Delhi District Court
M/S. P. R. Textiles vs M/S Orion Fabrics Pvt. Ltd on 3 December, 2012
IN THE COURT OF AJAY GOEL: ADDITIONAL DISTRICT JUDGE-II
(NORTH): DELHI.
CS-260/11
In the Matter of:
M/s. P. R. Textiles
C/o M/s Hotel Punnu International
7 Court Road, Amritsar
Through its Partner
Sh. Rakesh Kumar Mahajan. .....Petitioner.
VERSUS
1. M/s Orion Fabrics Pvt. Ltd.
668/1, Gali Ghanteshwar
Katra Neel, Chandni Chowk, Delhi
Through its Director,
Pawan Kumar Shah/
Pradeep Kumar Shah.
2. Sh. Rajinder Pal Singh
3. Sh. Anurag Bagaria
4. Sh. Raj Kumar Tulsiyan
Arbitrators of Penal No. 1
Delhi Hindustani Mercantile Association (Regd.)
1210/16, Main Market, Chandni Chowk,
Delhi.
5. M/s Pee Kay Synthetics
Gali Murgi Khana Batala Road,
Amritsar, Punjab. ......Respondents.
CS-260/11 Page No.1/10
Date of Institution: 08.11.2011
Date of Assignment to this court: 14.08.2012
Date of Arguments: 17.11.2012
Date of Order: 03.12.2012
JUDGMENT
1. Vide this order, I shall dispose off the objection petition under section 34 of the Arbitration and Conciliation Act, 1996 filed by petitioner against the arbitral award dated 02.08.2011 passed by respondent No. 2 to 4.
2. The brief facts of the case are that petitioner and the respondent No. 1 entered into an agreement on 01.4.2006 at Amritsar for purchasing 2 machines P-7100, 153, Sulzer projectile machines of Rs. 8,75,000/- each total amounting to Rs. 17,50,000/- and as stated respondent No. 1 paid a sum of Rs. 5,00,000/- in advance by cheque No. 051411 dated 01.4.2006. As stated respondent made further payment of Rs. 12 lacs paid by demand draft payable at Amritsar to the petitioner firm on 12.4.2006. As stated respondent No. 1 visited at Amritsar on 12.4.2006 and paid a sum of Rs. 12 lac by DD to the petitioner but they made request to purchase 2 machines from M/s Pee Kay Synthetics for value of Rs. 12, 16, 800/- including tax and as stated on request of respondent No. 1 the petitioner firm transferred a sum of Rs. 12 lac in the account of M/s Pee Kay Synthetics towards cost of said 2 machines by cheque and the respondent No. 1 issued a cheque of Rs. 16800/- for remaining amount in favour of M/s Pee Kay Synthetics and had taken the delivery of the said 2 machines from M/s Pee Kay Synthetics after fully satisfying with the same. It was further submitted that respondent No. 1 on same day also made purchased of fabrics from the petitioner for a value of Rs. 6, 03, 400/- vide Bill No. 000871 dated 12.4.2006 against remaining amount of Rs. 5 lac lying with the petitioner firm and they had issued a cheque bearing No. 051422 CS-260/11 Page No.2/10 dated 12.4.06 for a sum of Rs. 1,03,400/- for remaining bill amount as full and final after taking the delivery of the goods from the petitioner on 12.4.2006 along with 2 machines. As stated the cheque issued by respondent No. 1 for an amount of Rs. 1,03,400/- was returned dishonoured with remark "Payment Stopped" by the banker of the respondent No. 1. As stated the petitioner firm served notice U/s 138 of NI Act to the respondent but no payment was made by respondent No. 1 despite service of the notice and sent a false reply to the said notice. Thereafter, the petitioner filed the complaint U/s 138 of NI Act against respondent No. 1 which is pending in court of law at Punjab. It was also stated that cheque of Rs. 16800/- issued by the respondent No. 1 in favour of M/s Pee Kay Synthetics against sales tax amount on said 2 machines was also returned as dishonoured with remark "Payment stopped". As stated respondent No. 1 with malafide intention sent a false and frivolous notice dated 08.08.2006 to the petitioner and the respondent No. 5 thereby they claimed a sum of Rs. 5 lac alongwith interest @ 24 % pa. as third loom was not sent by the petitioner as per alleged agreement. As stated the petitioner firm sent a reply dated 18.8.2006 to the said notice to the respondent No. 1 through registered AD and UPC. It was also stated that petitioner firm shocked and surprised on receiving the notice from the respondent No. 2 to 4 in respect of alleged claim filed by respondent No. 1 against the petitioner and respondent No. 5 regarding alleged claim of Rs. 5 lacs along with interest @ 24 % p.a. on the basis of alleged arbitration agreement. As stated the petitioner firm sent the reply on 18.9.2006 through his advocate to the said claim to the respondent No. 2 to 4 and taken various preliminary objections that the petitioner firm M/s P R Textile is not the member of Delhi Hindustani Mercantile Association, Chandni Chowk, Delhi and no other documents on record regarding arbitration agreement between the petitioner and respondent No. 1 however following issues were framed on 30.5.2007:
a) Whether there is any arbitration agreement between the claimant and the respondent?CS-260/11 Page No.3/10
b) Whether Mercantile Association has got the jurisdiction to entertain this dispute?
