Andhra HC (Pre-Telangana)
The Transmission Corporation Of ... vs Galada Power And Telecomunication ... on 4 September, 2006
Equivalent citations: 2007(2)ALD697, 2007(1)ALT515, 2007(1)ARBLR447(AP)
JUDGMENT B. Prakash Rao, J.
1. This appeal is at the instance of the unsuccessful petitioners in the Court below in an application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (in brevity the Act) seeking to set aside the Award dated 23.12.2002 passed by the arbitrators, who are added as the respondents 2 to 4, allowing certain claims made at the instance of the respondent No. 1, as per the orders dated 30-10-2004 in O.P. No. 633 of 2003 on the file of the Chief Judge, City Civil Court, Hyderabad.
2. Heard Sri D. Sudershan Reddy, learned Counsel appearing on behalf of the appellants and Sri C. Kodanda Ram, learned Counsel appearing on behalf of the contesting respondent No. 1. The respondents 2 and 3 are the two out of arbitral panel.
3. The facts which are not in dispute are that the appellants herein, (conveniently called as petitioners herein) who are the successors to the former statutory Board, namely A.P. State Electricity Board, floated the Global Tenders on 28.04.1998 as a part of international competitive bidding in regard to the World Bank Aided Power Restructuring Project for high priority requirement in transmission and distribution system of the appellants on a fixed price basis, wherein the respondent No. 1 filed its quotation on 09.07.1998. The work contemplated was the procurement of AAA conductors required for laying 33 KV, 11 KV and LT lines in six lots and total value of the bid was for Us $91,03,250 exclusive of sales tax and excise duty but including freight and insurance. The bids were opened on 17-7-1998 and ultimately the bid of the 1st respondent, who having been found to be lowest were accepted and it was notified to him as per letter dated 30.01.1999, which was received on 12.2.1999. Accordingly, a letter of intent was given on the even date to the respondent No. 1 and he has furnished performance security on 18.02.1999 in the form of bank guarantee for 5% of the contract value i.e. for US $ 4,55,163 in favour of the appellants from the Syndicate Bank which was extended upto 09.05.2001. The appellants had accepted the same by letter dated 26.02.199 and issued a purchase order on 04.03.1999 containing terms and conditions of the supply of goods and mod of payment. The special conditions under the contract and the general conditions of contract along with technical specifications of the bid package, as entered into between the parties features amongst of the following important conditions:
a) The payments for the supplies made has to be paid in US $(dollars).
b) All payments have to be made through Letter(s) of Credit (L/C) in US $.
c) The delivery of goods has to commence within two months from the date of opening of L/C for 10% Advance payment by the APTRANSCO and the entire contract quantity has to be supplied by the GPTL, within six months from the date of commencement of delivery.
d) L/C for 10% advance payment has to be opened by the APTRANSCO i.e. the Purchaser within 30 days from the date of signing of the contract Agreement i.e. 4.3.1999
e) The date of commencement of delivery has to be reckoned from the date of actual payment of 10% advance.
f) The bank guarantee for Us $ 9,05,800 equivalent to 10% advance amount has to be furnished valid until the entire quantity of goods under the contract are delivered i.e., the final lot is delivered.
g) The payment of 10% advance shall be effected against the L/c on submission of performance security claim in the prescribed proforma and 10% advance bank guarantee as per Clause 6(i) of the purchase order.
4. Accordingly, the contract of demand was duly signed on 4.3.1999 between the respondent No. 1 and the appellants. The entire transaction and the contract as entered into with the terms and conditions contained therein, includes as a part thereof, the following documents viz.:
a) The bid form and price schedule submitted by the bidder/GPTL.
b) The schedule of requirements.
c) The technical specifications.
d) The general conditions of contract.
e) The special conditions of contract.
f) The purchaser's notification of award (purchase order).
Further as per the Clause 6(i) of the purchase order which provides for advance payment. It reads as follows:
Terms of payment: payment will be made in US Dollars as indicated below:
10% of the total Ex-works price shall be paid through L/C established in favour of the supplier within 30 days of signing of the contract agreement and subject to submission of:
a) Performance security in accordance with clause-3 (GCC 7.1) of the SCC (Section - V of bid document) and Clause 5 of this purchase order.
b) Claim, and
c) A bank guarantee for the equivalent amount i.e. 10% of the total ex-works price amounting to US $ 9,05,800 valid until the goods are delivered.
