Bangalore District Court
M/S Shree Ganesh Steel Rolling Mills Ltd vs Stcl Limited on 29 March, 2022
1
Com.A.S.No.118/2017
In The Court of LXXXIV Additional City Civil and Sessions
Judge (CCH-85 Commercial Court) Bengaluru
Dated this the 29th day of March 2022
Present: Smt.H.R.Radha B.A.L., LL.M.
LXXXIV Addl. City Civil and Sessions Judge,
(CCH-85 - Commercial Court)
Bengaluru
Com.A.S.No.118/2017
Plaintiff: M/s Shree Ganesh Steel Rolling Mills Ltd.,
14-A, Ennore High Road, Thiruvottiyur,
Chennai - 600019, Rep. by its Director,
Mr.A.Abdul Rahaman
(By Sri.Dhyan Chinnappa, Senior Advocate
for Sri.K.Arun Kumar, Adv.)
Vs
Defendant: STCL Limited, (a subsidiary of STC of India
Ltd., a Govt. of India undertaking) Formerly
having its Registered office at No.166/2,
13th Main Road, Vasanth Nagar, Bengaluru -
560 052
Presently at :
'Chandrodaya', No.10/1, 2nd Main, 30th
Cross, 7th Block, Jayanagar, Bengaluru -
560 082, represented by its Manager
(Mktg) Sri.B.Jagadeesh Kumar, under the
Letter of Authority by its Managing Director
Sri H.P.Girish
(Rep. by Sri.C.M.Desai, Adv.)
Respondent: Shri Justice H.N.Nagamohan Das (Retd.),
Former Judge High Court of Karntakam
Hon'ble Sole Arbitrator, Arbitration &
Conciliation Centre - Bengaluru (Domestic
& International), "Khanija Bhavan" III Floor,
East Wing, Race course Road, Bengaluru -
560 001
2
Com.A.S.No.118/2017
Date of Institution 16-09-2017
Nature of the petition U/s 34 of the Arbitration and
Conciliation Act, 1996
Date on which
judgment pronounced 29-03-2022
Years Months Days
Total Duration
04 06 13
LXXXIV Addl. City Civil and Sessions Judge
(CCH-85 Commercial Court) Bengaluru
JUDGMENT
This petition U/s 34 of the Arbitration and Conciliation Act, 1996 ('the Act' in short) is filed by the respondent in A.C.No.128/2016 for setting aside the arbitral award dated 20.06.2017 passed by the Arbitral Tribunal ('AT' for short).
2. The arbitration suit was transferred from CCH-63 to CCH-39 by notification dated 26-02-2018 and then to CCH-83 (Commercial Court) by notification dated 10-01-2019. By a subsequent notification dated 07-08-2021, it was withdrawn from CCH-83 and assigned to this court.
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Com.A.S.No.118/2017
3. The parties are referred as per their original rank before the AT for the sake of clarity.
4. Brief facts leading to filing of this petition are that the respondent entered into SEVEN contracts with the claimant between April 2008 an August 2008 to import waste and scrap of Iron and Steel consisting of heavy melting scrap. In terms of the contract, the claimant imported cargo worth Rs.9,1,1,974/- from overseas sellers and stored the same in the warehouse of the Container Corporation of India Ltd near Chennai Port ('CONCOR' for short). The respondent hypothecated the imported cargo in favour of the claimant on 13.09.2008, but failed to lift the same by paying the full value. Disputes arose between the parties with regard to payment of the value and lifting of the cargo. After exchange of notices, the claimant filed CMP 29/2016 U/s 11 of the Act and the same came to be allowed on 19.08.2016 by the Hon'ble High Court and AT was appointed.