c) Whether the claimant is entitled for claim amount alongwith interest and cost. If yes, then the interest at what rate?
d) Relief.
3. As stated the petitioner firm and respondent No. 1 filed their respective evidence by way of affidavits and matter was contested on merits. The respondent No. 2 to 4 passed the award on 02.08.2011 against the petitioner firm and respondent No. 5 and copy of said award was sent to the petitioner firm by registered AD and speed post but no copy of award was received by petitioner firm. As stated petitioner firm came to know about passing of the award when the respondent No. 1 appeared in the proceedings U/s 138 of NI Act at Amritsar in the month of September 2011 and informed the court that the award has been passed against the petitioner firm at Delhi in Arbitration proceedings by the respondent No. 2 to 4. As stated the petitioner firm immediately applied for the certified copies of award on 24.10.2011 in the office of respondent No. 2 to 4 and the certified copies of award was received by the petitioner firm on 31.10.2011. Hence, it was prayed that present petition may be allowed and award dated 02.8.2011 may be set aside as passed by respondent No. 2 to 4 in reference No. 115/06-07.
4. Reply was filed on behalf of respondent No. 1 to the petition/objection filed by petitioner wherein preliminary objections were raised stating that petition as filed by petitioner firm is not maintainable as same is hit by limitation and has been filed beyond the prescribed period of three months. It was also stated that petitioner has not come with clean hands and concealed the material facts. On merits, it was stated that initially the terms of agreement were settled between the respondent No. 5 and the respondent No. 1 at Delhi at the office of petitioner firm to supply the two machines, Model P-7100 of 153 for a consideration of Rs. 17,50,000/ and an advance of Rs. 5 lac was paid by the respondent no. 1 in advance and remaining Rs. 12,50,000/- was to be paid at the CS-260/11 Page No.4/10 time of delivery of the said machines but later on the plan was changed and demand was raised for three machines and original of earlier agreement was destroyed. It was further submitted that respondent No. 1 raised the demand for purchase of 3 machines from the petitioner firm and respondent No. 5; two having width of 153 for a price of Rs. 5, 85, 000/- and one 73 for the price of Rs. 5, 80,000/- alongwith accessories, CST @ 4% chargeable extra from the present respondent and this agreement was settled on 10.4.2006 and in pursuance to the said agreement the present respondent had paid Rs. 5 lac on dated 01.4.2006 by way of cheque which was adjusted later on and a fresh D.D. Of rs. 12 lac dated 10.4.2006 was paid to the respondent No. 5 and petitioner firm and for the remaining amount of 4% CST, the present respondent tendered following amount to the respondent No. 5 and petitioner firm, by way of two cheques bearing No. 051421 for a sum of Rs. 16,800/- dated 12.4.06 drawn in the favour of M/s P K Synthetics and second cheque bearing No. 051422 for a sum of Rs. 1,03,400/- dated 12.4.2006 in the favour of M/s P R Textile amounting to total sum of Rs. 12,00,000/- towards the CST @ 4% on the three machines as stated above. It was stated that alleged bill No. 871 dated 12.4.06 is forged and fabricated as such have no legal value since the respondent No. 5 and petitioner firm had not mentioned about the said bill in either reply to the notice or in the previous reply filed by them in this court and also not proved in evidence. In reply to the bouncing of subsequent cheques of Rs. 1,20,200/- it is submitted that since the respondent No. 5 and petitioner firm had not sent the 3 machine on dated 12.10.2006 therefore the payments of subsequent cheques were stopped by the respondent No. 1. It was also submitted that there was nothing to be shocked and surprised after receiving the said notice sent by respondent No. 1 as the same was legally recoverable from the petitioner firm and respondent No. 5. It was stated that award was rightly received by the petitioner firm and respondent No. 5 and thus the petition is liable to be dismissed on this ground of limitation itself as the same has been filed beyond the period of CS-260/11 Page No.5/10 limitation. Rest of the contents of petition were denied and it was prayed in the reply to petition that objection/petition be dismissed as filed by petitioner/objector.