Therefore, it is contemplated that the appellants have to establish a L/C in respect of 10% total ex-works in favour of the respondent within 30 days from the date of signing of the contract agreement i.e. 3.4.1999 and that the actual payment of the advance amount through L/C would be subject to the submission of the stipulated documents specified therein as above a, b, c. The respondent No. 1 had furnished the bank guarantee (BG No. 7/99) from the Syndicate Bank on 15.3.1999 itself for US $ 9,05,800 i.e. 10% of the total ex-works price even before the appellants would establish the L/C, which was valid up to 30.11.1999. Initially it was made in favour of the Chief Engineer (P&MM), but however subsequently, it was amended on 19.03.1999 in favour of the Chief Engineer (APL). Instead of the appellants coming forth for establishing the L/C in respect of 10% of total ex-works price, it was quoted rupee equivalent of 10% of advance payment by cheque dated 5.5.1999 for a sum of Rs. 3,89,67,516/- which was received by the respondent No. 1 on 10.05.1999. Thus, the appellants did not opened the L/C within 30 days of the purchase order which expired on 3- 4-1999 and even the advance payment was also not within the said period. At the instance of the appellants, the 1st respondent extended the validity period of the Bank guarantee on 3-5-1999 upto 30-1-2000. Yet, the respondent No. 1 had entered into a contract with the foreign supplier of aluminium (COMALCO Aluminium Limited, Australia) for the import of 220 MT of Aluminium Ingots for making supply to the appellants. Therefore, the complaint on the part of the respondent No. 1 was that due to the non-opening of the letters of credit there has been a substantial delay. However, the respondent No. 1 offered first lot of goods (AAA Conductors) for inspection on 22.6.1999 as per the letter dated 18.6.1999. Whereupon on behalf of the appellants' inspection was made on 23.6.1999 and the Despatch Instructions (I`I) were issued on 30.6.1999 and yet no letter of credit was established by the appellants even for the goods inspected. However, the respondent No. 1 dispatched the materials on 8.7.1999 and 9.7.1999. The appellants released 80% of ex-works price for those goods on 9.9.1999, 6.10.1999, 4.11.1999 and 24.1.2000. Further 100% sales tax in respect of those goods were paid on 20.1.2000 and 100% freight and insurance in respect of those goods were paid on 19.9.2000. The price of the goods which were supplied was Rs. 2,22,21,387/-. This was forwarded by the respondent No1 for the dispatch on 2.8.199, 5.8.1999, 6.8.1999 and on further dates. Thus by October, 1999, 31.8% of the contracted material was supplied by the respondent No. 1. However, the appellants did not make any payment during the period from 7.10.1999 to 3.11.1999 or 16.11.1999 to 19.1.2000. The amount for those goods which have been supplied accumulated to Rs. 494 lacs by the end of October, 1999 and Rs. 609 lacs by end of November, 1999 and Rs. 1093 lacs by the end of December, 1999.
5. The case of the respondent No. 1 was that in spite of the several reminders no payments were forthcoming from 16.11.1999 onwards till 19.1.2000 and it is only from the latter dates, the appellants started clearing the dues. Therefore, by the end of December, 1999 it was stated that the outstanding dues payable by the appellants to the respondent No. 1 amounting to 60,65% for the supplies made on 28.51% of the price for the total contracted quantity. Thus, the complaint of the respondent No. 1 was that there has been breach on the part of the appellants and having regard to the enormous dues amounting to Rs. 1093 lacs. The bankers of the respondent refused to extend the facility for purchase of raw-materials and other operations from the end of December, 1999. Though the appellants made all payments for the goods supplied in Indian Rupees. But however, there has been inordinate delay on every occasion and thereby imposing substantial financial burden on the respondent No. 1. Since the respondent No. 1 did not supply any material, thereafter the appellants terminated the contract on 19.2.2001 by invoking the bank guarantee for US $ 455,163. At this stage the respondent No. 1 apprehending against the invocation of the bank guarantee by the appellants, approached the court below in O.P. No. 1 of 2001 by way of an application under Section 9 of the Arbitration and Conciliation Act and sought injunction against the bank from making any payment. In respect of the same the Syndicate Bank paid all the amounts. As per the letter dated 14.12.2000 the appellants asked the 1st respondent as to why the contract should not be terminated since the balance material was not supplied. To which the respondent No. 1 has not replied, on 6.1.2001 explaining all the failures on the part of the appellants itself in adhering to the terms and conditions of the purchase order and sought for a joint meeting to settle the disputes as per Clause 28.1 Section IV of GCC. However, there were no such meetings but the appellants terminated the contract on 19.2.2001 as aforesaid.
6. Clause 10 of the purchase order contemplated for resolution of the disputes through arbitration and therefore, since there were no nominations on the part of the appellants, the respondent No. 1 filed Arbitration Application No. 29 of 2001 under Section 11(b) of the Arbitration and Conciliation Act, 1996 in this Court for appointment of an arbitrator to go in to the dispute and resolve. Ultimately the said application was allowed appointing the present arbitrators the respondents 3 and 4, who have chosen the respondent No. 2 as the presiding arbitrator/umpire who went into the arbitration. The respondent No. 1 has set forth with the 14 claims under various heads:
Claim No. 1: Claim for price escalation in terms of Clause 16.3, Section III, Bid Data Sheet (Annexure 3) for57,719US $ Claim No. 2: Loss incurred by way of bank commission on bid security Rs. 38,015/- (Annexure 4).
Claim No. 3: Loss incurred due to increase in cost of raw material on account of delay in opening L/C by APTRANSCO towards 10% advance payment in US $ 1,41,120 (Annexure 5).
Claim No. 4: Loss of Bank commission of Rs. 99,421/- due to extension of bank guarantee validity period (Annexure 6).
Claim No. 5: Loss on account of inordinate delayy in payments for the supplie effected Rs. 67,35,351/- (Annexure 2).
Claim No. 6: Loss of profit for the unexecuted work in US $ 12,33,995/- (Annexure 7).