5. The claimant presented its claim for Rs.31,83,35,681/- in all claiming that the cargo was imported under seven back to back sale contracts by paying full value to the respective suppliers. The respondent being the ultimate buyer negotiated with the overseas sellers regarding the import price, quantity and other 4 Com.A.S.No.118/2017 terms. However, due to the respondent's failure to pay the value and take delivery of the cargo within the stipulated time, it incurred storage charges. The respondent did not honour the cheques issued towards discharge of its liability and therefore, they suffered loss of profit. The respondent, as such, is liable for the following amounts:
(i) Amount due under the books of A/c - Rs.08,96,18,184/-
(ii) Interest @ 18% p.a. from 01.09.2009 to 31.10.2016 - Rs.22,61,00,000/-
(iii) Loss of profit at trade margin of 2.25% of 2.25% - Rs. 21,17,497/-
(iv) Legal expenses - Rs. 5,00,000/-
TOTAL - Rs.31,83,35,681/-
6. The respondent filed statement of objections and raised counter claim for Rs.25,60,28,344/- with interest, contending the claim is time barred. Separate notices ought to have been issued invoking the arbitration clause under the respective contracts and consent of parties cannot be a ground to entertain single claim in the respect of different causes of action. The claimant is involved in Rs.1250 Crore scam. Due to sheer mismanagement and maladministration the claimant suffered financial loss. Its bank accounts were declared as non 5 Com.A.S.No.118/2017 performing assets, as such LC payments to the overseas sellers could not be made within the stipulated time; and no payment was in fact made to the foreign supplier. It was ready to pay Rs.50 lakh at a time, lift the cargo to that extent and sell cargo until the time imported cargo stored at CONCOR was fully sold, but the claimant did not to permit the same.Iit was even ready to make adhoc payment, but the claimant's bankers insisted for full payment. The order of injunction dated 19-09-2009 in A.A.No.710/2009 prevented them from lifting the cargo. The claimant also got attached their Director's Son's property at Chennai, the factory premises at Thiruvottiyur worth Crores of rupees. Having collected collected documents relating to their land at Uppu Velur worth Rs.3 Crore assuring to supply material worth Rs.2 Crore, the claimant refused to supply the same.
C.C.306/2010 filed by the claimant U/s 138 of NI Act was dismissed on 21-12-2011. The claimant did not permit lifting of the cargo and also obtained a restraint order to that effect in A.A. 6(a). That due to failure on the claimant's part to auction the imported cargo lying at CONCOR, the cargo got rusted and deteriorated during heavy rains that lashed Chennai during the 6 Com.A.S.No.118/2017 Cyclones 'Nisha', 'Thane', 'Nikam' and 'Vardah'. In respect of the contract entered in August and September 2008 for importing 2000 MT Shredded Steel Scrap from H.J Hansen, the claimant failed to open LC for more than four months after the materials arrived at Chennai port. As a result, it had to pay Rs.60,00,000/- towards demurrage charges and cost of the material. This severally impacted its financial position leading to the account being classified as NPA on 30-09-2010. It also suffered loss to the tune of Rs.3,47,02,459/- and Rs.3,50,31,418/- on account of the breach committed by the claimant and the failure to safeguard imported cargo; auction of 1265 MT of materials by the customs department for non payment of customs duty, resulted in loss of Rs.1,63,35,772/-. Further, as the claimant did not clear 12 consignments for more than three months, there was acute shortage of raw materials and consequently, no production in its rolling mills. On account of the same it suffered loss of Rs.1,23,60,000/-. The claimant is therefore, liable for Rs.25,60,28,344/- with interest from January 2009 till the date of payment.
