Madras High Court
Faqir Chand Vinod Kumar And Company vs Tamil Nadu Civil Suppliers Corporation ... on 24 July, 2018
Author: Abdul Quddhose
Bench: Abdul Quddhose
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 24.07.2018 CORAM: THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE O.P.No.267 of 2011 Faqir Chand Vinod Kumar and Company, No.4094-95, Naya Bazaar, Delhi - 110 006. ... Petitioner Vs 1.Tamil Nadu Civil Suppliers Corporation Limited, represented by its Chairman cum Managing Director, Head Office No.12, Thambysamy Road, Kilpakkam, Chennai - 600 010. 2.Mithulal Jain 3.V.Bhoovalingam ...Respondents Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, praying to set aside the award dated 19.08.2008 passed by the third respondent, the Arbitrator; and set aside the Award dated 20.02.2008 passed by the third respondent and to order the first respondent to pay costs to the petitioner. For Petitioner : Mr.K.Manoj Menon For Respondents : Mr.C.Selvaraj for R1 No Appearance for R2 and R3 O R D E R
The instant petition has been filed under Section 34 of the Arbitration and Conciliation Act, challenging the Arbitral award dated 19.08.2008, passed against the petitioner.
2. The brief facts leading to the filing of the instant petition are as follows:
(i) The petitioner is a regular Contractor with the first respondent Office and they have been regularly supplying Green Grams to the first respondent. The petitioner was awarded the Contract pursuant to the tender floated by the first respondent and the first respondent entered into an agreement dated 12.09.2005, by which the petitioner was awarded the contract for the supply of Green Grams to the first respondent.
(ii) According to the first respondent, the petitioner committed breach of contract by not supplying the green grams as per the terms and conditions of the contract.
(iii) In view of the dispute between the parties, the dispute was referred to Arbitration by the 1st respondent, who has appointed the 3rd respondent as the sole Arbitrator to decide the dispute on merits. The 3rd respondent Arbitrator acted upon the reference and after issuing notice to the parties to the dispute has passed an award dated 19.08.2008, directing the petitioner to pay a sum of Rs.35,88,236/- together with interest and costs.
3. Aggrieved by the Arbitral Award dated 19.08.2008, the instant petition has been filed by the petitioner.
4. Heard Mr.K.Manoj Menon, learned counsel appearing for the petitioner and Mr.C.Selvaraj, learned counsel appearing for the first respondent.
5. According to the learned counsel for the petitioner, the primary ground for challenge in the instant petition is that the findings of the Arbitrator are erroneous and perverse and the Award is patently illegal.
6. According to the learned counsel for the petitioner, despite the petitioner having filed the counter before the Arbitrator, it was never considered by the Arbitrator in the impugned award.
7. According to the learned counsel for the petitioner, the award passed by the Arbitrator is a non speaking award. He drew the attention of this Court to the findings of the Arbitrator on the objections raised by the petitioner as well as the observations made by the Arbitrator to the objections raised by the petitioner.
8. According to the learned counsel for the petitioner, the claim made by the first respondent is on the ground of alleged breach of contract, since according to the first respondent, the petitioner did not supply any goods as per the contract and therefore they have engaged the service of another contractor for procuring the goods at higher price and therefore they have suffered huge losses. In order to recover the said loss, the first respondent has made a claim against the petitioner.
9. According to the learned counsel for the petitioner, no document has been filed by the first respondent to prove that they have suffered loss on account of non supply of goods by the petitioner as per the agreement dated 12.09.2005.
10. The learned counsel for the petitioner drew the attention of this Court to the various observations made by the Arbitrator on the objections raised by the petitioner which are as follows:
OBJECTIONS OF THE PETITIONERS OBSERVATIONS OF THE ARBITRATOR
1.
Unauthorized person has lodged the claim The G.M(B) is the Authorized person on behalf of the Chairman Cum Managing Director TNCSC Ltd., Chennai. A. These proceedings are illegal as Arbitrator has no jurisdiction The application given u/s 16 of the Arbitration and Conciliation Act 1996 already has been dismissed on 20.02.08 C. There is no intimation of the Rejection as per terms and therefore the claim of the claimant is not sustainable. The TNCSC Ltd., CMD RPAD Letter B53/76845/2005 dt: 15.09.2005, and TNCSC Ltd., Chennai dt: 01.12.2005 which has been acknowledged by Respondent -2 ie Reply FAX dt: 05.12.2005, inform that these objections do not hold good. D. There is no notice issued before the procurement, therefore alleged Risk purchase is invalid.
