethammadhara,
Visakhapatnam.
6. One CC to Sri. Vivek Chandra Sekhar S Advocate [OPUC]
7. One CC to Sri. S Rajan Advocate [OPUC]
8. Two CD Copies
Stu
sree
HIGH COURT
DATED:06/02/2025
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ORDER
COMCA.No.17 of 2021
O^ANDH^ 'x \ 9 FEB 2C2j J ^ Current Section ^^5.£esi»ATC«SS DISMISSING THE APPEAL