7. The claimant filed rejoinder contending that the counter claim is only a ploy to avoid the liability. They have already 7 Com.A.S.No.118/2017 initiated proceedings to recover the loss of Rs.1250 Crore from the defaulter and CBI has already filed charge sheet in that matter; and the same has nothing to do with their transaction with the respondent. Only on establishing the LC, the foreign supplier supplies the goods. In spite of the global crisis during 2008-09, they established LCs of 90/180 days in terms of the contract and much before the bank accounts were declared as non performing assets. The cargo was imported by paying Rs.9,91,10,974/- and stored at CONCOR. The respondent failed to lift the same by paying the full value and this resulted in accumulation of huge interest excluding storage, demurrage and other charges. They never prevented the respondent from taking delivery of the cargo. However, selective and preferential lifting of the cargo without fully paying the value was not permitted, as the same was contrary to the contract. They have challenged acquittal order passed in C.C.306/2010 in Crl.A.No.312/2012 and the same is pending. The interim order in A.A. was modified by directing both parties to maintain status quo, but the respondent did not attempt to get the same vacated or modified on the ground of changed circumstances. Nor did the respondent come forward to settle the dues. 8
Com.A.S.No.118/2017
8. The AT framed the following issues based on the pleadings:
ISSUES
1. Whether the claimant proves that the respondents committed breach of seven contracts of sales as specified in para 11 of the claim statement?
2. Whether claimant proves that they are entitled to recover Rs.9,41,10,974/- towards the full value of cargo charges paid by them to the respective foreign suppliers?
3. Whether the claimant prove that they are entitled for interest, loss of profit and legal charges in all a sum of RS.22,42,24,907/-?
4. Whether the respondents prove that the claimants failed to perform their part of obligation under the seven contracts of sales referred in the claim petition?
5. Whether the respondents prove that the claimants failed to take precautionary measures resulting in loss to the extent of Rs.25,60,28,344/- under various heads as claimed in para 26 of the counter claim?
6. What orders?
9. Pw1 was examined for the claimant and Rw1, for the respondent; Ex.P1 to P21 and Ex.R1 to R30 were got marked through them.
10. After hearing the arguments and considering the material on record, the AT partly allowed the claim and the counter claim 9 Com.A.S.No.118/2017 by impugned award, directing the respondent to pay Rs.8,96,18,184/- to the claimant towards value of the imported cargo and to lift the goods from CONCOR within six weeks from the date of the award. If the respondent failed to lift the cargo, the claimant to sell the same in accordance with law and after adjusting the payments made by the respondent, to realize the balance. The AT further directed the claimant to pay interest at 18% p.a. on the amounts paid by the respondent, from the date of issuing instructions to CONCOR to stop delivery of goods, but rejected other counter claims.
11. The respondent/plaintiff has filed this petition challenging the impugned award on the ground of being contrary to public policy and fundamental policy of Indian law, without jurisdiction and patently illegal. The claim was time barred as the contracts were of the year 2008 and the last payment was accepted in 2009; declining to consider the same is in contravention of Sec.3 of the Limitation Act r/w Sec.43 of the Act. Secondly, the contract value was Rs.9,41,10,974/- and the AT awarded Rs.8,96,18,184/- in favour of the claimant without any evidence to support the claim or that they had paid the overseas sellers and without explanation as to how the amount stood reduced. 10
Com.A.S.No.118/2017 Awarding the claim in favour of the one who committed breach is against the public policy of India. Assuming that there was breach on its part in refusing to take delivery of the goods by paying full value, the claimant could only sue for damages and not the price of the goods, in view of Sec.56 of the Sale of Goods Act. Further, the claimant failed to take steps to mitigate the losses; and the value of the material lost, owing to claimant's failure to preserve the cargo should have been determined by the AT. The material evidence that the claimant had obtained an order restraining it from lifting the goods has been ignored. The counter claims are rejected without reasons and the same is in violation of Sec.31(b) of the Act. Payment of Rs.3.32 Crore to the claimant under the contract is not at all considered by the AT. There is no proper quantification of the amounts held to be due to each party and the AT has not properly appreciated the facts, the law and also the evidence.
