Delhi District Court
Mittal Processors (P) Ltd vs Central Cottage Industries ... on 26 November, 2024
DLND010091652019
IN THE COURT OF MRS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE, NEW DELHI
OMP (Comm) No.94 of 2019
CNR No. DLND01-009165-2019
In the matter of:
M/s. Mittal Processors (P) Ltd.
275, Sector-29,
Part-II, HUDA,
Panipat-132103,
Haryana. ........ Objector / Petitioner
Versus
1. Managing Director
Central Cottage Industries Corporation of India Ltd.
(under Ministry of Textiles)
Janpath "A" Barrack,
Janpath,
New Delhi-110001.
2. Shri Amit Anand Tiwari
Sole Arbitrator
A-51, First Floor,
Defence Colony,
New Delhi-110024. ...... Respondents
Digitally signed
by VINEETA
GOYAL
VINEETA Date:
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Date of institution : 27.05.2019
Date of Judgment : 26.11.2024
Appearance : Sh. B.S. Mathur, Ld. Counsel for petitioner.
Ms. Priyanka Parmar, Ld. Counsel for respondent.
JUDGMENT
1 The present petition has been filed by petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 (as amended) (in short 'the Act') for setting aside award dated 06.04.2019 passed by Ld. Arbitrator in a matter of arbitration between 'M/s. Mittal Processors Private Limited', Panipat, and 'Central Cottage Industries Corporation of India Ltd (CCIC)'.
2. The petitioner was claimant before the Ld. Arbitrator. A Statement of Claim was filed by the petitioner alleging that CCIC was awarded a contract no. A/T 73155/DGOS/OS-PII/Proc Sec/TE/020/1680 dated 08.08.2006 for supply of 32,60,161 numbers Towel Hand Khaki 125 cms x 60 cms by DGOS, Ministry of Defence, Government of India, @ Rs. 54.00 each. Total value of the contract was Rs.17,60,48,694/-. The subject matter was governed by the conditions as contained in Ministry of Defence General Conditions of Contract scheduled in 'B' and 'C'. The contract was concluded on Free Delivery to consignee i.e. Commandant COD, Kanpur basis. Supplies were required to be Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:25:59 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 2 of 47 completed by 31.01.2007. In terms of Clause 29 of the Contract, 95% payment of each consignment was to be released by DGOS on production of inspection notes and proof of delivery to the consignee. Balance 5% after the supplies are completed and delivery period regularized. According to the petitioner, copy of this contract was never supplied to the petitioner, therefore, it was not aware about the detail terms and conditions contained therein.
2.1 As per the claim of the petitioner that instead of completing the supplies themselves, CCIC sub-letted the contract and placed a letter of intent dated 31.07.2006 for a part quantity of 21,65,313 numbers on the petitioner on lower rates @ Rs. 44.50 each. The total cost of the stores which were intended to be covered as per the aforesaid LOI worked out to be Rs.9,63,56,429.00. The respondent concluded contract with the petitioner only on 09.01.2007 with a condition that it becomes effective from 31.07.2006. In terms of Clause 9 of the Contract, the supplies were required to be completed by 31.01.2007. It is the case of the petitioner that the said contract was a self contained independent contract. As per delivery period specified in the contract, the petitioner was given only 20 days time in which they were required to manufacture, get the stores inspected and dispatched to consignee at Kanpur. Even assuming that the petitioner was ready with the stores, they could not have offered the same for inspection without a formal contract being entered Digitally signed by VINEETA GOYAL VINEETA Date:
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with them, especially when they were not aware about the detailed terms and conditions like inspection agency, consignee etc. It is clarified that petitioner was not privy to any contract with DGOS.
2.2 As per the petitioner, earlier, just four months back, CCIC had placed another letter of intent A/T No. 1637 dated 24.03.2006 on the petitioner for supply of 8,34,687 numbers of same stores with similar specifications which were under execution by them. The supplies against the aforesaid contract were required to be completed by 30.04.2006, however, on account of certain administrative and inspection issues and for which the DGOS consumed time in sorting out, this resulted in delay in supplies against previous contract which had cascading effect on the supplies against the subject contract also. After having experienced these bottlenecks in the previous orders, the petitioner on 15.01.2007 informed CCIC that with the process being followed by the inspection authority, it shall take 6 months for completion of supplies against subject contract. Since the delivery period of the contract was available upto 31.01.2007 only, the petitioner requested for extending the date of delivery for six months. The respondent CCIC sought extension of time from DGOS which was granted. It is further case of the petitioner that in the meanwhile, CCIC was delaying release of payments to the petitioner though they had themselves received payments against lots supplied. This was brought to their notice vide letters dated Digitally signed by VINEETA GOYAL VINEETA Date:
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22.12.2006 and 20.02.2007. The petitioner in its letter dated 20.02.2007 also cautioned the respondent that in case this kind of billing in releasing their payment continuous, it will not be able to complete timely supplies because it is affecting the cash flow of the company. The petitioner also clarified that it shall not be responsible for imposition of any liquidated damages due to such delay. On 31.05.2007, the DGOS again extended the delivery period of contract placed by them on CCIC upto 10.09.2007 with extraneous conditions. CCIC on their part never extended delivery period of contract placed by them on the petitioner beyond original delivery period and never invoked RR/Denial clause while accepting supplies. Yet again, on 25.07.2007, the petitioner informed the respondent that its Bill totaling Rs. 2,66,24,312/-
were pending since more than two months against supplies made by them in three different contract placed by the respondent. Delay in receiving payments was affecting smooth working of business of the petitioner. When the bills continued to be unpaid for another month, the petitioner sent a reminder dated 09.08.2007.
2.3 As per the petitioner, inspite of aforesaid issues entire supplies against the subject contract were completed by the petitioner. CCIC vide their letter dated 23.04.2007 informed this position to DGOS. They also confirmed having received 95% payments against the contract and forwarded detailed date wise Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:26:50 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 5 of 47 supply position to them. They further confirmed that except for balance 5% payment and performance security they have no other issue. In the same letter, they also confirmed having received all copies number 2 and 5 of inspection notes from the consignee. Respondent requested DGOS for regularization of delivery period upto 26.06.2007 so that they can claim their balance 5% payment. In the same letter, they also indicated that supplies delayed due to non-availability of power supply as UP Government imposed heavy power cuts which was beyond their control. The consignee vide their letter dated 20.05.2008 confirmed having received entire quantity of subject stores and also confirmed that they did not suffer any monetary loss due to alleged delay in supplying but inconvenience which cannot be quantified in terms of money. Finally, after more than one year of completion of supplies, DGOS regularized the DP of the contract upto 30.06.2007 with liquidated damages of Rs.53,80,417/- vide their letter dated 22.07.2008. Copy of this letter was forwarded by CCIC to the petitioner on 04.09.2008. In the same letter, CCIC assured the petitioner that they are taking necessary action in terms of Clause 22 of the conditions of contract concluded by Ministry of Defence to invoke arbitration clause. They also alleged that there was a delay on the part of petitioner in completing the supplies, however, this is without prejudice to CCIC's right to recover liquidated damages from the petitioner as per provisions agreed with the petitioner.
