Calcutta High Court
Gontermann Peipers (India) Ltd vs Shv Energy Pvt. Ltd on 25 June, 2020
Equivalent citations: AIRONLINE 2020 CAL 452
Author: Ashis Kumar Chakraborty
Bench: Ashis Kumar Chakraborty
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Original Side
A.P No. 478 of 2018
Gontermann Peipers (India) Ltd.
Vs.
SHV Energy Pvt. Ltd.
BEFORE:
The Hon'ble JUSTICE ASHIS KUMAR CHAKRABORTY
For the petitioner : Mr. Jishnu Chowdhury, Adv.
Mr. Jayanta Sengupta, Adv.
Mr. Sagnik Basu, Adv.
Ms. Dreamy Jain, Adv.
For the respondent : Mr. Rupak Ghosh, Adv.
Mr. Susanta Kumar Dutt, Adv.
Mr. S. Banerjee, Adv.
Judgment on : 25.06.2020
Ashis Kumar Chakraborty, J.
In this application under Section 34 of the Arbitration & Conciliation Act, 1996, as amended by the Act 3 of 2016 (hereinafter referred to as "the Act") the petitioner has prayed for setting aside of the award made and published by the sole arbitrator, a former Judge of this Court on April 16, 2018. The respondent herein was the claimant and the present petitioner was the respondent in the arbitral proceeding. By the impugned award 2 the arbitrator directed the petitioner to pay Rs.1,13,51,880/- to the respondent within eight weeks, failing which the said amount shall carry further interest at the rate of 10%, per annum till realisation.
The brief facts, which are relevant for deciding this application, are that the petitioner is involved in the activity of Roll Foundry and has his factory at Pailan, Diamond Harbour Road, West Bengal (hereinafter referred to as "the said factory"). For the purpose of its manufacturing activity at the said factory the petitioner requires supply of Liquefied Petroleum Gas (hereinafter referred to as "LPG"). The respondent carries on business, inter alia, of import, storage, filling, sales distribution of LPG and other ancillary work. The parties herein entered into a Commercial Bulk Gas Supply Services agreement dated April 30, 2003 and an addendum agreement dated July 1, 2010 (hereinafter collectively referred to as "the principal agreement") whereby the respondent agreed to supply Bulk LPG at the said factory of the petitioner for utilisation in its manufacturing unit, inter alia, on the terms and conditions mentioned therein. Under the principal agreement, the respondent was to instal two 10 MT LPG Gas Bullets which are metallic tanks together with other equipments (hereinafter referred to as "the Gas System") for storage of LPG at the said factory to be supplied by the respondent. As per the principal agreement the petitioner would procure at least 80 MTs of LPG per month, exclusively from the respondent by paying monthly facility 3 charges of Rs.27,000 plus taxes for the Gas System. The parties further agreed that in the event of any failure on the part of the petitioner to procure the guaranteed lifting of 80 MTs of LPG quantity from the respondent, the petitioner shall pay an amount of Rs.1,500 per MT to the respondent. The principal agreement further provided that the petitioner, as the customer would furnish security to the respondent, the supplier by way of bank guarantee of Rs.60,00,000 which could be encashed by the respondent in case of any outstanding dues of the petitioner. Clause 8 of the principal agreement contemplated that in the event of any failure of the petitioner to make any payment falling due to the respondent the latter might, without prejudice to any other rights available to itself, after service of thirty days notice, suspend further delivery of LPG till clearance of payment in full by the former and/or claim interest at the rate of 8% on all outstanding dues. It was also a term of the principal agreement that the composite value of the Gas System is Rs 60,00,000 and the petitioner would have an option to buy the Gas System after completion of ten years or in between the tenure of the agreement at a price based on the rate of depreciation of 5% on tanks and 10% on other machineries per year (calculated on WDV method).