12. The claimant/defendant has filed statement of objections contending that the petition is not maintainable and no grounds U/s 34 of the Act are made out for setting aside the Arbitral award; the material on record is properly appreciated by the AT while answering issue No.1 in its favour so also in rejecting the 11 Com.A.S.No.118/2017 counter claims. The impugned award is well within the parameters of the dispute referred for adjudication. The impugned award is not contrary to the fundamental policy of Indian law. Nor is there any error apparent on the face of the record. The AT has given reasons for holding that the claim is not time barred by considering the various correspondence. After giving credit to the payment made by the respondent, the claimant restricted their claim to Rs.8,96,18,184/- and the same is rightly awarded by the AT. It was for the respondent to take the responsibility of protecting the quality and quantity of the cargo and they were only the facilitator. As a pledgee of the cargo they could not sell the same. Not lifting of the imported cargo due to the respondent's financial constraints, led to loss. There is no perversity in the impugned award. The AT has given valid and cogent reasons for the conclusions arrived at with respect to the counter claim under different heads in para 31 to 37. There was no material to establish payment of Rs.3.32 Crore towards the cargo by the respondent. On the other hand, the claimant had produced all the materials to show that the amount paid by the respondent was given due credit in its account and therefore the petition should be dismissed. 12
Com.A.S.No.118/2017
13. Heard arguments of the respondent/plaintiff. The claimant/defendant has filed written arguments.
14. The following authorities are relied upon by the respondent/plaintiff in the context of the argument that-
(i) If on facts proved, the arbitrator fails to draw proper inference or draws an inference which is untenable on the face of it resulting in miscarriage of justice, the award will be open to challenge [Ssangyong Engineering & Construction Co. Ltd. Vs NHAI - AIR 2019 SC 5041]
(ii) An adjudicatory authority must apply its mind is a fundamental policy of Indian law and an award which is on the face of it, patently in violation of the statutory provisions cannot be said to be in public interest. - [Associate Builders Vs DDA - AIR 2015 SC 620]
(iii) When there is complete perversity in the reasoning of the arbitral tribunal, it can be challenged U/s 34 of the Act and the court has to adjudicate the validity of an award based on the degree of particularity of reason required having regard to the nature of issues falling for consideration [Dyna Technologies Pvt. Ltd.
Vs Crompton Greaves Ltd. - (2019) 20 SCC 1] 13 Com.A.S.No.118/2017
(iv) By virtue of Art. 137 of the Limitation Act, the limitation period for reference of a dispute to arbitration or for seeking appointment of an arbitrator, before a court is three years from the date on which cause of action or the claim which is sought to be arbitrated first arises. In a commercial dispute once the applicant asserts the claim and the respondent fails to respond to the same, such failure is treated as denial of the claim giving rise to a dispute; and sending representations and reminders cannot extend the time - [Geo Muller Co. Pvt. Ltd.
Vs Rajasthan Vidyut Utpadan Nigam Ltd. -
(2020) 4 SCC 643]
(v) Arbitrator is a creation of the contract between the parties and he gets jurisdiction under the terms of contract. He is expected to interpret and apply provisions of the contract and pass an award accordingly. While passing the award he has to bear in mind the provisions of sec.28 of the Act, which clearly provides that in case of domestic arbitration in India, the Arbitral Tribunal shall decide the dispute in accordance with substantive law for the time in force in India. If the Arbitrator ignores the substantive law in force in India and passes an award, it is bound to cause injustice and is liable to be set aside.
[Hindustan Petroleum Corpn. Ltd. Vs
Batliboi Environmental Engineers Ltd.
14
Com.A.S.No.118/2017
Mumbai & Anr. - 2008 (2) Mh.L.J. 542]
(vi) If breach of the contract by not taking delivery of the consignment on the part of the respondent is established, the claimant's entitlement to damages for the loss suffered on account of such breach has to be considered in the light of steps if any taken by the claimant to mitigate the same - [The Cotton Corporation of India Ltd. Vs Chakolas Spinning and Weaving Mills Ltd.
- 2008 SCC Online BOM 1199]
15. While dealing with a petition U/s 34 of the Act, the court is required to advert to the grounds, examine whether the same are available U/Ss.34(2) and 34(2A) of the Act and if available, the court should consider the grounds separately to see whether the same is established as enunciated in Union of India Vs M/s Warsaw Engineers & Anr. [COMAP No.25/2021 dated 17.04.2021 (DB)].