5. Rejoinder was filed by petitioner to the reply filed by respondent No. 1 wherein contents of petition/objection were reiterated and those of reply were denied by petitioner.
6. I have perused the Arbitration award as well as file which has been placed by Arbitrator.
7. The Cl. for the respondent has firstly argued that the objections petitions are time barred. The award is dated 2.8.11 and it was sent by registered on 4.8.11 at the Delhi address of the petitioner. The Cl. for the petitioner has argued that he has filed the objections on 5.11.11. I have perused the arbitration proceedings. The registered AD has not been delivered as one of them is dated 6.8.11. Thus even if 2-3 days are given for service purpose still the objections are within limitation as filed within 90 days. Hence this objection of the respondent is overruled.
8. The Cl. for the petitioner/objector has drawn my attention to the arbitration proceedings. It has been argued by the petitioner that P.K. Synthetics alongwith respondent Orion Fabrics are member of Mercentile Association and there was no agreement of objector as well as respondent but it was with other firm P.R. Textiles, objector but still the Mercentile Association conducted arbitration proceedings by becoming the arbitrator on its own. The Cl. has relied upon agreement dated 1.4.06 agreed between P.R. Textile, objector and Orion Fabrics and no where the parties have consented to the arbitration clause and further bare perusal of this document shows that P.K. Synthetics is not at all party to the said agreement. As per this agreement two weaving machines were to be purchased by Orion Fabrics from P.R. Textile for total sum of Rs.8,75,000/- each out of which Rs.5 lakhs were paid on 1.4.06. Number of cheque is also mentioned. It is also submitted that further an amount of Rs.12 lakhs were paid by respondent to the P.R. Textile, thus total amount of Rs. 17 lakhs were received by P.R. Textiles and the Cl. for CS-260/11 Page No.6/10 objector as well as for P.K. Synthetics i.e. the objector in second petition has fairly conceded that he had received in all Rs. 17 lakhs from the respondent. In the impugned award dated 2.8.11 it has been mentioned that the cheque was given to P.R. Textiles. It is argued by the counsel for objector that later on the respondent had agreed to purchase two machines from P.K. Synthetics by adjusting the amount already paid to the P.R. Textiles in the account of P.K. Synthetics and in fact further amount of Rs. 12 lakh was also paid to the P.R. Textile by Orion Fabrics Pvt. Ltd. on account of purchase of these two machines. It is argued that P.R. Textile had given cloth of Rs6,03400/- after adjusting the remaining amount of Rs.5 lakh and balance of Rs. 103400/- was payable by respondent which in fact was paid by cheque no. 051422 dated 12.4.06 but the same bounced. It was also submitted that the cost of machine was re-adjusted and after adjustment of Rs. 12 lakhs the total cost came to Rs.12,16800/- out of which remaining amount of Rs. 16,800/- was paid through one cheque which also bounced. The Cl. for the petitioner has fairly argued that these facts are duly admitted by him and rather he is admitting his liability to deliver the clothes as well as machines. The machines in fact were delivered and even admitted in award though there was no written agreement to the same effect. From the perusal of the award it transpires that the arbitrator on his own mentioned that cloth was not supplied though the challan is on the record depicting the amount of cloth as well as the payment of remaining amount alongwith adjustment of the advance of Rs. 5 lakh and thus it becomes matter of trial and evidence which should not been summarily adjudicated without proper evidence. Further the liability if any arising of P.R. Textile cannot be saddled on P.K. Synthetics merely because they are sister concerns. Surprisingly the arbitrator himself on his own has extended the agreement for three machines. The opening line which says that there was agreement of three machines is not made out from the sale agreement dated 1.4.06. Thus in these circumstances the arbitrator has misconducted himself and has made out a new case.