The respondent alleged that in discharge of its obligation under the principal agreement it installed and commissioned the Gas System at the said factory. The petitioner initially made payment for the LPG procured from the respondent. Subsequently, 4 however, the petitioner defaulted in making payment for the LPG procured by it. It was further alleged that based on business relationship and subsequent meeting held with the petitioner on March 9, 2015 it supplied LPG to the petitioner who continued to fails to make payment for the LPG supplied. The respondent further claimed that contrary to the understanding between the parties, the petitioner violated the principal agreement and purchased LPG from third parties but used the Gas System. By a notice dated October 27, 2014 the respondent called upon the petitioner to pay the outstanding amount of Rs.2,16,32,465/- which, among other outstanding things, included outstanding amount towards LPG supplied to the petitioner amounting to Rs.2,09,64.756/-, outstanding Gas System rentals of Rs.77,288.00/- and interest on account of delayed payment at the rate of 18% amounting to Rs.5,90,421.00/-. By an electronic mail dated May 18, 2015 the petitioner assured the respondent that it shall clear the entire outstanding dues by December, 2015 by issuing a Letter of Credit. The petitioner also assured to clear the entire rental and interest component by May, 2015. By an electronic mail dated June 22, 2015 the respondent informed the petitioner that as on that date there outstanding due was Rs.73,71,578.40/- and out of the said outstanding the petitioner was to pay Rs.12,28,770/- within June 15, 2015. According to the respondent, the petitioner did not live up to its representation and did not pay the entire outstanding dues of the respondent. The petitioner, however, denied its liability to pay any amount 5 to the respondent and further claimed that it is entitled to Rs.80,26,000/- from the respondent on account of loss of production due to irregular supply of LPG. Thereafter, the parties invoked the arbitration agreement between them as contained in the principal agreement and by an order dated August 30, 2016 passed in an application under Section 11(6) of the Act, a learned Single Judge of this Court appointed the arbitrator to adjudicate the disputes between the parties.
In the arbitral proceeding the respondent, as the claimant filed its statement of claim claiming an award of Rs.1,14,76,118/- against the respondent. The break up of the claim of the respondent for the said sum of Rs.1,14,76,118/- as mentioned in Paragraph 19 of the statement of claim was as follows:
SL. Amount (Rs.) Amount (Rs.)
Particulars
1 Add:
Outstanding towards cost
of LPG purchased 32,63,398.00
2 Interest on overdue cost
of LPG @ 8% p.a from the
date of respective 4,07,394.00
outstanding
3 Rentals for the months
of May 2015 to Dec 2016
@ Rs. 25,762.50 per 5,15,250.00
month including taxes
4 Interest on overdue cost
of Rentals @ 8% p.a from
the date of respective 36,076.00
outstanding
5 Failure to purchase
minimum assured quantity
(TOP) between Nov 2014
till Dec 2106 @ 8% p.a 22,66,440.00
from the date of
6
respective outstanding
6 Interest on TOP amount
of Rs. 22,66,440 @ 8%
p.a from the date of 1,37,560.00
respective outstanding
7 Preliminary Expenses as
fair compensation and
liquidated damages as 1,50,000.00
per clause 9 (b) (I) of
the Agreement
8 Cost of Gas System
payable to Claimant
owing to breach of 60,00,000.00
Principal Agreement
9
Total Outstanding 1,27,76,118.00
10 Less: Outstanding amount
adjusted towards
encashment of Bank
Guarantee: 13,00,000.00
11 Balance amount payable
by Respondent:
1,14,76,118.00
The respondent also claimed an award for interest at the rate of 18% per annum on the said sum of Rs. 1,14,76,118/- from the date of filling of the statement of claim till the date of payment by the petitioner.