16. In the light of the rival contentions of the parties, the following are the points that arise for consideration in this petition:
1. Whether the AT has failed to clearly answer the question of limitation and thereby contravened Sec.3 of the 15 Com.A.S.No.118/2017 Limitation Act?
2. Whether the finding on payments made by the claimant to overseas seller is without basis and not supported by evidence?
3. Whether awarding of Rs.8,96,18,184 towards the claim under the first heading is contrary to the evidence on record and the contract terms?
4. Whether the impugned award is in contravention of Sec.53 of the Indian Contract Act and Sec.56 of Sale of Goods Act?
5. Whether the respondent/plaintiff establishes that the AT has violated Sec.31(3) of the Act by not giving reasons for rejecting the counter claims?
6. Whether the respondent/plaintiff has made out the grounds for setting aside the arbitral award U/s 34(2)(b)
(ii) and 34(2A) of the Act?
7. What order?
17. My findings on the above points are :
Points 1 to 6: In the negative Point No.7 : As per the final order for the following 16 Com.A.S.No.118/2017 REASONS
18. Admitted facts of the case are that the claimant, a Govt. of India undertaking company under the Ministry of Commerce & Industries and a subsidiary of the State Trading Corporation Ltd, is into carrying on business in overseas buying and selling of various commodities. They also facilitate export/import business by funding/establishing letters of credit ('LC' for short) at a fixed profit margin in favour of and at the cost and risk of the business organizations.
19. The respondent entered into SEVEN back to back contracts with the claimant for purchase of waste and scrap of Iron and Steel consisting of heavy melting scrap between April 2008 an August 2008 and offered personal guarantee in respect of each of the transactions. The claimant imported the cargo in terms of the contract as detailed here under and stored the same in the warehouse of the Container Corporation of India Ltd ('CONCOR' for short) near Chennai Port:
Sl. Contract
Overseas Seller Amount in INR
No. Date
1. 08-04-2008 H.J.Hansan International A/s 1,65,74,528
2 11-05-2008 Metal Trading
61,55,139
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Com.A.S.No.118/2017
Sl. Contract
Overseas Seller Amount in INR
No. Date
3 11-05-2008 Voss International Ltd 2,25,69,954
4. 14-06-2008 H.J.Hansan International A/s 56,50,784
5. 21-06-2008 - do- 1,36,33,978
6. 09-07-2008 Voss International Ltd 18,25,51,688
7. 11-08-2008 Voss International Ltd 1,63,84,798
TOTAL 9,91,10,974
20. Point No.1: Sri.Dhyan chinnappa, the learned Senior Counsel for the respondent/plaintiff, submitting that the AT gets jurisdiction only when the claim is within the period of limitation, argues that the question of limitation cannot be decided as an abstract principle of law divorced from the facts; it has to be done by ascertaining the starting point. But AT has rendered finding on the question of limitation without any reference to the relevant dates and simply declined to go into the question, for the reason that the CMP was allowed in 2016. When the claim was time barred, order in CMP filed U/s 11 of the Act could not extend the period of Limitation. The impugned award should be set aside for contravening the mandate of Sec.3 of the Limitation Act.
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Com.A.S.No.118/2017
21. Per contra, the learned counsel for the claimant/defendant submits that the arbitration clause was invoked on 16-04-2009, within the stipulated time. There were several correspondences between the claimant and the respondent and only after the arbitrator communicated that he was unable to enter into reference, the claimant filed CMP 29/2016. All the relevant facts are considered by the AT and there is no contravention of the provisions of the Limitation Act.