Vide letter dated 04.03.2009, the petitioner protested against the Digitally signed by VINEETA GOYAL VINEETA Date:
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aforesaid allegation that there was no delay on their part in completing supplies, highlighting the entire sequence of events and submitted detailed chart to substantiate their claim that delays were largely due to delay in clearing the lots by the inspection authority. The respondent rejected the claim of the petitioner vide letter dated 22.05.2009 reiterating that the supplies were delayed by the petitioner and also suggested that petitioner should take up the matter directly with DGOS regarding waiver of liquidated damages (LD). The petitioner submitted that A/T No.1680 was concluded by DGOS with CCIC and therefore, the petitioner had no locus standi in the matter to approach DGOS especially when they had been awarded contract for part quality by CCIC.
2.4 It was further case of the petitioner that the petitioner sent reminder letters dated 21.06.2010 and 08.08.2012 to the respondent requesting for release of 5% payment which was due past two years and to take up the matter of waiver of liquidated damages separately with DGOS. The petitioner, vide their letter dated 08.08.2012 reiterated their claim and asking for release of payments. It is further alleged that the counsel for the petitioner sent a RTI to DGOS Army Headquarters seeking information amount details of contract placed by them on ACAHS / KVIC Firm and when any liquidated damages was levied by them against those contracts. In reply, DGOS vide communication dated 29.08.2012 confirmed that previously they placed only one Digitally signed by VINEETA GOYAL VINEETA Date:
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contract on ACASH in which no liquidated damages was imposed. It is further case of the petitioner that the respondent vide their letter dated 13.04.2012 finally informed the petitioner that DGOS had neither agreed to waive or nor to refer the dispute to arbitration, therefore, they are treating the matter as closed. It is claimed by the petitioner that respondent clearly back tracked from their assurance given earlier that they will move the High Court for appointing an Arbitrator in case DGOS does not respond. Aggrieved by this, the petitioner served the respondent with a notice u/s. 80 of Code of Civil Procedure on 12.02.2013 for release of balance payment of 5% or alternatively to refer the dispute to arbitration in terms of contract entered into by them with CCIC. Consequently, the matter was referred to Ld. Arbitrator and the petitioner prayed for the reliefs as follows :-
a) Direct the respondent to release balance 5% payment due to the claimant - petitioner herein against supplies made by them against the contract awarded to them by respondent.
b) Direct the respondent to release the security deposit of Rs.3 lacs given by the claimant -
petitioner herein to the respondent for due performance of contract vide DD No.051164 dated 22.08.2005.
c) Allow payment of interest @ 18% p.a. on the outstanding 5% amount from the date of supplies Digitally signed by VINEETA GOYAL VINEETA Date:
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from the date supplies were completed till actual realization.
d) Allow payment of interest @ 18% on the security amount deposited by the claimant - petitioner herein and not reimbursed to them by the respondent from the date the supplies were completed till actual realization.
e) Allow payment of a sum of Rs.1,00,000/-
towards litigation expenses
f) Grant any other relief which the Ld. Arbitrator may think just and proper under the facts and circumstances of the case.
2.5 The respondent filed Statement of Defence raising preliminary objections that claim of the petitioner is beyond the prescribed period of limitation because the claim made by the petitioner on 08.08.2012 was beyond the period of limitation in as much as the contention was rejected by the respondent way back on 22.05.2009 and after three years, the petitioner sought payment of 5% of balance amount. It is further alleged that claim is also barred by the terms of contract and is also barred by principle of waiver, acquiescence, conduct and estoppel. The respondent further submitted that DGOS placed orders for supply of handmade Khadi towels on the respondent vide order no. 1680. Time to time, further orders were placed by DGOS in turn, the Digitally signed by VINEETA GOYAL VINEETA Date:
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respondent entered into back to back agreement with suppliers including petitioner. The petitioner was fully aware of the terms and conditions under which stores were to be supplied by it. The parties reduced the terms and conditions of existing contract in writing on 09.01.2007 which came into effect from 31.07.2006. The contract formally reduced into writing on 09.01.2007 clearly mentions that delivery was to be effected on 31.01.2007. In Clause 9 (4) of the Contract, it is also mentioned that time and delivery of supplies are essence of contract. Clause 13 of the Contract provides that petitioner shall be entitled to payment only after receipt of full and final payment to DGOS in respect of towels supplied under this contract. Clause 9 (7) of the Contract deals with payment of agreed liquidated damages. The petitioner could not make the supply of stores as per stipulated time i.e. by 31.01.2007. The time to time extension was sought for supply of towels and in turn, the respondent sought extension of time from DGOS for supply of towels which were granted subject to payment of liquidated damages. Ultimately, supplies were completed on 10.09.2007. The respondent also submitted that petitioner herein gave various reasons for delay but those reasons were not unknown to the petitioner when it chose to enter into the contract and therefore, the delay in delivery of the stores and in consequence thereof, and realization of liquidated damages by DGOS caused loss to the respondent and respondent was fully authorized under the Contract not to make any payment to the Digitally signed by VINEETA GOYAL VINEETA Date:
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petitioner till the receipt of full payment by DGOS.
2.6 The Ld. Arbitrator, after perusing the material on record, passed the impugned award dated 06.04.2019 rejecting the claims of the petitioner.
2.7 Aggrieved by this, the petitioner challenged the impugned award on various grounds that it is against public policy of India. It is in contravention with fundamental policy of Indian law. The Ld. Arbitrator while deciding issue no. II i.e. Whether the claim is barred by limitation , only relied upon letter dated 22.05.2009 treating it as date for commencing limitation period. No reason has been given as to why letter dated 13.04.2012 should not be treated as effective date for the said purpose. Respondent vide their letter dated 13.04.2012 had finally communicated that the matter regarding dues is treated as closed. There was no mention of letter dated 22.05.2009 in the said letter. Thus, till 13.04.2012 the issue was still under consideration by the respondent. Even the said letter mentions that 'DGOS has not accepted the request of CCIC for waiving of LD so far'. Thus, the respondent was still hopeful for getting relief from DGOS till that date. It is submitted that this letter was not reiteration but final rejection of petitioner's claim after receiving detailed representation. Ld. Arbitrator thus, erred in concluding that limitation commenced on 22.05.2009 and, therefore holding that claim is barred by limitation. Petitioner relies on judgment in case Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:28:13 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 11 of 47 of Krishna Bhatacharjee vs. Sarathi Choudhary & Ors., (2016) 2 SCC 705, wherein, the Hon'ble Apex Court clarified the meaning of continuing cause of action and held that expression 'continuing offence' is not defined in the code but that is because the expression which do not have a fixed connotation or a static import are difficult to define. The Hon'ble Court referred to earlier decision in case of State of Bihar vs. Deokaran Nenshi, 1973 AIR 908.