The petitioner contested the respondent's claim in the arbitral proceeding. In its counter statement the petitioner denied all material allegations made against it in the statement of claim. It was alleged that the supply of LPG made by the respondent had been irregular and not up to the petitioner's satisfaction, but considering the long standing business relationship, the petitioner continued to procure such supplies from the respondent upon making regular payment therefore. The petitioner, however, claimed that since April, 2013 it faced 7 certain financial stringency for which its payment to the respondent had been irregular. For the said reason, as demanded by the respondent on three diverse dates between July 2013 and December 2013 it furnished three separate bank guarantees for a sum of Rs.53,00,000/- in favour of the respondent. The petitioner further alleged that the purpose of furnishing of the said three additional bank guarantees in favour of the respondent was to ensure regular supply of LPG in compliance with the principal agreement. Although the petitioner regularly made payment as demanded by the respondent, but the latter kept on demanding further payment failing which the petitioner was threatened with stoppage of supply of LPG. The respondent wrongfully and without service of thirty days prior notice to the petitioner, as mandatorily required by the principal agreement, suspended supply of LPG to the said factory. Thus, according to the petitioner, it was compelled to procure supply of LPG at a much higher cost from open market. The petitioner claimed that in view of the wrongful stoppage of supply of LPG to the said factory by the respondent it suffered production loss to the tune of Rs.80.26 lakh and the same was communicated to the respondent by electronic mail dated June 26, 2015. It was also the case of the present petitioner in its counter-statement that upon scrutiny of the invoices raised by the respondent it was found that the respondent had been charging more than 30% over and above the market rate for supply of LPG at that point of time and, as such, during the period of January, 2015 to May, 2015 the 8 respondent had raised invoices which were over and above the market rate of supply of LPG, by Rs.20.68 lakh and the same was communicated to the petitioner by the respondent through its letter dated July 15, 2015. The erratic supplies coupled with demand for unsubstantiated claims by the respondent, the petitioner was compelled to procure supply of LPG from third parties to keep its production running in order to keep its commitment to its clients. The petitioner further alleged that the respondent invoked the three bank guarantees furnished to the tune of Rs.53,00,000/- and encashed the same to its benefit with mala fide intent. In the counter-statement the petitioner raised a counter-claim against the respondent for Rs. 1,84,07,596/-, out of which Rs.80.26 lakh was on account of loss suffered by it for non-supply of LPG by the respondent, Rs.60.08 lakh was on account of excess rate charged by the respondent and Rs.43,73,596/- on account of interest at the rate of 18% from June 26, 2015 till February 18, 2017, that is, till the date of filing of the counter-claim. According to the petitioner, by a letter dated August 09, 2015 the respondent made a purported claim of Rs.1,23,75,531.94/- without giving credit to the amount received by it through invocation of the bank guarantees of Rs.53,00,000/. The petitioner disputed each of the claim raised by the respondent in its statement of claim. It further alleged that as per the ledger maintained by itself Rs.19,13,454/- remains outstanding to the respondent. Thus, the petitioner claimed that after setting off for the said sum of Rs.19,13,454/- receivable 9 by the respondent an award for Rs.1,64,94,142/- be made against in its favour. The respondent further filed the rejoinder denying the allegations of the petitioner in the counter statement. The petitioner also filed sur- rejoinder and the respondent filed its rejoinder.
After considering the averments made by the parties in their respective pleadings, the arbitrator framed the following issues:
1. Is the proceeding maintainable in its present form and prayer?
2. Had there been a legal and valid agreement between the parties?
3. Had there been any act in violation and breach of terms of the agreement dated 30th of April, 2003?
4. Is the Claimant entitled to get an award for an amount of Rs.1,14,76,118/- along with interest @ 18% per annum for such breach of the terms and conditions of the said agreement?
5. Is the Claimant entitled to get any further amount towards facility charges (rentals) or any other consequential reliefs?