E. There cannot be double penalty Forfeiture of security deposit towards the claim amount as a part cannot be considered as a Double penalty. This is the usual procedure corporation adopts. F. The time was not essence of the contract.
G. The claim of the claimant is Exorbitant and not sustainable and principles of mitigation of Damages have not been followed. H. Failure by claimant to file the vital/material documents.
I. Non production of Evidence claim of the claimant Based on No evidence. J. Non admission of claimant's document L. Non compliance of the Transparency in Tender Act, 1998 and Rules 2000. M/S Faqir Chand Vinod Kumar & Co are not new to the claimant corporation TNCSC Ltd., for Business deals. They have remitted security deposit, received tender documents signed agreements and their information that they have commenced supply on 26.09.2005 as per the agreement made, requested for a meeting in TNCSC Ltd., to sort out issues. The proposed purchase of 1000mt Green gram (whole) was intended to Government noon meal scheme which is an ongoing scheme for the welfare of students community, which cannot be disturbed at any level. The consequential loss claimed has been informed them by RPAD on 01.04.2006. He has come forwarded to the Arbitrator under the provisions of their agreement only. All these show, that the objections of the Respondent -2 are only after thought and deserves no consideration. K. Increase of the claim is not possible and Remote damages are claimed.
This may be reconsidered by the TNCSC Ltd., for a long standing relationship of both the parties. M. No claim of interest on damages is permissible It is true that the interest rate of 24% appears to be high. As a good will and gesture to their client parties, the TNCSC may consider a lesser and reasonable prevailing rate of interest.
Narrated points in the written arguments of the Respondent counsel on 19.8.08.
1. The Agreement itself is not valid as it is not signed by both the parties.
2. The power of Attorney is not signed by all the partners.
The power of Attorney signed by R.2 authorises R1 to sign in the agreement on behalf of him. The agreement has been signed on 12.09.2005 by R1 only on this strength of power. Only after accepting this, R2 has started supply on 26.09.05 vide R2 Fax-on 10.10.05. Further under sec 18 of the said Agreement only R2 has approaced this court for Arbitration. Thus now questioning the validity of the power of Attorney and Agreement is not correct.
3. No notice was given about the subsequent purchase.
Already discussed under 'D'
4. Subsequent purchase is not subject to TNGST.
This may be considered by the claimant Corporation.
11. In particular, the learned counsel referred to paragraph No.3 supra, in Item No.3 for the objections raised by the petitioner and submits that no notice was given by the petitioner about the subsequent purchase. The Arbitrator has observed that the same has been already discussed under 'D'. Whereas under 'D' according to the learned counsel for the petitioner, the column is left blank. Therefore, according to him, there is no discussion by the Arbitrator on any of the objections raised by the petitioner for the claim made by the first respondent.
12. Per contra, the learned counsel for the first respondent submits that the Arbitral Award is a well considered and the reasoned Award which does not call for any interference by this Court.
13. According to him, each and every objections raised by the petitioner are duly considered by the Arbitrator. He also submitted that no written submission was filed by the petitioner before the Arbitrator.
14. This Court after considering the materials available on record, the Arbitral Award and after hearing the submissions of the respective counsels, observes the following:
The claim made by the claimant namely the first respondent before the Arbitrator is on account of breach of contract committed by the petitioner. The claimant seeks recovery of the alleged losses suffered by the first respondent on account of the first respondent engaging the services of another contractor and for procuring goods at higher price.
15. As seen from the Arbitral Award, no document has been filed by the first respondent to establish their claim that they had suffered loss on account of the breach of contract committed by the petitioner. The documents filed before the Arbitrator as seen from the Arbitral Award are as follows:
List of documents filed for consideration of the Arbitrator in Arbitration case No. 11/2007VB.