CS-260/11 Page No.7/10Disputed questions of facts are involved in the present matter and when specific finding is required to be given on whether goods were supplied or not or whether the contract was for two machines or three machines. Moreover if there was no original agreement with P.K. Synthetics qua cloth as well as machines then P.K. Synthetics could not have been made liable for any payment. The observation of arbitrator that because other objector P.K. Synthetics as well as respondent no. 1 are members of Mercantile Association, hence matter is required to be decided by arbitrator of Mercantile Association who has power to adjudicate ipso facto is against the law and cannot be allowed to sustain. The arbitrator had bifurcated the initial agreement with P.R. Textile into two and had given joint payment of Rs. 4,83200/- without any basis by two common awards clubbing the facts without disclosing the liability and the reasons thereof. Cl. for objector has placed reliance upon Arbitration Law Reporter 2004(1) SC Sathyanarayana Brothers Vs. Tamil Nadu Water Supply and Drainage Board in which it was held that " An award ignoring very material and relevant documents throwing light on the controversy to have a just and fair decision would vitiate the Award as it amounts to misconduct on the part of the Arbitrator."
9. It is also made out that some criminal prosecution regarding the bouncing of the cheque is pending in the court of Amritsar but the effect of the same has also not been considered and the pleadings therein have not been considered. In the bill itself it was mentioned that all the disputes are subject to Amritsar jurisdiction only then it was necessary for the arbitrator to decide the jurisdiction issue also and to see as to where the contract was concluded.
10.Ld. Cl. for objector has rightly relied upon AIR 1997 SC 1376 Tamil Nadu Electricity Board vs. M/s Bridge Tunnel Constructions and others and ONGC vs SAW Pipes 2003(4) SCALE wherein inter alia it was observed that CS-260/11 Page No.8/10 "Arbitrator enjoined to decide about arbitrability of certain claims and decision thereon cannot be given by implication, hence non speaking award granting lump sum amount is liable to be set aside". Reliance was also placed upon 1998(supplementary) Arbitration Law Reporter 11 Arihant Industries Vs UOI) and argued that when the claim of the respondent was rejected without giving the reason then it means question is not decided by the arbitrator and matter should be remanded back and further the jurisdiction issue should be decided first. The counsel has also relied upon 1998(2) Arbitration law Reporter 248 UOI vs Jai Society woods works wherein it is mentioned that if arbitrator has not assigned any reason, the award should be remanded back. In AIR 1997, Hon'ble Supreme Court of India 3603(Premier Fabricators Vs Heavy Engineering Corporation Ltd. full Bench Judgment by Hon'ble Supreme Court it has been laid down that umpire should give his findings of claims and reason and without this award is illegal. The Ld. Counsel for the UOI has relied upon Sudarshan Trading Company vs. Govt. Of Kerela AIR Supreme Court AIR 1989 Supreme Court 890 and argued that even if reasons have not been given then court cannot interfere with the award. This judgment is not applicable on two counts to the fact of the case. Firstly on the ground that this is division bench judgment and the judgment relied upon by the objector is full bench judgment and further more this ruling was under consideration before the Hon'ble Supreme Court in 1997,S.C. 3603. Thus no help can be taken by the counsel for UOI from this ruling. The counsel for the UOI has also relied upon AIR 1989, Supreme Court ,777 and argued that in appeal in arbitration matter, court cannot sit as a appeal. This legal aspect is not disputed but herein CS-260/11 Page No.9/10 the arbitrator has misconducted himself as stated above, hence there is no question of court as sitting in appeal but rather this court has been deprived of the reasons prevailing in mind of arbitrator to pass the award. In these circumstances, there is no question of any reappraisal of the evidence. The counsel for respondents failed to justify the award on the test of principles of natural justice and thus in these circumstances as held by Hon'ble Supreme Court Supra the award is not sustainable and is accordingly set aside. However parties are at liberty to seek appropriate remedy for settlement of their grievances. File be consigned to record room.
Announced in open court (AJAY GOEL)
on 03.12.2012 ADJ-II(North)/Delhi.
CS-260/11 Page No.10/10