Claim No. 7: Loss due to extension of Bank guarantee for 10% advance payment Rs. 4,97,105/- (Annexure 8).
Claim No. 8: Loss due to price escalation of raw material US $ 50,826 (Annexure 9) Claim No. 9: Loss incurreddue to duty exemption scheme benefit denial Rs. 98,63,15/- (Annexure 10).
Claim No. 10: Loss of business suffered due to the cancellationRs.7,00,00,000/-.
Claim Nos. 11 & 12: Wrongful invocation of 10% advance BG, 5% performance BG US $ 9,05,800 and BG US $ 4,55,163.
Claim Nos. 13 & 14: Claim of the opposite party and costs.
7. These claims were contested by the appellants and they also came forward with the counter claims. During the course of the Arbitration proceedings, no oral evidence was produced from both sides, but sought to rely on the documents submitted by either side. Ultimately, the arbitrator passed the Award on 23.12.2002 allowing the claims 4, 5, 6, 7, 10, 11 and 12 and rejecting the claims 1 to 3, 8 and 9. The arbitrator rejected the entire counter claim submitted by the appellants and no costs were allowed. Challenging the said award the present application has been filed by the appellants in the Court below.
8. Neither side has produced any evidence in the court and on the basis of the award proceedings and the submissions made the application filed by the appellants, was dismissed. Hence, this appeal.
9. Sri D. Sudershan Reddy, learned Counsel appearing on behalf of the appellants submitted by taking us through the entire material in the award proceedings and the proceedings of the Court below that the claims as allowed by the arbitrator as aforesaid are wholly unsustainable and the respondent No. 1 is not entitled to any amounts as claimed thereunder. Further the counter claims made by the appellants ought not to have been rejected. Further there has been serious glaring and substantial error and illegality in the conduct of proceedings before the arbitrators and in the award. Since there was no due and proper enquiry by properly marking of the documents for enabling due appreciation as required under law and therefore, the arbitrators have been totally mislead in not considering many of the documents, though those are part of the record. It was pointed out in the court below, no attempt was made for leading evidence either oral or otherwise for proving the documents by the respondent and therefore, there has been a total miscarriage in the very approach made and that ultimate conclusions as arrived at. According to him, there is no specific finding on the main and core issue as to the breach and by whom, and therefore, question incidence for any liability does not arise. That apart the learned Counsel submitted that the very award is in the teeth of the mandatory procedure and is not complete one in the due format as required under the provisions of the Arbitration and Conciliation Act, 1986 as the same is not passed by the umpire and the arbitration with consensus, as there is variation in regard to the signatures of the amongst arbitrators the Umpire. Therefore, such an award is wholly void and liable to be set aside.
10. Sri C. Kodanda Ram, learned Counsel appearing on behalf of the respondent No. 1 seeking to sustain the findings both at the level of the arbitrator as that of the Court below and submitted that the award is perfectly valid including the claims as granted in favour of the respondent No. 1 which is wholly basis supported by valid material on record and it is only in view of the breach committed on behalf of the appellants in not adhering to the very terms of the contract, the respondent No. 1 is rightly held to be entitled for such amounts and therefore, there is absolutely no error in awarding such amounts. Further it was contended that having regard to the scope and the well established principles an enquiry in regard to an application filed under Section 34 of the said Act, the Court below could not have possibly gone into the merits or reappreciate any evidence or material nor could tamper with the findings as arrived at on the facts by the arbitrators, as long as no such vitiating error is made out, to warrant interference under the said provision. Therefore, the appellants cannot convert either the application filed by them in the court below as a regular first appeal on facts and thus not entitled to canvas on merits and the same would extend to the scope in the appeal. Further it was pointed out that the appellants now cannot complain as against the non marking of the documents, since both sides agreed to proceed with the enquiry without any such formalities to which the respondent No. 1 also agreed to and therefore, mere non marking of the documents even otherwise cannot be a ground to set aside the award. Coming to the other submission, it was urged that the award was passed duly by arbitrators along with the umpire together and therefore, the same is perfectly valid. Even otherwise it is submitted that there exist no such irregularity to vitiate or invalidate the very award itself therefore, there are absolutely no merits in any of the pleas raised in the appeal and the same is liable to be dismissed.
11. With these above and other detailed submissions as made on behalf of the both sides and on perusal of the record and material, the main points which arise for consideration in this appeal is:
1. Whether on the facts and circumstances, the court below can go into merits in an application filed under Section 34 of the Act to assess the correctness of the findings given by the arbitrator either in respect of the claims which are awarded in favour of the respondent No. 1 or on the rejection of the counter claims made by the appellants and the findings given in this regard are liable to be set aside.
2. Whether the enquiry before the arbitral proceedings and the Court below without marking the documents, held on either side is vitiated and illegal?