22. Sec.3 of the Limitation Act no doubt casts duty on the AT to examine whether the claim for arbitration is barred by time, even if no defence is raised to that effect. By virtue of Sec.43 of the Act, the provisions of the Limitation Act apply to Arbitration proceedings as they apply to the proceedings in the court. As per Sub Sec.(2) of Sec.43 of the Act, arbitration is deemed to have commenced on the date referred in Sec.21.
23. There is no dispute that, after the dispute arose with regard to payments, the claimant got issued notice dated 17.03.2009 and the respondent, by its reply dated 06.04.2009 sought to take recourse to arbitration for resolution of the dispute. The AT has considered that the seven agreements were entered into between 08-04-2008 and 11-08-2008; and the last 19 Com.A.S.No.118/2017 payment was made by the respondent on 14-05-2009 as per Ex.R26. Subsequently, there was of mortgage by deposit title deeds by the respondent in the month of February 2010. This, as rightly submitted by the learned counsel for the claimant, amounts to acknowledgment of liability within the period of limitation.
24. The records disclose that after the arbitration clause was agreed to be invoked, there was disagreement as to the name proposed for being appointed as the arbitrator. This led to filing of CMP 29/2016 U/s 11 of the Act. The AT after making reference to the order dated 19-08-2016 in CMP 29/2016 has declined to accept the contention of the respondent.
25. Admittedly, the claimant issued notice dated 17-03-2009 to the respondent and its directors demanding payment of Rs.1,85,42,000/-, Rs.57,60,000/- and Rs.1,59,75,000/- being the amounts due under the dishonoured cheques drawn on Union Bank of India and issued by the respondent. By issuing the reply at Ex.P8 dated 06-04-2009, the respondent denied the liability contending that those cheques were issued as security and not for payment of the contract value. The respondent also sought that the claimant should get the dispute resolved through 20 Com.A.S.No.118/2017 arbitration, as per the terms of the contracts.
26. Thereafter, the claimant wrote to the respondent on 24-02-2010 vide Ex.R2 acknowledging and confirming receipt of the title deeds and demanding compliance of the agreed terms without seeking further extension to pay the overdue amount. But the respondent by writing Ex.R1 dated 28-06-2010 submitted the proposal for sale of the consignment on rotation and piecemeal basis stating that such procedure would help pay the value of the goods lifted and it also agreed to register simple mortgage by deposit of title deed. On 07-02-2013, the respondent wrote to the claimant vide Ex.R6 proposing to pay the amount by DD and also seeking instructions to CONCOR to release the material.
27. Ex.R5 dated 19-03-2013 goes to show that the respondent addressed letter to the customs authorities stating that the goods were imported by the claimant; though it was required to pay for the same and to get the goods cleared, could not do so because of the injunction order in A.A.No.710/2009. Ex.R22 would show that on 05-09-2014, the respondent addressed a letter to the claimant requesting them to take steps to collect documents relating to the auction conducted by the customs 21 Com.A.S.No.118/2017 department to recover the alleged dues considering that it was not allowed to lift the cargo without paying the value.
28. Thereafter, as seen from Ex.R21, on 09-09-2014 the respondent wrote to CONCOR requesting to stop delivery of the material to the auction purchaser alleging that CONCOR was doing so without informing it or the claimant and at the instance of the customs department. The series of communications referred above after the imported cargo reached Chennai are considered by the AT to conclude that the claim was well in time. Therefore, the argument of the respondent/plaintiff that the AT's finding on the question of limitation is without reference to factual aspects of the case or that it is in contravention of Sec.3 of the Limitation Act r/w Sec.43 of the Act, cannot be accepted. Accordingly, the point for consideration is answered in negative.
29. Points 2 to 4: Since inter related, these points are taken up together for consideration for convenience.
30. Sri.Dhyan Chinnappa, strongly argues that when the contract value was Rs.9,41,10,974/-, no reasons are forthcoming from the impugned award for reducing the same to Rs.8,96,18,184/-. Specially when no evidence was adduced by 22 Com.A.S.No.118/2017 the claim and to establish payments made to overseas sellers. Further, having come to the conclusion that both the parties acted in breach of the contract, awarding Rs.8,96,18,184/- in favour of the claimant towards the value of the imported cargo, by the AT would be against public policy.