6. Is the Respondent entitled to get an award towards counter claim, as prayed for? If so, to what extent?
7. To what other relief, the Claimant is entitled. 10
The respondent, as the claimant in the arbitral proceeding adduced evidence through two witnesses, who were also cross- examined. The petitioner adduced evidence through one witness, who was also cross-examined. In the impugned award the arbitrator held in view of Section 19 of the Act, the power of the Arbitral Tribunal to conduct the proceeding in the manner it considers appropriate includes the power to determine the admissibility, relevance, materiality and weight of any evidence and there is little scope for ventilating any grievance in regard to the documentary evidence produced by the parties before the Tribunal. The arbitrator referred to clause 6 of the principal agreement and held that there is clear mention that Gas price will vary based on the gas cost ex source for which the invoice from the sources will be the documentary evidence of the same. He also referred to clause 8 of the principal agreement and held that as per the said clause if the customer fails to make any payment, the supplier may without prejudice to any other right available under the agreement suspend further delivery of Gas till clearance of payment in full by the customer, thirty days notice will be given to the customer before suspending Gas supply and/ or on all dues from the due date of payment until actual payment or recovery of the dues in full is effected. While summing up, the arbitrator held that it may very well be said that the claim, as made in the present proceeding is based on consistent and cogent oral evidence of two witnesses and the same derived support and strength from the documentary exhibits. On the other 11 hand, according to the arbitrator, there is nothing significant on behalf of the respondent (the present petitioner) to establish its counter claim. The arbitrator further held the claimant has been successful to establish its claim to the satisfaction of the judicial conscience of the Tribunal and law does not necessarily demand dotting of every 'i' and cutting of every 't'. Leaving aside of the seventh claim of claimant, the respondent herein, for Rs.1,50,000/- as compensation and liquidated damages which was not pressed, the arbitrator allowed all other claims of the respondent. By the impugned award, the arbitrator held that the present petitioner is liable to pay Rs.1,13,26,118/- only to the present respondent and that the respondent cannot be denied interest at the rate of 18%, per annum on the said amount of Rs.1,13,26,118/- till the date of payment by the respondent, the petitioner herein. The petitioner was further directed to pay interest, on the said amount of Rs.1,13,26,118/-, at the rate of 18% from the date of filing statement of claim till the payment. The arbitrator also allowed the claim of Rs.25,762.00/- by the claimant, the respondent herein towards Gas System facility charges rental from the date of filing of the statement of claim till realisation.
The petitioner has challenged the impugned award on various grounds, including the ground that impugned award does not disclose any reason to allow the claims of the present respondent and rejecting its counter claims. Mr. Jayanta Sengupta, learned counsel, led by Mr. Jishnu Chowdhury contended that from a 12 reading of the impugned award it is evident that the same merely records the case made out by the parties in their respective pleadings and the arguments advanced by the learned counsel appearing for the respective parties. He argued that although the parties did not make any argument with regard to the first and the second issue framed by the arbitrator, but from a reading of the impugned award it is evident that while dealing with the issue nos. 3 to 7, the arbitrator only recorded the arguments advanced by the learned advocates appearing for the respective parties, but the impugned award does not record any reason of the arbitrator with regard to any of the issue nos. 3 to 7 framed by him. According to Mr. Sengupta, inasmuch as in the impugned award the arbitrator has not rendered any reason to allow the claims of the present respondent and to reject the counter-claims of the petitioner, the same is in violation of the mandatory requirement of law laid down in Section 31(3) of the Act and liable to be set aside for being in conflict with the public policy of India. In support of such contention, learned counsel relied on the decisions of the Supreme Court in the cases of Som Datt Builders Ltd. -vs.-State of Kerala reported in (2009) 10 SCC 259 and Anand Brothers Pvt. Ltd.-vs.- Union of India & Ors. reported in (2014) 9 SCC 212, the Single Bench decision of this Court in the case of Kinnari Mullick -vs- Ghanshyam Das Damani reported in (2014) 3 WBLR(Cal) 259, as well as a Single Bench decision of the Delhi High Court in the case of Jai Singh -vs- DDA & Ors. reported in 2008(3) Arbi LR 667 (Delhi).