3. Whether the award as made by the arbitrators and the umpire on 23.12.2002 is valid?
12. POINTS 1 AND 2:
There is no dispute to the chequered events in regard to the basic transaction and the subsequent facts and circumstances. However, the case of the appellants is that having regard to the nature of the terms and conditions, the payments are being made to the first respondent through account payee cheques from time to time as and when the materials are delivered and the bills presented which is in Indian rupees equivalent to US dollars at the ruling Dollar exchange rate prevailing on the day of release of payment as per the instructions in para 4 (a) of G.O.Ms.85, dated 22-04-1999 issued by the Government of Andhra Pradesh. All these payments were accepted by the first respondent and there was absolutely no protest on its part nor there was any categorical insistence by them for payment only in US dollars. The supplies were commenced by the first respondent in July, 1999 and went on up to December, 1999 and the details of which are shown as follows:
Size Order Quantity Quantity Balance
Supplied Percentage Quality
100Sq .mm 3500 km 2202 km 62.91% 1298 km
55 Sq.mm 15000 km 8103 Km 54.02% 6897 Km
34 Sq.mm 1200 km 2615 km 21.79% 9385 Km
13. Admittedly, there was no supply during January, 2000. However, the first respondent was insisting for establishing letter of credit in advance for the entire balance quantity of conductor for restoration of supplies. According to the appellants, such letter of credit could not be opened as the specific instructions were issued in G.O.Ms. No. 85, dated 22-04-1999 which states to the effect that:
All payments under this loan Account No. 4441-IN must necessarily be made only through Account Payee Cheques from Account No. 8004147 and no letter of credit payments are acceptable from accounting under this loan.
14. According to the appellants, the outstanding bills to a tune of US $ 32,58,135.04 of the first respondent were cleared by March 2000 and the first respondent was requested to restore supplies in April 2000. According to the appellants, the delay in making the payments occurred due to the fact that the claims have been submitted to the Controller-Aid, Audit & Accounts (C- AAA) for scrutiny and it is only after their admission, the Reserve Bank of India/World Bank had to be advised to release the funds to the Government of India, which in turn sanction the assistance to the Government of Andhra Pradesh and consequently, the amount has to be released in favour of the appellants. This entire process normally takes about four months. Therefore, there has been absolutely no delay or latches on the part of the appellants. Hence, in fact, the fist respondent was requested by a letter dated 24-08-1999 to opt for direct payment method by World Bank through Government of India to avoid delays which the first respondent did not accept. In respect of the claim made on 19-02-2001 on 10% advance bank guarantee No. 7/99, dated 15-3-1999 for the full amount of US $ 905, 800 with bankers, M/s Syndicate Bank, New Nallakunta branch, Hyderabad. Pay Order No. 959973, dated 22-02-2001 for Rs. 4,24,18,614/- (Rupees four crore twenty four lakh eighteen thousand six hundred and fourteen only) was issued by the Syndicate Bank and the same amount was credited to A.P. Transco on 03-03- 2001 after clearance by this Court. A claim was lodged on 02-05-2001 on performance security bank guarantee No. 5/99, dated 18-02-1999 for the full amount of US $ 4,55,163 with Bankers, M/s Syndicate Bank, New Nallakunta branch, Hyderabad. Pay order No. 959978, dated 03-05-2001 for Rs. 2,13,24,386/- (Rupees two crore thirteen lakh twenty four thousand three hundred and eighty six only) was issued and the same was credited to the appellants on 05-05-2001. However, the first respondent approached the B.I.F.R. and ultimately the matter was referred to a Panel of Arbitrators. Therefore, having regard to the above, on behalf of the appellant, there was absolutely no delay or latches much less any breech on their part, the question of making liable for any amounts under the schemes as made by the first respondent is unsustainable and therefore, there is absolutely no basis. Further it is pointed out specifically by the learned Counsel appearing on behalf of the appellants that neither the Arbitrator nor the Court below have gone into the basic question as to on whose part the breach can be attributed so as to inflict any such liability. There is neither any issue nor any finding specifically in this regard, which is fatal. Therefore, in the absence of any such finding, the appellants cannot be made liable for any of the amounts as awarded.
15. The case of the respondents is to the effect that it is only due to the specific terms and conditions as agreed to and more so it being a World Bank aided project payable in US $ and assured payments through letter of credit, the first respondent has undertaken the project. However, in spite of the same, the appellants did not adhere to the terms and the appellants erroneously terminated the agreement on 19.02.2001 and therefore the first respondent had to raise claims to which he is entitled to. Further, having regard to the claims, counter-claims and the findings as arrived at by the Arbitral Tribunal and as contained in the Award where it was found that the contract between the parties was under the International Business Projects funded by the World Bank adopting Uniform Customs and Practices for documentary credit and the contract being a deemed export transaction, it provided opening letter of credit by the appellants under a specific term of contract which is vital. The respondent had furnished a bank guarantee aggregating US $ 13,60,963 towards advance payment and performance security and made all preparations necessary for effecting the supplies. and yet the letter of credit was not opened by the appellants and therefore, there is a clear breach on the part of the appellants which is basic and fundamental and amounting to repudiation of contract. That apart, there has been enormous delay on the part of the appellants in making the payments for the goods supplied. The contention as regards the documents not being marked as submitted on behalf of the appellants is not sustainable since the parties had agreed to the conduct of arbitration proceedings on affidavits and especially when the documents are not in dispute. Therefore, having regard to such finding as arrived at by the Arbitral Tribunal, there is a clear breach on the part of the appellants and thus, the appellants are bound to repay the amounts as awarded along with interest. Further, having regard to the scope of the enquiry under Section 34 of the Act, the power as conferred under Civil Court thereunder is akin to the power of judicial review of High Court under Article 226 of the Constitution of India in reviewing the decisions of the bodies which is quite limited and confined to the examining of decision making process rather than the merits of the decision. Therefore, the Court below had virtually found no factual foundation to warrant any interference of the Award.
