Bombay High Court
Kishore Textiles Mills vs Union Of India, Through The Director Of ... on 28 April, 2000
Equivalent citations: 2000(3)BOMCR688, 2000(3)MHLJ395
Author: Vijay Daga
Bench: Vijay Daga
ORDER Vijay Daga, J.
1. The award dated 24th December, 1998 delivered by Shri S.B. Sharan, Additional Legal Adviser to the Government of India, Ministry of Law and Justice, New Delhi, who was appointed as a sole arbitrator by the Director General of Supplies and Disposals, New Delhi is the subject matter of challenge in this petition.
2. The facts in brief relevant to the subject matter are as under :
The petitioners were invited to participate in an advertised tender enquiry for supply of drawers cotton short white at the rate of Rs. 6/- per pair of quantity of 53,495 pairs. The petitioners supplied about 33,625 pairs and failed to supply the balance quantity. The delivery period was extended by the respondents but the petitioners did not accept the same.
3. The petitioners claimed to have offered 33,625 pairs with some additional quantity, which the respondents refused to accept and rejected the same. The period of delivery was extended from 15th May, 1992 to 30th September, 1992 however the same was not accepted by the petitioner. According to Clause 14(7)(3) of DGS & D-68 (Revised), the terms as applicable to the contract and agreement between the parties, the risk purchase was permissible within six months from the last date of delivery. The respondents, after expiry of the contractual period, on 14th November 1992, issued risk purchase enquiry for 19,870 pairs but cancelled the same on 7th January, 1993. The respondents demanded a sum of Rs. 11,58,183/- from the petitioners. The petitioners since failed to meet with the said demand of the respondents. The dispute was raised and the same was referred to the sole arbitrator as referred to hereinabove.
4. The petitioners challenged the submissions set up by the respondents and stated that the balance quantity of pairs could not be supplied due to force majeure circumstances. It is further stated by the petitioners that the offer of the petitioner to supply 33,625 pairs with some additional quantity was wrongfully rejected by the respondents and that the extension of delivery period was unilateral and the same was not acceptable to the petitioners. It is further stated that the petitioner being a small scale industrial unit it was exempted from payment of security deposit but the same was wrongfully insisted by the respondents and they were compelled to make security deposit of Rs. 14,979/-. It was further placed in defence that the risk purchase was permissible only within a period of six months from the date of delivery but the said purchase was made after the expiry of period of six months and that was also cancelled. As such, the respondents did not suffer any loss much less the loss claimed in arbitration dispute. The Arbitrator tried the said dispute between the parties and passed an award on 24-12-1998 awarding claim in favour of Union of India for having incurred an extra amount of Rs. 1,15,183/- on account of risk purchase at higher rate and at the same time rejected substantial part of counterclaim details of which are given in the award.
5. The petitioners have challenged the aforesaid award on the following grounds :
(a) that the arbitrator has not given any opportunity to the petitioners to make its submissions;
(b) that the arbitrator, without giving any reasons, has rejected the substantial part of the counter claims set up by the petitioners.
The award specifically makes a reference that the arbitrator has taken into account the documents filed and pleadings raised by the parties as also the arguments put forth by the Counsel for both the parties in the arbitration proceedings in question. The petitioners have not brought anything on record to demonstrate that no opportunity of hearing was given to the petitioners. Even no specific ground in this behalf has been raised in the petition challenging the assertion made by the arbitrator in the impugned award wherein the arbitrator has specifically mentioned that the documents and pleadings were perused and the arguments of the parties, through their Counsel, were heard. Under these circumstances, I do not find any substance in the contention of the petitioners that no opportunity was given to the petitioners by the arbitrator during the course of arbitration proceedings.
6. The second question raised on behalf of the petitioners is that no reasons have been given by the arbitrator either while rejecting their claim or while allowing the claim of the respondents. In order to appreciate this submission, if one turns to the award in question then it would be clear that while awarding the claim of the respondents - Union of India, the arbitrator has given some reasons in support of his findings. He could have given better and exhaustive reasons but that can not be a ground to set aside the award. Therefore, no fault can be found with this part of the award. However, the arbitrator has not given reasons while rejecting the counter claims set up by the present petitioners. The said counter claims of the present petitioners are dealt with in the following manner :
"AWARD COUNTER CLAIM NO. 1.
The claim for release of withheld amount is disallowed being not justified. AWARD COUNTER CLAIM NO. 2.
The claim for Rs. 6 lac on account of damages is disallowed being not justified. AWARD COUNTER CLAIM NO. 3.
The claim of Rs. 29,960/- on account of deducted towards security is not allowed, being not justified. AWARD COUNTER CLAIM NO. 4.
Claim for Rs. 5,000/- towards balance price of stores supplied is allowed, if due, along with interest @ 18% per annum, from 1-2-1998 till actual realisation of the payment. AWARD COUNTER CLAIM NO. 5.
Costs of proceedings is disallowed, being not justified."
7. The perusal of the aforesaid part of the award would unequivocally go to show that no reasons whatsoever have been given by the arbitrator while rejecting the Items Nos. 1, 2, and 3 of the counter claims set up by the petitioner. The Apex Court in the matter of Tamil Nadu Electricity Board v. The Bridge Tunnel Constructions, has thus said:
"32. In this regard, section 31(3) of the Arbitration and Conciliation Act, 1996 provides thus :
"(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."
33. The Parliament has expressed the legislative judgment that the award shall state reasons upon which it is based unless parties have agreed otherwise or the award is covered on agreed terms under section 30 of the new Act.
34. Thus, the law on the award, as governed by the new Act, is other way about of the preexisting law; it mandates that the award should state the reasons upon which it is based. In other words, 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 of the New Act, the award should state the reasons in support of determination of the liability/non-liability....."
In the aforesaid legal position, the impugned award to the extent it deals with item Nos. 1 to 3 above of counter claim being in breach of principles of natural justice and against the mandate of section 30 of the Act, cannot stand to the scrutiny of law and as such findings thereon are liable to be set aside.
8. Accordingly, the petition partly succeeds. The proceedings are remitted to the arbitrator for reconsideration of the item Nos. 1 to 3 of the counter claims set up by the petitioners with direction to arbitrate and decide the same within a period of four months from the date of receipt of writ from this Court afresh after giving opportunity of hearing to the parties.
9. The parties are directed to appear before the arbitrator on 5-6-2000.
10. The petition is partly allowed in terms of the above order and stands disposed of accordingly with no order as to costs.
11. Petition partly allowed.