2.8. The petitioner submitted that the Ld. Arbitrator ignored that Hon'ble Delhi High Court in Arbitration petition 298/13 vide its order dated 23.04.2024 in a parallel case, in para 8, clearly ruled that the right of petitioner to receive the balance amount is a continuing right and it cannot be said that limitation had expired by the time arbitration was invoked. In the facts of the present case, it is clear that limitation in the matter starts from 13.04.2012 i.e. the date on which respondent finally rejected petitioner's claim. Ld. Arbitrator, thus, erred in concluding that limitation commenced on 22.05.2009 and, therefore, holding that claim is barred by limitation. Ld. Arbitrator ignored aforesaid observation of Hon'ble High Court and went by the argument advanced by respondents and imported its own ruling, thereby giving a biased award.
2.9 The petitioner further submits that Ld. Arbitrator also Digitally signed by VINEETA GOYAL VINEETA Date: GOYAL 2024.11.26 17:28:25 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 12 of 47
ignored evidence filed by petitioner which clearly proves that supplies were delayed because the specification details were incomplete, inspection was restricting lot sizes and due to administrative mix up between the respondent and the inspection authorities. Though the respondent has not accepted these reasons which were attributable for delay before Ld. Arbitrator but in the Arbitration petition no. 35318/AR-1/CP Cell before Ld. Arbitrator Brig. Ashok Sharma in A/T No. 73155/DGOS/PII/Proc Sec/OS PII/160 i.e. principle contract, the respondent itself pleaded that delay in supplies was caused due to aforesaid reasons and had obtained a favourable award. Thus, contradictory stand was taken by respondent before two different tribunals.
2.10 It further submitted that the Ld. Arbitrator has failed to even appreciate the oral evidence given by the respondent's witness who confirmed that subject contract entered into by the respondent with the petitioner was an independent contract. Even the respondent did not place any evidence on record to show that it extended the delivery period of the contract reserving its right to claim liquidated damages for delay in supplies. DGOS had imposed liquidated damages on the respondent in its contract which was sub-divided and subletted by it to three different firms.
The respondent kept on accepting the stores even expiry of delivery period without extending the same. Therefore, in terms of Section 55 of the Contract Act, 1872 and the respondent is not Digitally signed by VINEETA GOYAL VINEETA Date:
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entitled to claim any losses, if any, incurred by it.
2.11 It is further submitted that Ld. Arbitrator has misinterpreted Clause 31 of the contract which entitled the respondent for indemnification from the first party in case :
i) any loss or damage is suffered by the respondent
ii) On account of any claim made by DFOS from the respondent and
iii) claim by DGOS is to be cause of any act or action on the part of the claimant relating to the contract.
2.12 Undisputedly, there is no claim made by DGOS from the petitioner because of any act or omission on their part relating to the contract. Rather as per record no amount has been withheld by DGOS under the contract in reference between the petitioner and the respondent. In case of Khatrapal Amar Nath vs. Madhukar Pictures, AIR 1956 Bom 106, the Hon'ble Apex Court observed that indemnity holder can sue the indemnifier even before he has actually suffered loss. However, in the facts and circumstances of the present case respondent has not suffered any loss under the contract between the parties nor any such loss has been specifically pleaded or quantified, save and accept that certain amounts have been withheld by DGOS on account of liquidated damages under the contract between DGOS and the Digitally signed by VINEETA GOYAL VINEETA Date:
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respondent, which is not related to and / or concerned with the supplies to be made under the agreement in reference between the petitioner and the respondent. As of now the arbitration proceedings which were pending for liquidated damages imposed by DGOS on respondent (though not arising out of supplies made under the contract under reference) have been finalized in favour of respondent. Thus, the indemnity holder shall be entitled to indemnification only if it has incurred liability and that liability is absolute. It is further stated that respondent themselves breached the agreed payment terms and therefore, cannot take the shelter that they will release the balance payment only after receiving the balance amount from DGOS. The respondent have already received payment in excess from DGOS than what is due to the petitioner. The Ld. Arbitrator has failed to give any reason as to why the security deposit of Rs.3 lakhs given by the petitioner should not be refunded to them, after they had completed supplies against the contract and a confirmation was received from the consignee that they have received the material and have not suffered any monetary loss. The petitioner is hence, entitled to interest on the amount which is due to them for the supplies made by them against the contract. On these grounds, the petitioner submitted that the present petition filed by the petitioner under Section 34 of the Act deserves to be allowed.
Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
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3 On the other hand, counter affidavit to the objection u/s. 34 of the Act has been filed on behalf of respondent wherein it is stated that the petition is not maintainable as the same is barred by Section 34(2) (b) (ii) Explanation-II which specifically exclude re-consideration or re-appreciation of merits of disputes. Further, the instant petition is also barred by Section 34 (2A) Proviso which specifically bars the re-appreciation of evidence in Section 34 of the Act proceedings. The petitioner has not impugned any specific finding of the Tribunal on any of the issues before the Tribunal. The instant petition is liable to be dismissed as the petitioner has failed to make out a case warranting exercise of limited jurisdiction under Section 34 of the Act. It is submitted that the impugned arbitral award is well reasoned and speaking order which has been passed within four corners of the agreement between the parties after consideration of contentions raised by both the parties and the each contention raised by the petitioner and the respondent has been dealt in detail and the contentions of the petitioner have been rejected by the Ld. Arbitrator. There is no scope of interference with such findings of the Tribunal as there is no perversity in the findings or the reasoning of the Tribunal, which in any even cannot be subject matter of judicial review u/s. 34 of the Act. It is no longer res-integra that the arbitrator is the last word on facts and on interpretation of the agreement terms. Since the petitioner has failed to establish that the approach of the arbitrator was neither arbitrary nor capricious, the instant petition Digitally signed by VINEETA GOYAL VINEETA Date:
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warrants dismissal with costs. It is further submitted that when the Ld. Arbitrator has applied his mind to the pleadings, evidence adduced before him and the terms of contract, it is not within the scope and jurisdiction of the Court to re-appraise the matter. It is further submitted that the instant petition for setting aside of the impugned arbitral award is contrary to the decisions of the Hon'ble Supreme Court as follows :
a) Renusagar Power Co.Ltd. vs. General Electric Co., 1994 Supp (1) SCC 644;
b) Kuldeep Singh vs. Comr. of Police 1999 (2) SCC;
c) Rajasthan State Mines & Minerals Ltd. vs. Eastern Engineering Enterprises and Anr., 1999 (9) SCC 283;
d) M/s. Arosan Enterprises Ltd. vs. Union of India & Anr., AIR 1999 SC 3804;
e) U.P. SEB v. Searsole Chemicals Ltd., 2001 (3) SCC 397;
f) Ispat Engineering and Foundry vs. Steel Authority of India Ltd., 2001 (6) SCC 347;
g) ONGC v. Saw Pipes, 2003 (5) SCC 705 ;
h) State of U.P. vs. Allied Constructions, 2003 (7) SCC 396;
i) Pure Helium India Pvt. Ltd. vs. Oil & Natural Gas Commission, 2003 (8) SCC 593 ;
j) McDermott International Inc. vs. Burn Standard Co. Ltd., 2006 (11) SCC 181 ;
k) Associate Builders vs. Delhi Development Authority, 2015 (3) SCC 49.