Sl.No Date of Documents filed Subject matter Pages From - To
1. 09.05.2007 Vakkalath of Claimant Corpn. TNCSC Ltd., Advocate Thiru.V.Selvanayagam 1-2
2. 09.05.2007 (a to g) Claim statement of TNCSC Ltd., Chennai along with supporting documents received by Respondent Rep on 09.05.2007(P.14) 3-14
a) Tender Documents 15-46
b) Agreement Dt : 12.09.2005 signed by GM(B) and Respondent -1 (Thiru. P.Mittulal Jain) 47-64
c) TNCSC offer acceptance Lr.BS3076845/2005 Dt: 15.09.05 65-74
d) Respondent -2 Thiru. Faqir Chand Vinod Kumar & Co., Fax to TNCSC (10.10.2005) 77-
e) Meeting Request of R.2 referring TNCSC Ltd.,Letter Dt:15.09.2005(offfer acceptance & 1.12.2005) 89-
f) Information of notice of TNCSC sent by RPAD (Act at P-283 =) regarding forfeiture of SD & pretender in case of non supply.
97-
g) Termination of agreement & claim of consequential loss of TNCSC Ltd.,
-BS3-76845/05 Dt: 19.4.2006 by RPAD. Act at P-281 (2/2) 103-112
3. 27.07.07 Vakkalath filed by Respondent 1 & 2 Advocate Tvl.S.K.Selvaraj & N.Sivakumar 131-
4. 07.09.2007 Counter statement filed by R.1 copy received by claimant counsel P 141, on(7.9.2007) 143-146
5. 07.09.2007 Interim counter statement, by R-2-copy received by claimant counsel on 7.9.07 147-210
6. 29.01.2008 Written argument of claimant counsel copy received by Respondent Counsel on 29.01.08 at P-222 211-222
7. 20.02.08 19.03.08 09.04.08 08.05.08 28.05.08 24.06.08 08.07.08 30.07.08
1. Notices of Hearings
2. Undertakings of both the Advocates to quickly dispose of the case P-243.
3. Certificate of posting P-231, 239, 269 & RP AD-acts P -255-262.
223-270
8. 30.07.08 Xerox copy of POA executed by R-2 to R-1 six sheets received by Respondent counsel on 30.07.08) p-273. 275-282
9. 30.07.08 Two RPAD Acts of TNCSC Ltd lr sent to R-2 on 13.01.2006 and 27.04.2006.
283(1/2& 2/2)
10. 30.07.08 Undertaking given by both the Advocates to finalise this case on 19.08.08.
28511. 19.08.08 Written argument of R.2 counsel copy received by claimant counsel on 19.08.08 P-288 289-290
12. 19.08.08 Award proclaimed Information statement.
291-292
16. Excepting for the above mentioned documents which does not contain any document pertaining to the alleged loss suffered by the first respondent, no other document has been filed by the first respondent. The documents filed by the first respondent are all the documents involving the petitioner like agreement, minutes of meeting, the notice of termination etc. No document like an agreement with the new Contractor or invoices raised by the new Contractor claiming higher price has been filed by the first respondent before the Arbitrator. Only these documents will enable the first respondent to establish the alleged loss suffered by them on account of breach of contract committed by the petitioner. Even for absolving the liability of the first respondent in the Arbitration who was the power agent of the petitioner, no reasons have been assigned by the Arbitrator under the Arbitral Award.
17. Even under Section 73 of the Indian Contract Act 1872, compensation is not to be given for any remote and indirect loss or damage sustained by the breach. Section 73 of the Indian Contract Act, 1872 reads as follows:
73.Compensation for loss or damage caused by breach of contract.-When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract.-When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.
18.In the instant case, no document has been filed by the first respondent to establish the loss suffered by them on account of alleged breach of contract committed by the petitioner. The Arbitrator without considering the objections raised by the petitioner in accordance with law and without any supporting document filed by the first respondent in support of their claim has erroneously passed an Award, directing the petitioner to pay a sum of Rs.35,00,000/- together with interest and costs.
19. In the award excepting for reproducing the claim statement as well as the objections raised by the petitioner, the Arbitrator has not given proper and valid reasons for allowing the claim made by the first respondent. For the foregoing reasons, this Court is of the considered view that the findings of the Arbitrator are perverse and consequently the Arbitral Award is patently illegal.
20. In the result, the award passed by the 3rd respondent dated 19.08.2008 against the petitioner is hereby set aside and the Petition is allowed. The 3rd respondent is granted liberty to initiate fresh Arbitration against the petitioner in accordance with law.
24.07.2018 ub Internet:Yes/No Speaking Order/Non Speaking Order ABDUL QUDDHOSE, J.
ub O.P.No.267 of 2011 24.07.2018