16. The Arbitral Tribunal proceeded to consider the contract between the parties being an international business group at the instance of the World Bank in terms of Uniform Customs and Practices for Documentary Credit. It was a deemed export transaction. As per the terms of the contract, the opening of Letter of Credit (LC) by the appellant is a vital term on furnishing the bank guarantee aggregating to U.S.$ 13,60,963 towards advance payment and performance security. The Letter of Credit was not opened by the appellant and there has been delay on its part in making payment to the goods supplied. On the non- supply of the goods by the respondent is only due to non-opening of the Letter of Credit by the appellant in spite of the extension of the validity period of bank guarantee at the instance of the appellant arises. Therefore, there has been no such opening of the Letter of Credit and further there has been delayed payments. Amongst the claims made by the respondent herein, the claim No. 1 for a sum of US$ 57,710 is towards the loss incurred due to the respondent's refusal to update the process in terms of the ITD and the same was rejected by the arbitrator and was duly confirmed by the Civil Court. The second claim pertaining to Rs. 38,015/- towards the loss incurred by way of bank commission charges for extension of bid security, which was not accepted by the Arbitrator and duly confirmed by the Civil Court. The third claim pertaining to the US $ 1,41,120 towards the loss incurred due to raw material fluctuations on account of delay in opening the letter of credit towards 10% advance payment, which was not accepted by the Arbitrator and confirmed by the Civil Court. In regard to claim No. 4 pertaining to the commission of bank guarantee in extending the validity period on account of the delay in opening the letter of credit for 10% advance payment claiming a sum of Rs. 99,421/-, the same was accepted by the Arbitrator. Having regard to the extension of the bank guarantee at the instance of the appellant and the delay caused by it in releasing 10% advance and the finding on this claim was confirmed by the Civil Court. The claim No. 5 was for Rs. 67,35,351/- towards the loss incurred by way of interest on account of the appellant's failure to open the letter of credit and the delay caused in making payments. The Arbitrator allowed the said claim for the self-same delay in making the payments and the Civil Court confirmed the same. Coming to claim No. 6, which is of US $ 12,33,995 towards loss of profit suffered due to cancellation of contract for the unexecuted contracted work by the respondent. The Arbitrator found that the appellant has to calculate 10% of the value of the unexecuted portion of the contract and furnish the same to the respondent and the said finding is duly confirmed by the Civil Court. The claim No. 7, which is towards loss incurred by way of extension of bank guaranteed validity period for a sum of Rs. 4,97,105/-, the Arbitrator held that the respondent is entitled to the sum on the ground that the extension is due to delay in releasing the 10% advance and this was confirmed by the Civil Court. The amount in claim No. 8 is US $ 50,826 towards the loss incurred due to raw material price fluctuating once again due to inordinate delay in making payments of the amounts for the material supplied. The Arbitrator did not find in favour with the respondent - claimant and similarly the Civil Court. In regard to claim No. 9, which is stated to be the loss incurred due to non-importation of eligible quantity of raw material under "Duty exemption scheme" on executed portion of orders for a sum of Rs. 98,63,185/- was not found favor with the respondent by the Arbitrator and the same was confirmed by the Civil Court. In regard to claim No. 10, which is for a sum of Rs. 7 crores on account of loss of business suffered due to withdrawal of support by the bank and non-availability of working capital facilities to secure fresh orders, the Arbitrator awarded the said amount and the same was confirmed by the Civil Court. The claim No. 11 is for US $ 9,05,800 on the ground of wrongful invocation of 10% advance bank guarantee. The Arbitrator found in favour of the claimant and the same was confirmed by the Civil Court. The claim No. 12 is for US $ 4,55,163 on account of wrongful invocation of 5% advance bank guarantee. The Arbitrator found in favour of the claimant and the same was confirmed by the Civil Court. Coming now to the counter claims made by the appellant herein on the ground of default on the part of the respondent, as a result of non-delivery of the balance quantity of 100 Sq. mm AAA conductor 1298 km; 55 Sq. mm AAA Conductor 6987 km; 34 Sq. mm AAA Conductor 9385 km, which according to the appellant was forced to procure resulting in extra expenditure to the appellant to a tune of US $ 2,13,111-30, which was denied by the respondent on account of breach committed by the appellant. The Arbitrator directed the return of the amount and the same was confirmed by the Civil Court. Coming to the last claim No. 12 for US $ 4,55,163, which is on account of wrongful invocation of 5% advance bank guarantee, the Arbitrator found in favour of the claimant and the same was confirmed by the Civil Court. For the counter claim made by the appellant, the Arbitrator did not find favour of the claimant and it was confirmed by the Civil Court.