3.1 It is further submitted that the Arbitral Tribunal has returned categorical finding that the delivery of stores by petitioner was completed on 16.05.2007 and 95% of the payment as stipulated under agreement terms was paid on 16.05.2007 itself by the respondent and the demand for balance 5% by the claimant (petitioner herein) was expressly and unconditionally rejected by Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:29:17 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 17 of 47 the respondent on 22.05.2009, therefore, the cause of action (if any) accrued on 22.05.2009. The arbitration proceedings were initiated by petitioner on 12.02.2013 which was well beyond the period of 3 years available to the petitioner for invoking arbitration, therefore, Arbitral Tribunal came to the conclusion that the claim was barred by limitation. The said finding is neither erroneous nor perverse and has been arrived at after due consideration of evidence on record and is not amenable to review under Section 34 of the Act. Prima facie, satisfaction of Hon'ble High Court under Section 11 petition, would not be binding on Arbitral Tribunal. There can be no interference with this finding under Section 34 of the Act. Allegations of bias leveled against Arbitral Tribunal are completely unsubstantiated.
3.2 It is further submitted by the respondent that even on merits, the Arbitral Tribunal has critically examined the issue 'whether was any delay in supplying stores to COD Kanpur. The Arbitral Tribunal after detailed examination of facts placed by the parties arrived at the conclusion that there was delay in supply of towels by the petitioner herein. The supply of towels was delayed beyond the terms of period specified in the Contract, which is not attributable to the respondent. The Ld. Arbitrator has noted that petitioner herein was aware that duration /period for supply was short and despite having knowledge of the said fact, the petitioner entered into contract with the respondent out of free will and Digitally signed by VINEETA GOYAL VINEETA Date:
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accepted the terms of Contract. It is further submitted that the contentions of the petitioner are contrary to Clause 13 of the Contract between the parties whereby it was clear that payment of 5% would only arise when full and final payment was received by respondent from the consignee DGOS. The contention of the petitioner that the back to back arrangement with DGOS was not known to it is ex facie contrary to the record. The petitioner was aware of the facts that there were back to back agreements between the respondent and DGOS and the petitioner and that the petitioner was involved in other similar contract with the respondents with the same terms and conditions. Therefore, petitioner being well aware of the requirements envisaged in terms of the agreements and having failed to effect delivery in terms thereof, is indulging in malicious tactics of making unfounded and objectionable assertions against a government company of global repute and good standing in the industry. Being the terms of the contract were voluntarily accepted by the petitioner, therefore, reneging from the agreed terms is by itself a breach. It is further submitted that the petitioner was fully aware about the time schedule for completion of supplies and the petitioner was also aware of the details of the inspection agency and that inspection was a pre-requisite to delivery. Therefore, the petitioner, having accepted the delivery time-lines, cannot raise the issue of purportedly short delivery timelines. In any event, the Arbitral Tribunal is bound by the terms of the agreement. Therefore, Digitally signed by VINEETA GOYAL VINEETA Date:
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admittedly, delivery schedule was breached by the petitioner and the petitioner, having accepted the delivery time-line, cannot raise the issue which could have come in the way for supply of the material, still petitioner accepted the delivery period and thereafter, he cannot make out grievance about the short period given to the petitioner to supply the stores. It is submitted that petitioner was not entitled to receive any amount till the time full and final payment has been received by respondent DGOS. The respondent has shown magnanimity by making payment even without receiving the entire payment as the clause of the contract provided payment to the petitioner only after receipt of full and final payment from DGOS. It is then submitted that the petitioner was not entitled to any payment till CCIC received full and final payment from DGOS. Despite having knowledge of the delivery period in terms of the agreement, delay has taken place in delivery of stores and the stores could not be delivered within the period stipulated in the order of CCIC and DGOS.
3.3 It is further submitted that the respondent vide its letter dated 20.03.2006 placed an order on the petitioner to supply 8,34,687 numbers of towels at the rate of Rs.44.50 per unit amounting to Rs.3,71,43,572/- pursuant to the petitioner readiness and willingness to supply stores to DGOS on behalf of respondent and the said order was issued by the respondent in favour of the petitioner subject to award of contract by DGOS on CCIC. The Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:29:43 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 20 of 47 respondent further submitted that petitioner was not entitled to receive any amount till the time full and final payment has been received by respondent from DGOS. The respondent has made payment without receiving the entire payment from DGOS, as the Clause of Contract provided payment to the petitioner only after receipt of full and final payment from DGOS. The petitioner was not entitled to any payment till the respondent receive full and final payment from DGOS. The petitioner despite having knowledge of delivery period in terms of contract, has caused delay in delivery of stores and supplies could not be delivered within the time prescribed in the contract. It is thus, submitted that the submissions made by the petitioner are devoid of any merit and petitioner has failed to make out any ground for interference with the impugned award.
4. Before delving into contentious issues, it is relevant to refer section 34 of the Act, which is as follows:-
"34.Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3). (2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
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(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if -
i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
ii) It is in contravention with the fundamental policy of Indian law;
iii) It is in conflict with the most basic notions of morality or justice.
Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:30:07 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 22 of 47 2 (A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence."
5. Normally, the general principles are that the decision of the Ld. Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different con-
clusion on the same facts. The court cannot reappraise the evi- dence and it is not open to the court to sit in appeal over the con- clusion of the Ld. Arbitrator. It is not open to the court to set aside a finding of fact arrived at by the Ld. Arbitrator and only grounds on which the award can be set aside are those mentioned in the Act. Where the Ld. arbitrator assigns cogent grounds and suffi- cient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in the exercise of the power vested in it.
6. In the case of Associate Builders v/s Delhi Develop- ment Authority, (2015) 3 SCC 49, it was held that interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. The Ld. Arbitrator is ultimately a master of Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:30:16 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 23 of 47 the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and can- not be of trivial nature.
7. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Hon'ble Supreme Court has held that under Section 34 of the Act, a decision which is perverse while no longer being a ground for challenge under public policy of India but would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse.
8. In the case of Patel Engineering Ltd Vs. North East- ern Electric Power Corp Ltd, 2020 (7) SCC 167 , it was observed that in paragraphs (39) & (40) of Ssangyong Engineering (supra), the Court reiterated paragraphs (42.2) & (42.3) of Associate Builders (supra), wherein, it was held that construction of the terms of a contract is primarily for Ld. Arbitrator to decide, unless the Ld. Arbitrator construes a contract in a manner, which no fair minded or reasonable person would take i.e. if a view taken by the Ld. Arbitrator is not even a possible view to take. It was held that the ground of patent illegality is a ground available under the Digitally signed by VINEETA GOYAL VINEETA Date:
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statute for setting aside a domestic award, if the decision of the Ld. Arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at the same; or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view.
9. There is no quarrel on the legal position that the legislative mandate clearly bars the Court to re-appreciate the evidence for deciding an objection under Section 34 of the Act. The parties are also not allowed to expand the scope of defences raised before the Ld. Arbitrator to get fresh adjudication from the Court. However, in order to see whether the Ld. Arbitrator has passed the award against the basis notions of justice or it is patently illegal as alleged by the petitioner, I deem it appropriate to consider the real controversy between the parties, which gave rise to the cause of action for filing claims and the manner in which they were appreciated by the Arbitral Tribunal in reference to the terms & conditions of the contract.
10 Coming to the case in hand, under challenge in this case is impugned award dated 06.04.2019 passed by Ld. Sole Arbitrator. For the sake of repetition, the epitomized facts are that the petitioner herein filed arbitration claim against CCIC. The respondent was awarded a contract for supply of 100% Digitally signed by VINEETA GOYAL VINEETA Date:
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Handloom Cotton Towels Hand Khaki by DGOS, Ministry of Defence, Government of India. The CCIC sub-letted the contract and issued a LOI dated 31.07.2006 to the petitioner by placing an order for 21,65,313 pieces of towels (stores) at the rate of Rs. 44.50/- per piece. The respondent concluded a contract with petitioner on 09.01.2007 with a condition that it becomes effective w.e.f. 31.07.2006. As per the terms of the order, the supplies were to be completed by 31.01.2007. The petitioner could not make the supply of the stores within the stipulated time i.e. 31.01.2007 and extension was sought by the petitioner for supply of towels. In turn, respondent sought extension of time from DGOS. The extension was granted by the respondent, subject to payment of liquidated damages. Admittedly, the supplies were completed on 10.09.2007. The dispute arose between the parties about the claim of part non- payment of the amount agreed under the contract. The petitioner herein initiated an arbitration proceedings against the respondent which culminated into the impugned Arbitral Award dated 06.04.2019. The learned arbitrator framed eight issues but for the sake of convenience and discussion, the following three broad contours of issues are discussed.
I. Claim was beyond the period of limitation: - Ld. Arbitrator has held that the claim filed by the petitioner herein was barred by limitation being filed beyond period of limitation. In the impugned award, this issue Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:30:44 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 26 of 47 has been decided as issue no. II.
II. Delay in supply of stores: - Ld. Arbitrator has held that there was a delay in supplying stores to DGOS/ COD Kanpur as stipulated in the terms of the contract and this delay was not attributable to the respondent. In the impugned arbitral award this issue has been decided as issue no. III.
III. Liquidated Damages: - The Ld. Arbitrator clubbed three issues regarding whether the respondent has waived their right to claim liquidated damages by accepting delivery of stores after expiry of period stipulated in the contract. Secondly, whether the respondent or DGOS have sustained no loss due to any delay in supply of the contract stores. Lastly, whether the L/D imposed by DGOS was not entirely attributable to the quantity of stores supplied by the petitioner herein. In the impugned award, these are decided against the petitioner herein as issue nos. IV, VI & VII.
11 The important issue in this case is the justification of inflicting Liquidated Damages upon the petitioner, therefore this point is being discussed prior to the other points. Under the contract for supply of towers dated 09.01.2007 executed between CCIC and petitioner, the relevant clause 9(7)(a) provided as under :-
Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:30:52 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 27 of 47 "(7) Failure and Termination: - Should the Second party fail to deliver the Towels or any consignment thereof, within the period prescribed for such delivery or at any time repudiates the contract before the expiry of such period, the first party may without prejudice to his right to recover the damages for breach of the contract:
(a) recover from the Second party as agreed liquidated damages, and not by way of penalty a sum of 2% of the price of any Towels which the Second party has failed to deliver within the period fixed for delivery for each month or part of a month exceeding 15 days during which the delivery of such store may be in arrears where delivery thereof is accepted after expiry of the aforesaid period, and/or."
12 In para 11.1 of the impugned arbitration award quoting from the letter dated 20.05.2008 of the principal purchaser of the towels (DGOS), it is noted that though no monetary loss has been caused, the Liquidated Damage (L.D.) imposed are due to the inconvenience caused which cannot be quantified in terms of money. The Ld. Arbitrator justified the imposition of LD by stating that DGOS may not have suffered loss, but the present respondent has suffered it as it did not get the said 5% from DGOS.
13 The law of Liquidated Damages is fairly settled in Kailash Nath Associates v. Delhi Development Authority & Anr. (2015) 4 SCC 136 , the Hon'ble Supreme Court had referred to Section 74 of the Indian Contract Act, 1872 and has held as under :-
"43. On a conspectus of the above authorities, the law on Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:31:01 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 28 of 47 compensation for breach of contract under Section 74 can be stated to be as follows:
43.1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the court cannot grant reasonable compensation.
43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the section.
43.4. The section applies whether a person is a plaintiff or a defendant in a suit.
43.5. The sum spoken of may already be paid or be payable in future.
43.6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
43.7. Section 74 will apply to cases of forfeiture of Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:31:09 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 29 of 47 earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application."