31. Drawing the attention to Sec.53 of the Indian Contract Act and Sec.56 of the sale of goods Act, the learned Senior Counsel argues that considering that the claimant obtained restraint order in AA against the respondent and prevented it from lifting the goods; and having received payment of Rs.50,00,000/- and issued orders permitting lifting of the goods, the claimant directed CONCOR not to release the goods and also that the claimant being an unpaid seller was entitled only for compensation and not the value of the goods.
32. It is relevant to note here that as per the terms of contract the respondent agreed to purchase the entire quantity of waste and scrap of iron and steel consisting of heavy metal scrap on back to back sale conditions, where the export terms and conditions of overseas seller were binding on it. In fact, it was the respondent who negotiated the import price, quality and other import terms, at its risk and cost, being the ultimate buyer. 23
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33. As per Clause 11 of the contract, immediately on the arrival of the cargo the respondent should make payment as per schedule and take delivery of stocks. Clause 10 provides that the cargoes from the CONCOR should be taken delivery after making full payment. If the stocks are not taken delivery as per the delivery schedule during the funding usance period plus 30 days, interest of 18% is leviable for 30 days, for the balance actual value.
34. The clauses in the agreements also so to show that, the respondent was liable to effect payment whether the stocks reached the port and taken delivery or not and under any circumstances, the total credit period could not exceed 180 days from the date of Bill of Lading. It was also liable for demurrage, all other costs and risks, for the delay in taking delivery and in disposing of the stocks by the claimant in the open market, if the stocks are not taken delivery, as well as to pay penalty, costs including penal interest of 18% p.a. for breach of the terms and conditions.
35. Clause 13 shows that the cargoes sold on high seas had to be pledged in favour of the claimant by the respondent immediately on clearance of the goods from the port and it was 24 Com.A.S.No.118/2017 prohibited from entering into second high seas sale agreement with the third party, without prior written permission of STCL as the goods were pledged in its favour.
36. The mode of sale is dealt in clause 15 of the contract which provides that it was by way of financial arrangement for the full value of material to the satisfaction of the claimant or in lots from warehouse after receipt of 100% payment as advised by the claimant or in lots ex-bonded warehouse basis on receipt of 100% payment of lots on cash and carry basis or by establishment of inland LC in favour of the claimant through any nationalized bank.
37. A plain reading of the above clauses would make it clear that the claimant was only a facilitator, overseas sellers were the sellers and the respondent was the ultimate buyer. All the import terms were negotiated by the respondent with the overseas seller and the claimant had no role to play. The contracts entered into by them were on back to back sale terms and high-sea sale was effected in favour of the respondent and the cargo was pledged in favour of the claimant. Therefore, the argument, that the claimant is only an unpaid seller and could sue for damages in terms of Sec.56 of the Sale of Goods Act, 25 Com.A.S.No.118/2017 does not hold any water.
38. Coming to the applicability of U/s 53 of the Indian Contract Act, it is to be noted that as stipulated by the terms of the contract, the respondent was entitled to lift the cargo only on 100% payment. It could even lift the cargo in lots but only on payment of 100% value of the imported cargoes. Therefore, the claimant cannot be found fault with for refusing to allow the respondent to lift the same in a selective manner and on piece meal payment basis.
39. The question of the claimant disposing of the stocks in terms of Clause 16(5) of the contract comes into play only in the event of the respondent not lifting the same against payment, within the stipulated period of 180 days plus grace period of 30 days or if the cargo does not reach the discharge port within the scheduled time. Therefore, the AT has rightly concluded that, without paying the full value of the cargo there was no question of permitting the respondent to lift the same.