17. Having regard to the aforesaid backdrop in regard to the respective claims and counter claims made by both sides and though the counsel on either side tried to make out their supporting submissions vis-a-vis the limitations of the Court below under Section 34 of the Arbitration and Conciliation Act, 1996 to go into the merits, by referring to the various decisions in support, it is quite essential for consideration for fixing liability either way, primarily a finding has to be amended, on whose part or side breach occurred. Unless and until such a specific and categorical finding is arrived at by raising a pointer, the question of imposing any liability towards any of the claims does not arise and the entitlement to these claims as a right is sine quo non to the breach. The case of the respondent - claimant squarely sought to be rested on by blaming the appellant for not adhering to the terms of contract mainly in maintaining the letter of credit as contemplated and delayed payments and whereas the case of the appellant is that the respondent is bound by the orders issued by the government in regard to making payment under the above referred G.O. and having accepted the money in terms thereof in part for some time, the question of any breach on their part does not arise.
18. Coming to the procedural lapses as complained by the appellants herein at both the levels of arbitrary proceedings as well as court below, in regard to the non-marking of the documents filed on either side, there is no serious dispute to the fact that none of the documents which have been filed from both sides have been given any proper numbering or marking nor any evidence has been produced either to say in support thereof or to prove the same. Therefore, there has been a set of documents filed from both sides which was sought to be relied at both the stages. No doubt as per the normal practice and procedure in any proceedings, the documents have to be necessarily given a marking irrespective of the admissibility though of which, on an objection, requires to be considered, and further the necessary oral evidence also has to be let to prove the documents. But as pointed out during the course of arguments that it was agreed that both sides would not stand on formalities and all the documents should be taken on record. Be that as it may, it is now well established that at any stage of proceedings either final or interlocutory, it is felt more necessary and expedient to give a due marking of the documents by a number filed on either side for a convenient sake and for enabling all the sides including the Court to make a proper reference thereto while considering the issue in question. Without marking any of the documents more so where strong reliance sought to be placed on certain papers and documents etc., it would be very difficult to refer the same by giving any date or other particulars with comparisons added. That apart, as rightly pointed out either in the award or in the Court below, all the documents filed from both sides do not find reference individually and considerations accordingly. Admittedly, in this case, no such attempt has been made either by parties or by the arbitrator or in the Court below at least to give marking of the documents by consent by both sides in respect of series like A and B or otherwise.
19. On a reading of the award of the Court below, it cannot be said that all the documents filed from both sides individually and separately have come up for consideration. Except mere reference to the chequered events which relate to the dispute, a conclusion is being arrived at, without such depth consideration or any particular attention. It cannot be said that no such approach need be made in a case of this nature where the main question is as to the blame made one against the another in regard to the breach. The circumstances as can be culled out from the transactions or correspondents etc., could be a tell-tale story of the events which should have lead to the present situation and which could have thrown ample focus on the person responsible for such breach. No doubt, such act to make a marking document is only procedural one and at the most can be called or treated as irregular but certainly it reflects on the irregular procedure adopted, though there was no objection from either side for marking. In this regard, the parties cannot escape blaming themselves in not assisting properly during the arbitral proceedings or in the court for giving a marking with consent so that the reference could have been made to each of the said document while coming to any conclusion on any of the disputes or claim either way. Therefore, no doubt, there has been a serious lapse which glaringly show the non attention being paid to the documents and no consideration having been given in support of all the issues vis-a-vis every document. Thus it can be said that there has been no proper application of mind in respect of the entire evidence viz., documents filed on either side.
20. It does not require any elicitation in this regard to the entitlement of claim for damages, by a party who claims that he suffered due to a breach on the other side. Necessarily there has to be a conclusion to be arrived at on such a breach. Even in case where there are allegations and counter allegations as to the breach of contracts and complaint of sufferance and a blame against each other followed by the claims and counter claims, it necessarily mandates on the part of an arbitrator basically to arrive at a finding as to the person who is responsible for the breach and then only under the instance of fixing any liability or quantum has to be taken up. It is but quite incidental to say that where a party suffers as a result of the previous contract, certainly he would be entitled at all events to make a damage and sustain the same. Therefore, for awarding damages to either of the parties, the finding as to breach is a sine qua- non and without which, no liability can be fastened. This basic principle gets its deterioration also under Section 73 of the Indian Contract Act which itself reads to the effect that "when a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him hereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made a contract, to be likely to result from the breach of it. Therefore, in view of the attack made on behalf of the appellants and in view of the plea raised on behalf of the appellants herein as to the very absence of the finding or conclusion on the breaching it has to be seen as to whether either the arbitrator or the Court below has given any such finding.
21. On as reading of the award dated 23-12-2002, it entirely proceeds in considering the claims and counter claims and referring to the chequerred events, which lead to the disputes between the parties though including making reference to the various pleas raised on either side in detail upto paragraphs 54, the award straight away takes up to consider each item of the claims made in the statement of the claim and counter claim from paragraph 65 onwards and ultimately as we have already stated that some claims of the respondent are accepted including the rejection of counter claim made on behalf of the appellants herein. However, with regard to the breach of contract and the person responsible therefor, there is absolutely no discussion in this regard nor any consideration to find the reasons either in support or against. Even though a reference is made to the submissions made on either side claiming breach against each other which has been referred to in the respective contentional paragraphs but however, there is no discussion or a reason or a finding on the breach. This approach of the tribunal prima facie, we are of the view that it is in the teeth of the principles as contemplated under Section 73 of the Contract Act and also general principles to say that in the absence of any contention being raised as to the breach, fixing the liability against any person, as such is wholly unsustainable. This lapse is quite a serious and fatal one, which effects the very basis for awarding the claim in favour of the respondents herein before fixing the responsibility. No reasons also has been shown on either side as to why and how such a glaring foundation is not adverted to by the arbitrators.