13
Leaned counsel for the petitioner drew the attention of this Court to the electronic mail dated June 22, 2015 (appearing at page 110 of the petition) issued by the respondent to the petitioner alleging its outstanding due as on that date to be Rs. 73,71,578/- and that dispatch quantity will be intimated only after reflection of payment by the petitioner in their account. Admittedly, on diverse dates of July 2015 the respondent encashed the three bank guarantees furnished by the petitioner for a sum of Rs.53,00,000/-. Thus, according to Mr. Sengupta, the arbitrator fell into an error of law to allow the first claim of the respondent for Rs.32,63,398/- on account of outstanding LPG purchase without disclosing any reason therefore. It was next submitted that neither in the statement of claim nor in the affidavit evidence of the witnesses of the present respondent there was any proof of its second claim of Rs.4,07,394/- for interest on overdue cost of LPG from the date of respective outstanding and once again, the arbitrator, without disclosing any reason, made the impugned award allowing the said claim of the respondent. It was submitted that the arbitrator appears to have accepted the contention of the claimant/ respondent that under clause 8 of the principal agreement it has chosen the path of requiring the customer to pay interest at the rate of 8% per annum on all outstanding dues. Further, as stated in sub paragraphs (i), (j), (k) and (x) of paragraph 7 of the counter statement the present respondent stopped supply of LPG to the petitioner and in fact, from the month of June 2015 the 14 respondent stopped supply of LPG to the said factory of the petitioner. The respondent's first witness in his cross examination (Q.29) stated that pending clearance of the outstanding the claimant, the respondent herein decided to suspend supply of gas to the petitioner. However, the said witness could not refer to any notice of thirty days intimating the petitioner that it would stop supply of LPG for nonpayment of its bills. Therefore, according to the petitioner, it was proved that it was the claimant, the respondent herein who committed breach of clause 8 of the principal agreement and the impugned award allowing all claims of the present respondent and the finding of the arbitrator that there is nothing significant on behalf of the respondent, the petitioner herein to establish its counter claim is perverse and shocks the conscience of the Court. In any event, the arbitrator has not rendered any decision on the third issue framed by himself.
It was further argued for the petitioner, when the respondent itself stopped supply of LPG to the petitioner from the month of June, 2015, the latter could not be held liable to pay any amount to the former on account of any shortfall to lift the minimum guaranteed quantity of LPG. In this connection, the petitioner referred to the said electronic mail dated June 22, 2015 issued by the respondent, as well as paragraph 10 of the affidavit evidence of respondent's second witness. It was emphasised that in the present case the arbitrator once again 15 committed a patent illegality in allowing the fifth and sixth claim of the respondent of Rs.22,66,440/- and Rs.1,37,560/- for alleged failure of the petitioner to purchase minimum assured quantity of LPG between November, 2014 till December, 2016, together with interest thereon and that too without disclosing any reason for allowing the said claims of the respondent. It was further contended that as per the terms of the principal agreement, the respondent would all along remain the owner of the said Gas System installed at the said factory, but the petitioner would have an option to purchase the same at a depreciated value. In their cross examination, both the witnesses of the present respondent admitted that the petitioner did not exercise any option to purchase the said Gas System nor did it prevent the respondent to remove the Gas System from the said factory. It was urged that the arbitrator committed a patent illegality in making the impugned award holding the petitioner liable to pay Rs.60,00,000/- to the respondent on account of cost of the sad Gas System, once again without disclosing any reason to allow such claim of the respondent. It was vehemently urged that by the impugned award the arbitrator has also allowed the third and fourth claim of the respondent on account of rentals of the Gas System from the month of May, 2015 to December, 2016 and interest on overdue cost of rentals amounting to Rs.5,15,250/- and Rs.36,076/-, respectively without disclosing any reason. According to Mr. Sengupta, even if it were accepted for the sake of argument that the petitioner was liable to pay the cost of the 16 Gas System after depreciation, in that event also the arbitrator committed patent illegality in making the petitioner liable to pay Rs.25,762/- to the respondent towards Gas System facility charges (rental) from the date of filing the statement of claim till realisation, that too without disclosing any reason. It was stressed that in the present case, when all the claims of the respondent, including pre-reference interest were liable to be rejected the arbitrator committed a patent illegality to allow the claim of the respondent for interest pendente lite and interest upon award. Further, in any event when the agreed rate of interest payable for delayed payment of any bill of the respondent was 8% per annum, the arbitrator without disclosing any reason allowed the claim of the respondent for interest at the rate of 18% per annum from the date of filing of the statement of claim till the date of the date of payment by the present petitioner. It was submitted that assuming but not admitting that the arbitrator could allow the claim of the respondent for interest at the rate of 18% per annum from the date of filing of the statement of claim till the date of payment by the present petitioner, even then the decision of the arbitrator to direct that any failure of the petitioner to pay the awarded amount to the respondent shall carry further interest at the rate of 10% per annum amounts to grant of interest upon interest which is prohibited by law and the said decision is once again patently illegal. Mr. Sengupta strenuously contended that, in the present case, when it was proved that the respondent had 17 on various occasion stopped supply of LPG to the petitioner without issuing thirty day prior notice, the arbitrator committed a patent illegality in holding that there was nothing significant on the respondent, the petitioner herein to establish it's counter-claims. Similarly, clause 6(b)(ii) of the principal agreement stipulated that the gas price will vary based on the gas cost ex source for which the invoice from the source will be the documentary evidence of the same. However, the first witness of the present respondent during his cross examination (Qs. 23, 24 & 25) could not substantiate that the alleged invoices raised by the supplier from whom the respondent purchased LPG, were made over to the present petitioner. Therefore, according to the petitioner, the arbitrator committed a further patent illegality in rejecting the second counter claim of the petitioner on account of inflated invoices raised by the respondent which were over and above the market rate of LPG amounting to Rs.60, 08,000/-. Further, when the respondent stopped supply of LPG to the petitioner without issuing thirty days prior notice, the arbitrator committed a patent illegality to reject the first counter-claim of the petitioner for Rs.80,26,000/- on account of loss. Urging all these grounds it was strenuously argued for the petitioner that in the present case the impugned award made and published by the arbitrator is liable to be set aside not only on the ground of non-disclosure of any reason but also for being perverse and patently illegal, as well as shocking the conscience of this Court.