40. The cargo imported under the seven contracts between the parties was admittedly stored in the warehouse of the CONCOR, near Chennai and the same was imported by the claimant on 26 Com.A.S.No.118/2017 behalf the respondent, as per the terms of contract. There is a clear admission on the part of the respondent's witness that the imported cargo could not reach the warehouse of CONCOR, without the claimant issuing LC for the same. Therefore I am unable to accept the argument that there was no proof of payments made by the claimant to the overseas sellers.
41. As stated by Rw1, the claimant rendered services on fixed commission basis as specified in the contracts. The respondent had to pay the amount due to the claimant within 180 days and also obligated to pay the customs duty, but did not pay it either earlier to R5, R22 or subsequently. It is also seen from the records that the claimant issued permission to the respondent to lift material on payment of Rs.50,00,000/- but their bank who had issued the LC insisted for full payment. As such the claimant had to stop the respondent from lifting the stock from the CONCOR warehouse. This, by no stretch of imagination, can be termed as failure of the claimant to perform its part of the reciprocal promises and therefore, points 2 to 4 are answered in the negative.
42. Point No.5: Sec. 31(3) of the Act mandates that the arbitral award shall state the reasons upon which it is based, 27 Com.A.S.No.118/2017 unless the parties have agreed that no reasons are to be given, or the award is an arbitral award on agreed terms U/s 30 of the Act. The learned Senior Counsel has sought to assail the impugned award on the ground that it is not a speaking order when it comes to the counter claims and no reasons are assigned for rejecting the same and justice has not been done.
43. The impugned award would disclose that the AT has discussed the counter claims of the respondent at length in paras 31 to 37. The findings on the same as well as the findings on issue No.1 are based on appreciation of the facts and evidence on record. It is not the case of the respondent that the AT has failed to consider vital evidence or ignored material evidence on record, in coming to such conclusion. Such being the case, I do not find any merit in the respondent's argument in this and accordingly, answer the point for consideration in the negative.
44. Point No.6: It is argued that joinder of claims was not permissible as the seven contracts contained separate arbitration clause and the AT could not have entertained claim No.1. This too, in my considered opinion, does not deserve any consideration. Because, it is not the respondent's case that it 28 Com.A.S.No.118/2017 sought to lift the cargo imported under each contract separately and construction of arbitration clause should always start with the assumption that the parties, as rational businessmen are likely to intend that any dispute arising out of their commercial relationships/transactions should be decided by the same tribunal; and a single proceeding always eliminates the possibility of conflicting awards.
45. The respondent has failed to demonstrate that the interpretation placed by the AT on the contracts terms is unreasonable or that the impugned award is without jurisdiction or in contravention of section 3 of the Limitation Act, Sec.53 of the Indian Contract Act or Sec.56 of the Sale of Goods Act. The proviso to Sec.34(2A) of the Act prohibits setting aside the award by reappreciating the evidence or on the ground of erroneous application of law. Therefore, this court cannot reappreciate facts or evidence to come to a conclusion different from the one arrived at by the AT.
46. For the forgoing reasons and having regard to the ratio laid down in Ssangyong Engineering & Construction Company's case, under no circumstances the court can interfere with an arbitral award on the ground that justice has not been done, as 29 Com.A.S.No.118/2017 that would be an entry into the merits of the dispute contrary to the ethos of Sec.34 of the Act, the point for consideration is answered in the negative holding that the respondent has failed to make out the grounds U/s 34(2A) of the Act or Sec.34(2)(b)(ii) of the Act for setting aside the impugned award.
47. Point No.7: In the result, I pass the following ORDER The petition U/Sec.34 of the Arbitration and Conciliation Act is hereby dismissed.
Issue copy of the judgment to the parties through e-mail as provided U/o XX Rule 1 of CPC, if mail ID is furnished.
(Dictated to the stenographer, transcribed and typed by her, corrected and then pronounced by me in the open court on this the 29th day of March 2022) (H.R.Radha) LXXXIV Addl. City Civil and Sessions Judge, (CCH-85 Commercial Court) Bengaluru