22. Even on a careful reading of the judgment of the Court below in the application filed by the appellants herein seeking to set aside the award it is seen that after referring to the events, the case and counter cases from the allegations made in the respective pleadings in detail and all other aspects like the scope of the enquiry by the Civil Court and arbitrability of the dispute, and ultimately the finding given on the respective claims and counter claims, the order does not either consider the reference thereto, much less give any reasons or arrive at any categorical finding on the breach and the person responsible therefor. Therefore, at either of the stages, we are surprised to know that there is no finding as to the breach of contract even though there have been blames and counter blames against each other. It can be viewed from another angle in this case that according to the respondents, the appellants did not stick on to its terms in obtaining the loss of credit as contemplated therein for a quite some time, even though he started supplying the goods and furnishing Bank guarantee and received the money in Indian currency, at various points of time. There is absolutely no explanation till the end of December, 1990 for such waiver all along. There is absolutely no explanation as to why and how he could possibly proceeded against the very term on which he is trying to place reliance for the purpose of setting forth claims and now and later trying to put a blame on the appellant herein. The clear inconsistency on the part of the respondents only started for the period subsequent to December, 1999. These aspects having a substantial bearing necessarily go a long way in deciding to see where there is a breach on the part of the appellants or otherwise. However, having regard to the fact that there is no such finding in the Award or in the order by the Arbitrator initially nor by the Court below, the entire proceedings gets vitiated and are liable to be set aside and no claims can flow either way.
23. POINT No. 3:
This question involves as to the correctness of the validity and fatality of the award since it is incomplete and not been signed by the entire arbitrary tribunal as constituted. Before venturing into the factual side, it is necessary to refer to Section 31 of the Arbitration and Conciliation Act, 1986 which reads as follows:
Form and Contents of Arbitral Award.
1. An arbitral award shall be made in writing and shall be signed by the members of the arbitral Tribunal.
2. For the purpose of Sub-section (1), in arbitral proceedings with more than one arbitrator the signatures of the majority of all the members of the arbitral Tribunal shall be sufficient so long as the reason for any omitted signature is stated.
3.The arbitral award shall state the reasons upon which it is based, unless-
a. the parties have agreed that no reasons are to be given, or b. the award is an arbitral award on agreed terms under Section 30.
4. The arbitral award shall state its date and the place of arbitration as determined it accordance with Section 20 and the award shall be deemed to have been made at that place.
5. After the arbitral award is made, a assigned copy shall be delivered to each party.
6. The arbitral Tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final, arbitral award.
7. (a) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the payment of money, the arbitral Tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment. 8. Unless otherwise agreed by the parties- a.the costs of an arbitration shall be fixed by the arbitral Tribunal; b.the arbitral Tribunal shall specify
(i) the party entitled to costs,
(ii) the party who shall pay the costs,
(iii) the amount of costs or method of determining that amount, and
(iv) the manner in which the costs shall be paid.
Further Section 29 of the said Act also contemplate the manner in which it has to be made which reads as follows: Decision-Making by panel of Arbitrators (1) Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral Tribunal shall be made by a majority of all its members.
(2) Notwithstanding Sub-section (1), if authorized by the parties or all the members of the arbitral Tribunal, questions of procedure may be decided by the presiding arbitrator.
24. A reading of the aforesaid provisions, what all it could spell out clearly is a legal requirement under law, apart from a minimum but basically, is that the arbitrary award shall have to be in writing and shall be signed by the arbitrary Tribunal. Further the said decision has to be made by the majority unless a reason is given for any omitted signature. Admittedly, in this case, the arbitrary Tribunal consists of three arbitrators namely the respondents 2 and 3 and Justice Bhate (Retd). The award is stated to have been pronounced on 23-12-2002. In the award, as produced before the Court below, it only contains the signatures of two arbitrators, i.e., the respondents 2 and 3. The name of the presiding Officer namely Justice Bhate (Retd) is neither shown or typed, not it contains his signature. Therefore, it can only follow that the award which was stated to have been pronounced on 23-12-2002 was only by two arbitrators but not by the presiding arbitrator Justice Bhate (Retd). Even on a look at the proceeding sheet and the contents of the award, it is nowhere indicated much less shown specifically any reasons or explanation for the absence or omission of the arbitrator Justice Bhate (Retd.,) either in person or by signature. The counsel on either side are not able to explain in any manner properly. Nor there was such attempt any time at either of stages to show any valid justification. In fact as contemplated under the aforesaid provision, the question of subsequent jurisdiction also does not arise since it contemplates the signatures of all the arbitrators and in case where there is a majority or any absence, the reasons have to be found placed in the proceedings of the award for the absentee. In this case, admittedly, either in the arbitrary proceedings or in the award, no such reasons have been existing or shown. The record is surprisingly silent all the way. It is also noticed that in the entire award, each of the page contains only two signatures from the 1st page till last page. Further, it has been shown during the course of the documents, the copy of the award which has been furnished to the parties which is signed on 23-12-2002 contained signatures of only two arbitrators. Another glaring lapse which is most staring is that in fact on all the pages of the award at the bottom, the names of the three arbitrators are typed. However, the signatures are found only that of the two arbitrators but there is no signature of the presiding arbitrator i.e., Justice Bhate (Retd.,) on any of the pages of the entire award. It is stated that the true copy of the original award which has been furnished to the parties was filed in Civil Court at the time of the filing of the present application challenging the award. The entire award runs into 39 pages and the said copy which has been filed is shown as true copy of the original. Therefore, it is amply clear that as per the requirement under those provisions, there is no award duly signed by all the arbitrators and there is no reason also for the absence of the signature of omitted arbitrator. In fact, during the course of arguments, it has been contended that the presence of the presiding arbitrator was very much doubted at the place or on the date when the award was stated to have been pronounced i.e. on 23-12-2002. Even in this regard, there is no proper explanation or material forthcoming from any side as to the presence of the omitted arbitrator or for the absence of the signature of that arbitrator and any reasons for such a omitted arbitrator. This lapse is apart from serious is directly in the teeth of the mandate as contemplated under the aforesaid provision.