18
On the other hand, Mr. Rupak Ghosh, learned counsel appearing for the respondent, strongly argued that it is well settled law that when the arbitrator has made his award after well appreciating the evidence adduced by the respective parties, the Court exercising power under Section 34 of the Act would not sit in appeal and interfere with the arbitral award by re- appreciating the evidence adduced by the respective parties. It was further argued that in the instant case, the arbitrator in his award has allowed the claims of the claimant, the respondent herein after interpreting the terms of the principal agreement as well as by appreciating the evidence adduced by the respective parties and the petitioner cannot maintain this application. It was further submitted that by no stretch of imagination the impugned award made by the arbitrator can be held to vitiated by any illegality, nor can it be said that the impugned award does not disclose any reason for allowing the claims of the respondent and rejecting the counter claims of the petitioner. Mr. Ghosh did not dispute the well settled principle of law as laid down in the decisions cited by the petitioner that an award made by an arbitrator disclosing no reason is liable to be set aside under Section 34 of Act. He, however, submitted that the said legal principle has no application in the present case. It was emphasised that there is no merit in any of the contentions raised by the petitioner to challenge the impugned award and, as such, this Court would reject the present petition. 19
I have considered the pleadings of the respective parties filed before the arbitrator, the evidence adduced by the respective parties in arbitration and the arguments advanced by the learned counsel of the respective parties before this Court. The relevant terms of the principal agreement, which are germane for deciding the claims and counter-claims of the respective parties before the arbitrator have already been discussed above. As pointed out by the petitioner, in answer to question 29 of his cross-examination, the first witness of the respondent admitted the decision of the respondent to suspend supply of gas to the petitioner, pending clearance of the outstanding. The said witness could not point out any document to substantiate that such decision of the respondent was preceded by a mandatory thirty days notice under clause 8 of the principal agreement. Further, by the electronic mail dated June 22, 2015 the respondent informed the petitioner that it's outstanding as on that date is Rs. 73, 71, 578. 40/- and the dispatched quantity will be intimated only after reflection of the petitioner's payment amount in their account. Admittedly, in the first week of August, 2015, the respondent invoked and encashed all the three bank guarantees furnished by the petitioners for a sum of Rs.53, 00,000/- and from the month of June, 2015 the respondent did not supply LPG to the petitioner for alleged non-payment of it's dues by the petitioner. In these facts, I find the petitioner to be justified in it's contention that the impugned decision of the arbitrator to allow the first claim of the respondent, in its 20 entirety towards outstanding cost of LPG purchase is not only devoid of any reason but the same is also patently illegal and perverse. The impugned award even does not disclose any reason to allow the second claim of the respondent its entirety on account interest on overdue cost. Similarly, when the respondent on it's own volition decided to stop supply of LPG to the petitioner on various occasions and permanently from June, 2015, once again the impugned award allowing the fifth and sixth claim of the present respondent of Rs.22,66,440/- and Rs.1,37,560/- respectively, on account of alleged failure to purchase minimum assured quantity between November, 2014 till December, 2016 and interest thereon at the rate of 8% per annum is not only devoid of any reason, but the same is also patently illegal as well as perverse. Further, as per the principal agreement the respondent was the owner of the Gas System, but the petitioner was entitled to exercise the option to purchase the said Gas System at a depreciated value. As pointed out by learned counsel for the petitioner, both the witnesses of the respondent in their cross examination admitted that the respondent did not attempt to remove the Gas System from the said factory nor did the petitioner exercise any option to purchase the Gas System. In these facts, once again