14 In Hindustan Petroleum Corporation Ltd., Mumbai v. Offshore Infrastructure Ltd., Mumbai 2015 SCC OnLine Bom 4146, the Hon'ble Bombay High Court following the decision of the Hon'ble Supreme Court in Kailash Nath Associates (supra) had observed that unless loss is pleaded and proved, where it capable of being proved, it cannot be recovered. There cannot be any windfall in favour of the respondent to recover liquidated damages even if no loss is suffered or proved. The Hon'ble Division Bench of Delhi High Court in Hindustan Petroleum Corporation Ltd. v. M/s Dhampur Sugar Mills (Neutral Citation: 2022:DHC:2258-DB) had upheld the decision of the learned Single Judge setting aside an arbitral award awarding damages on the basis of a penalty clause by observing as under:-
"11.2. A careful perusal of the same would show that the appellant claimed "penalty". Penalty is generally construed as a sum stipulated in terrorem. On the other hand, damages, liquidated or unliquidated, when awarded, have a compensatory flavour to it. Liquidated damages are awarded by a court only if it construed as a genuine pre-estimate of the loss that is caused in the event of breach. It is no different from unliquidated damages i.e., it cannot be granted if there is no loss or injury. Where parties have agreed to incorporation of a liquidated damages clause in the contract, the Court will grant only reasonable compensation, not exceeding the Digitally signed VINEETA by VINEETA GOYAL GOYAL Date: 2024.11.26 17:31:18 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 30 of 47 sum stipulated. Liquidated damages does away with proof where loss or damage cannot be proved, but not otherwise. Thus, the party suffering damages can be awarded only a reasonable compensation, which would put such party in the same position, in which the party would have been had the breach not been committed. The appellant's pleadings are woefully deficient in this regard. Unless loss is pleaded and proved, where it capable of being proved, it cannot be recovered."
15 The Hon'ble Division Bench of Delhi High Court in Mahanagar Telephone Nigam Ltd. v. Finolex Cables Limited, 2017 SCC OnLine Del 10497 , in paragraph 36 of the judgment observed that it is well settled principle that it was incumbent on other party to prove before the Arbitrator that it had suffered some loss, even though it may not have to prove the actual loss.
16 In the present case, the respondent has not proved any such loss except stating that there was inconvenience caused due to delay. The other aspect that the present respondent did not get the said amount from the principal buyer DGOS is also altered by the time this petition is adjudicated. It is worth mentioning here that the petitioner herein has placed on record Minutes of Committee of Secretaries (CoS) held on 21.06.2023 for Resolution of Commercial dispute between Central Cottage Industries Corporation & Director General Ordinance Services (DGOS) under the Administrative Mechanism for Resolution of disputes (AMRCD) guidelines wherein the liquidated damages retained has been ordered to be Digitally signed by VINEETA GOYAL VINEETA Date:
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released to the respondent.
17 Recently, the Hon'ble Delhi High Court in
judgment titled as Indian Oil Corporation Ltd. Versus M/s Fiberfill Engineers (2024:DHC:8911-DB) FAO (OS)(COMM) 114 /2019 judgment dated: 20/11/2024 in para 52 has held that the impugned award is vitiated by patent illegality on the ground that the Arbitral Tribunal has awarded liquidated damages/ compensation by way of price adjustment in absence of any averment by IOCL that it had suffered any loss whatsoever and without any finding to the said effect.
18 The above reproduction of settled legal position makes it crystallized that the proof of law is sine qua non and unless loss is pleaded and proved, where it is capable of being proved, it cannot be recovered. In the instant case, the Ld. Arbitrator though observed in Para 11.2 of the impugned award that respondent or DGOS have not suffered any loss but awarded LD after noting that DGOS has communicated vide letter dated 20.05.2008 that it has not suffered any loss but as far as respondent is concerned, it has clearly suffered a loss of 5% on account of non-payment by DGOS. In view of the above discussion, the impugned award suffers from patent illegality and is liable to be set aside on this account.
19 Another aspect on which the impugned award is unsustainable is the issue of holding that the claim filed was Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:32:05 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 32 of 47 beyond the period of limitation. In paragraph 9 of the impugned Award, Ld. Arbitrator has decided the issue of whether the claim is barred by limitation and for deciding the issue, facts such as the delivery of orders in the contract was completed by the petitioner on 16.05.2007 has been highlighted. Further, it was noted that payment of 95% of the amount was made but for the remaining 5% of the amount the petitioner herein sent letters dated 25.07.2007, letter dated 04.03.2009 and a reminder letter dated 15.04.2009. Ld. Arbitrator in the impugned award noted that these letters and reminder were responded by the respondent vide letter dated 22.05.2009 whereby the claim for payment of balance 5% was rejected on the ground that there has been delay in supplies which led to imposition of LD. As per clause 30 of the contract, the petitioner herein was bound to indemnify the respondent for any such loss thus in the impugned award it has been noted that vide letter dated 13.04.2012, the respondent reiterated rejection in response to letter dated 20.03.2012 of the petitioner herein. Subsequently, the petitioner served a notice under Section 80 CPC dated 12.02.2013 for releasing the balance payment and alternatively referred the dispute to the arbitration.
20 Further, in paragraph 9.1 of the impugned award, it has been held that for the first time, the cause of action arose in the matter when the demand for payment was made on Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:32:12 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 33 of 47 25.07.2007 on the completion of supply of towels in April 2007. The request was rejected in clear terms on 22.05.2009 and on that date cause of action arose again in favour of the petitioner. Further in para 9.2 of the impugned award, it has been mentioned that in view of categorical rejection above, the period of limitation started running against the petitioner herein from 22.5.2009. The present claim being the money claim, therefore the total period of limitation for agitating the dispute either by way of referring to arbitration or by approaching the court was 3 (three) years. In this case, reference for arbitration was sought on 12.02.2013 i.e., after more than three years. Hence, on face of it, the claim is barred by limitation. In paragraph 9.3, Ld. Arbitrator noted the argument of the petitioner herein regarding clause 13, which stipulates that payment to the petitioner herein would be made only after receipt of entire payment under the contract by the respondent from DGOS (the main employer). In other words, the claim of the petitioner herein subsists under this clause and therefore the claim cannot be treated as time barred. In support of this contention, an order passed by the Hon'ble High Court of Delhi in similar dispute between this same vary parties wherein the Hon'ble High Court vide order dated 23.5.2014 in Arb. Petition No. 293/2013 (it is typographic error the correct number is Arb.
Pet 298 of 2013) held:
"6. The first objection of the respondent is that the petition is Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:32:24 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 34 of 47 barred by limitation is argued that the supplies were completed? Even according to the petitioner, in April 2007, whereas the arbitration was invoked on 21.02.2013, i.e. well beyond the period of three years from the date of supply.
7. The further submission is that the DGOS has imposed liquidated damages in respect of the aforesaid purchase order and, consequently, no amount is payable to the petitioner.
8. 1 do not find merit in either of the submissions of the respondent. Clause 13 of the contract says that the right of the petitioner to receive payment shall accrue upon receipt of full and final payment from the DGOS by the respondent.
Even according to the respondent, that eventuality has not arisen till date. Therefore, the right to receive the full and final payment cannot be said to have accrued, merely because the supplies had been completed in April 2007. The right of the petitioner to receive the balance payment is a continuing right and it cannot be said that the limitation has expired by the time arbitration was invoked."