25. It is now well settled as laid down in Haridwar Singh v. Bagun Sumbrui that "in statues conferring a power to be exercised on certain conditions, the conditions prescribed are normally held to be mandatory, and a power inconsistent with those conditions is impliedly negatived. So, if a corporation is authorized to do an act, eg., to borrow at interest, subject to certain conditions, it must be deemed to have been prohibited to do the said act except in accordance with the provisions of the Act which confers the authority on it. Even an affirmative Act prescribing the conditions for exercise of a power conferred by it, is construed as mandatory. The rule stated in Bacon's Abr. is:
if an affirmative statute which is introductive of a new law directs a thing to be done in a certain way, that thing shall not, even if there be no negative words, be done in any other way.
26. Though an attempt has been made by the learned Counsel appearing for the respondent herein that such a plea at this stage in this appeal as to the absence of the signature of the presiding arbitrator is a belated one and further the signing of the award is only ministerial one and therefore, the absence would not have any effect as long as there is shown consensus among the arbitrators at the time of passing of the award.
27. It is contended on behalf of the appellant that since the absence of the signatures goes to the very root of the matter and affects the validity of the award and therefore, there is no bar, as such, in raising such a plea. On considering either of the submissions and also a perusal of the material, it is seen that the question as to whether there is a proper award or not in the manner in which it has to be, does not warrant any enquiry into the facts or appreciation thereof, more so, when it goes to the very roof of the award and its validity, on a basical error on jurisdiction and the perfect existence. A bare look at the award and the proceedings at the time of passing of the award are sufficient enough to see whether the award is perfectly in order and in the manner as contemplated under the law. Therefore, the objection raised on behalf of the respondent that such plea is raised first time does not hold water.
28. We have summoned the original award and compared vis--vis the Xerox copies of the award filed by either side and we are surprised to find that there is any amount of variance in between the Xerox copies which are being sought to be relied on by this Court with the original award. The absence of signature of the entire panel together is quite staring and there is no explanation nor any valid reason has been given at any stage of the proceedings not even at this stage, for the absence of one of them.
29. From the above and especially as provided for under Sub-clause 1 therein, necessarily it follow that the award has to be made in writing and shall has to be signed by the members of the Arbitral Tribunal i.e., by all of the members together. However, as contemplated under Sub-clause 2 above, in the event of any member of the Tribunal, omission to sign, the same has to be explained or stated as to the reason for such omission, and it is the signature of the majority of all members of the Tribunal, which is considered to be sufficient for making the valid award. Thus, it makes an obligatory on the part of each of the members of the Arbitral Tribunal to sign the award to make it as a valid one or in the absence of any of them necessarily it contemplates to state the specific reasons for such absence.
30. On a reading either of these two sub-clauses and the procedural format as contemplated that the expression as used therein, especially the word "shall" preceding the procedure, which mandates and such procedure has to be necessarily taken as a mandatory rather than a directory, much less a ministerial or an empty formality. Since, an award is a decision and the ultimate conclusion on the disputes arising between the parties, there cannot be any let go of the due procedure as formulated above. Whereas, in this case, admittedly and as observed by the counsel on either side and after looking at the original award vis--vis the Xerox copies of the award filed, sub-section including in this para there is no one signature by all the members including the Umpire therein and on a reading of the award and contents therein, there is no explanation for the absence of other members at a time when each of them is signing. In fact, a reading makes as if the award is being made by all of them together, but which is dispelled by the existing signatures therein and the record.
31. In view of the same, we hold that the award as has been made by the Arbitral Tribunal is in the teeth of the mandate as contemplated under both the provisions reading together namely Section 31 and 29 of the aforesaid Act. Hence, we hold that the same is not valid and cannot be enforceable.
32. For the aforesaid reasons, we allow the appeal and set aside the judgment and decree in O.P. No. 633 of 2003 dated 30.10.2004 on the file of the Chief Judge, City Civil Court, Hyderabad, by allowing the application filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 and set aside the award dated 23.12.2002 passed by the respondents. Both parties shall bear their own costs.