I accept the contention of the petitioner that the impugned award made by the arbitrator allowing the eighth claim of the respondent of Rs.60, 00,000/- on account of cost of Gas System payable to the respondent owing to breach of the principal agreement is not only bereft of any reason, but the 21 same is also perverse and patently illegal. Even if it were admitted for the sake of argument that the petitioner was liable to pay the cost of the Gas System, in that event also the impugned award allowing the third and fourth claim of the petitioner for rentals of the Gas System for the months of May, 2015 to December, 2016, as well as the decision of the arbitrator directing the petitioner to pay Rs.25,762/- towards Gas System facility charges (rental) from the date of filing of the statement of claim till realisation is also bereft of any reason, and such decision is also patently illegal. In fact, I further find substance in the argument advanced by the petitioner that when the respondent stopped supply of LPG to the petitioner without issuing thirty days prior notice and did not provide the petitioner with the ex source invoices issues by the source, the respondent committed breach of clauses 8 and 6 (b)(ii) of the principal agreement and, as such, the decision of the arbitrator not to hold the respondent to have committed breach of principal agreement is also vitiated by patent illegality and perversity.
When the direction of the arbitrator to the present petitioner to pay Rs.1,13,26,118/- to the claimant, the present respondent cannot be sustained on the grounds mentioned herein above, the decision of the arbitrator to allow the claim of the present respondent on account of pendente lite interest and interest upon award, that too at the rate of 18% per annum cannot be sustained. The petitioner was even correct to contend that the impugned decision of the arbitrator directing that any failure of 22 the present petitioner to pay the awarded amount to the present respondent within eight weeks from the date of the award, would make the petitioner liable to pay further interest at the rate of 10% per annum till realisation amounts to a direction to pay interest upon interest, which is prohibited by law. In these facts the finding of the arbitrator that while summing up, it may very well be said that the claim, as made in the present proceeding is based on consistent and cogent oral evidence of two witnesses and the same have derived effective support and strength from the documentary exhibits is patently illegal and shocks the conscience of this Court.
On the facts of the case, as discussed above, the decision of the arbitrator to allow the aforementioned claims of the respondent on the basis of his observation that law does not necessarily demand dotting of every 'i' and cutting of every 't' shocks the conscience of this Court.
In the face of the facts that the respondent never issued the mandatory notice for stopping supply of LPG to the petitioner and did not provide the petitioner with the ex source invoices issued by the main supplier of LPG it is difficult to sustain the decision of the arbitrator to reject the counter claims of the present petitioner on account of losses suffered by it and excess rate charged by the respondent. The respondent did not dispute the principle of law laid down in decision of the Supreme Court in the case of Som Datt Builders (supra) and the Single Bench decision of this Court in the case of Kinnari Mullick (supra) 23 that an arbitral award bereft of any reason is liable to be set aside by Court under Section 34 of the Act. As held by the Supreme Court in the case of Associate Builders -vs- Delhi Development Authority, reported in (2015) 3 SCC 49 an arbitral award can be set aside under Section 34 of the Act, if the same is vitiated by perversity or any patent illegality or if the award shocks the conscience of the Court. In view of the above findings I have already arrived at, the impugned award is vitiated by non-disclosure of any reason, the same is also patently illegal, perverse and shocks the conscience of this Court.
For all the foregoing reasons, the present application by the petitioner succeeds and the impugned award made and published by the arbitrator on April 16, 2018 is set aside.
There shall, however, no order as to costs.
Urgent certified website copies of this judgment, if applied for, be made available to the parties subject to compliance with requisite formalities.
(ASHIS KUMAR CHAKRABORTY, J.)