21 The abovesaid observations of the Hon'ble High Court in this specific case were not accepted by Ld. Arbitrator on the ground that the issue of limitation has to be decided by the Arbitrator independent of any observations made by the Court under Section 11(6) of the Act. It was further stated that those observations are merely a prima facie view and therefore, not binding and the Arbitral Tribunal was entitled to arrive at its own conclusion. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Indian Oil Corporation Limited vs. SPS Engineering Ltd. (2011) 3 SCC 507 and State of Goa vs. Praveen Enterprises (2012) 12 SCC 581. In paragraph 9.6 of the impugned order Ld. Arbitrator reiterated the findings by stating Digitally signed by VINEETA GOYAL VINEETA Date:
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that the law in the field of arbitration as enunciated by the Hon'ble Supreme Court is clear. The issue of limitation is required to be looked into independently, therefore, following this dictum of law this issue has been independently examined and decided by the Tribunal against the petitioner herein. Further, in paragraph 9.7 of the impugned award, rejecting the contention that it was continuous cause of action it was held that Clause 13 would not make the claim to be continuous cause of action because even as per DGOS full and final payment has already been made (after deducting the LD charges) which was conveyed in the letter of rejection of claim dated 22.5.2009 issued by the respondent therefore, there was no occasion to await for further payment under clause 13 and the period of limitation started running from the said date. Secondly, the argument of continuing cause of action, reading of the above noted Clause 13 of the Contract, is also self-defeating as it would make the claim premature in as much as it is admitted case of the parties that only 95% payment has been received and rest of the 5% has been not released and adjusted towards LD by DGOS. The Ld. Arbitrator held the claim barred by limitation.
22 At the outset, it would be relevant to note the findings in Hon'ble Delhi High Court in ARB.P. 298/2013 titled MITTAL PROCESSORS P LTD Vs. MANAGING DIRECTOR CCIC LTD vide order dated 23.05.2014 under identical circumstances where it was held that the cause of action was not hit by limitation because clause 13 of the contract says that the right of the petitioner to Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:32:44 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 36 of 47 receive payment shall accrue upon receipt of full and final payment from the DGOS by the respondent even if that eventuality has not arisen till date. The right to receive the full and final payment cannot be said to have accrued, merely because the supplies had been completed. The right of the petitioner to receive the balance payment is a continuing right and it cannot be said that limitation had expired by the time arbitration was invoked. Even though these observations are made u/s 11 of the Act but yet Hon'ble Court made an observation that the claim was is a continuing right.
23 These specific findings of the Hon'ble High Court cannot be ignored by the Ld. Arbitrator merely by invoking the legal jurisprudence that the Ld. Arbitrator would decide issue of limitation on its own. The reasoning given in the above order of the Hon'ble High Court has to be addressed in case of disagreement.
24 Moreover, the findings of Indian Oil Corporation Limited vs. SPS Engineering Ltd. (2011) 3 SCC 507, were in different background where Hon'ble Court held that the court appointing arbitrator to merely see if the claim has not become dead so far as the question of the limitation is concerned rest the issue is it be decided by the Ld. Arbitrator. But it was not a case where the Ld. Arbitrator was given absolute discretion for deciding questions of limitation without following the legal principles Digitally signed by VINEETA GOYAL VINEETA Date:
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governing the limitation.
25 Similarly, in State of Goa vs. Praveen Enterprises
(2012) 12 SCC 581, the issue was as to how the period of limitation to be reckoned for additional claim which was not there at the time of making reference or period of limitation for filing a counter claim. Considering the particular facts, it was held that the Ld. Arbitrator was the authority to decide upon the question of limitation.
26 A combined reading of the entire material, it is not disputed that the Ld.Arbitrator may have authority to decide on the question of limitation but the Ld. Arbitrator is bound to follow the legal postulates before invoking the bar of limitations. In the present case, the Ld. Arbitrator has overlooked an important aspect that clause 13 of the contract makes it clear that whatever is received from DGOS is payable to the petitioner herein. Thus, if the balance 5% of the payment has not come and it is informed that this payment will not come under these circumstances still the claim of the petitioner herein subsists. An important aspect which has been missed by the Ld. Arbitrator is that the right to foreclose the claim of 5% is not vested in the respondent but is entirely dependent upon DGOS. Even if the claim has been momentarily rejected it is a continuous cause of action.
27 The Hon'ble Supreme Court in M. Siddiq v. Suresh Das (2020) 1 SCC 1, examined continuing wrong and observed as Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:33:04 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 38 of 47 under :-
"343. The submission of Nirmohi Akhara is based on the principle of continuing wrong as a defence to a plea of limitation. In assessing the submission, a distinction must be made between the source of a legal injury and the effect of the injury. The source of a legal injury is founded in a breach of an obligation. A continuing wrong arises where there is an obligation imposed by law, agreement or otherwise to continue to act or to desist from acting in a particular manner. The breach of such an obligation extends beyond a single completed act or omission. The breach is of a continuing nature, giving rise to a legal injury which assumes the nature of a continuing wrong. For a continuing wrong to arise, there must in the first place be a wrong which is actionable because in the absence of a wrong, there can be no continuing wrong. It is when there is a wrong that a further line of enquiry of whether there is a continuing wrong would arise. Without a wrong there cannot be a continuing wrong. A wrong postulates a breach of an obligation imposed on an individual, whether positive or negative, to act or desist from acting in a particular manner. The obligation on one individual finds a corresponding reflection of a right which inheres in another. A continuing wrong postulates a breach of a continuing duty or a breach of an obligation which is of a continuing nature. [...] Hence, in evaluating whether there is a continuing wrong within the meaning of Section 23, the mere fact that the effect of the injury caused has continued, is not sufficient to constitute it as a continuing wrong. For instance, when the wrong is complete as a result of the act or omission which complained of, no continuing wrong arises even though the effect or damage that is sustained may ensure in the future. What makes a wrong, a wrong of a continuing nature is the breach of a duty which has not ceased but which continues to subsist. The breach of such a duty creates a continuing wrong and hence a defence to a plea of limitation."
28 In the present case, the issue is whether rejecting the claim of 5% of the amount by the DGOS to CCIC and eventually to the petitioner herein by virtue of clause 13 of the contract would extinguish the right to claim for ever. The relevant clause 13 provides as under:- Digitally signed by VINEETA GOYAL VINEETA Date:
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13. PAYMENT UNDER THE CONTRACT
Payment for the cost of Towels will be made by the first party to the second party only after receipt of full and final payment from DGOS in respect of the towels supplied under the contract.
29 The clause above creates another legal fiction that the contract was back-to-back between the parties parent contract between DGOS to CCIC and back to back contract between CCIC and Mittal Processors, petitioner herein. The responsibilities of each stake holder in such back-to-back contract were examined by Hon'ble Supreme Court in Zonal General Manager, Ircon International Ltd. Vs. Vinay Heavy Equipments, (2015) 13 SCC
680. There would be thus a pass-through claim surviving with the present claimant/ appellant despite it is once rejected. A "pass- through" claim may be defined as a claim by a party who has suffered damages (in this case, a subcontractor) against a responsible party with whom he has no contract (namely, an owner), and which are presented through an intervening party who has a contractual relationship with both (namely, a contractor).
30 It is a matter of record that even though CCIC conveyed to the petitioner / Mittal Processor that DGOS has rejected the claim of 5% outstanding dues but CCIC continued its efforts to recover that amount from DGOS. Because the right of CCIC against DGOS was not foreclosed, therefore the right of the petitioner / Mittal processor cannot be barred by limitation.
Digitally signed by VINEETA VINEETA GOYAL
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31 Ld. Arbitrator failed to appreciate the interplay of
Section 22 and 23 of the Limitation Act, 1963, which are reproduced hereunder:-
22. Continuing breaches and torts.-- In the case of a continuing breach of contract or in the case of a continuing tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort, as the case may be, continues.
23. Suits for compensation for acts not actionable without special damage.-- In the case of a suit for compensation for an act which does not give rise to a cause of action unless some specific injury actually results therefrom, the period of limitation shall be computed from the time when the injury results.
32 There exists a fine relationship between section 22 and section 23 of the Act as these two provisions represent two very different concepts because there is a difference between a continuing injury and the continuing effects of an injury. The former is applicable to cases under section 22 of the Act, while the latter usually comes into play under section 23 of the Act.
33 In the present case, the injury to the claimant would fall in either of the two because if it is assumed that the petitioner's right to the outstanding amount was closed on the date when it was conveyed that DGOS would not release the balance payment even then by virtue of clause 13 of the contract final injury would happen when the claim of the CCIC was also denied by DGOS. In the present case, the final denial to CCIC had not happened thus the petitioner herein was entitled to raise the claim of unpaid Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:33:34 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 41 of 47 amount at the point of time when the same was denied to CCIC because then the injury is final. Thus, the impugned award is unsustainable because the findings that the claim was beyond period of limitation is patently illegal.
34 Another aspect raised by petitioner for setting aside impugned award is that the Ld. Arbitrator ignored the fact that there is back-to-back contract of supply of towels viz. contract between DGOS and CCIC as one and another contract between the CCIC and petitioner. The towels were directly to be supplied to the end point user at Kanpur which was also entrusted the task of inspection. It is the contention of the petitioner that there was another arbitration proceeding in progress almost simultaneously with the instant matter or the one between CCIC and DGOS with the Arbitration Tribunal of Brig. Ashok Sharma which culminated into Arbitral Award dated 06.12.2018. In the proceedings of this award, CCIC presented a case, that it was DGOS which was at fault and did not take deliveries and make inspections. The delay is not attributable to the supplier therefore levy of LD was not in accordance with the terms of contract. The relevant findings of the Ld. Arbitrator on this aspect are extracted hereunder: -
AT 73155/DGOS/PII/ Proc Sec / OSPII/1680 dated 08 Aug 2006 for 32,60,161 Nos of Towel Hand Khaki:
10. Claimant responded to Ltd. Tender Enquiry (LTE) floated by the Respondent for supply of 32,60,161 Nos. of Towel Hand Khaki in Feb/ March 2006. Claimant informed the Respondent that it was already in process of supplying Digitally signed by VINEETA GOYAL VINEETA Date:
GOYAL 2024.11.26
17:33:45
+0530
OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 42 of 47
the item against previous two (2) Supply Order of quantity 5,65,460 Nos. each and requested reasonable DP with all necessary amendment to lot Sizes and LD clause.
11. The request with regard to DP was not agreed to by the Respondent and AT No. 1680 referred to above was placed on the Claimant on 08 Aug 2016 with DP on 31 Jan 2007. The Sampling clause remained unchanged. The Claimant vide their letter dated 23 Jan 2007 intimated that over 10 lac pes of Towel Hand Khaki had been supplied to COD Kanpur and balance would be completed by 31 Mar 2007. He also requested extension of DP for the instant so up to 31 Mar 2007. The DP was finally extended up to 30 June 2006 with imposition of LD of Rs. 53,80,417/-.
12. The Respondent all along maintained that once having accepted the AT. It is the responsibility of the Supplier to ensure that supplies are in time irrespective of any bottle necks, further imposition of LD is not a penal recovery.
Finding by The Tribunal
13. The Claimant participated in the tender enquiry and also highlighted the delays in built in Inspection of tendered stores but the Respondent did not take any cognizance of the same.
14. DP of only five month was given for AT of over 32 lacs while one year DP was given for earlier two supply order. The DP was totally inadequate, both in terms of quantum and the time taken in Inspections, which had been highlighted time and again.
15. The Claimant made all efforts to ensure timely completion of stores delivery. Imposition of LD by the Respondent was carried out as a matter of routine without understanding the ground condition, that over approximately 43 lac Towels Hand Khaki had been supplied in 15 months after crossing all hurdles.
AT 71355/DGOS/OS-PII/Proc/Sec/TE/1637 dated 24 Mar 2006 for Towel Hand Khaki Qty 8,34,687 Nos Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:33:56 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 43 of 47
16. The AT referred above was placed on the Claimant.
The DP wan given up to 30 Apr 2006. All other conditions remained same. Certain irregularity regarding stitching of side Edges besides the Traverse Ends of the Towel had not been quoted in the supply order. Claimant requested the Respondent to issue amendment so that inspection could be conducted, as the inspection agency would not proceed without it. This was communicated on 28 Mar 2006. DP Extension was initially given up to 30.11.2006 with LD and subsequently extended up to 30.04.2007 with LD.
17 The Supplies were held up by Inspection Agency insisting on prior amendment of AT before commencement and thereafter limiting the lot sizes to max 10,000 pcs.
Finding:
18 The Claimant was given hardly one month time to complete the supplies, while testing per lot takes 25 to 30 days. The specifications given the contract were at variance and the Respondent amended to the contract was given after a gap of over two months i.e way beyond the DP given in the contract.
19. There was a lack of synergy between the Respondent and the nominated Inspection Agency. It is visible in their letters dated 16.06.2006 and 20.06.2006. This unusually small DP and delay in response to Inspection Agency and non-submission of any reasons to substantiate their actions leads to the feeling of autocratic behaviour on the part of the Respondent."
35 It is contention of the petitioner that however, when it came to the arbitration proceedings between the petitioner herein and CCIC, on the same set of contentions raised by the supplier (petitioner herein) the arguments were not appreciated which form part of the impugned award of Ld. Arbitrator dated 06.04.2019 in paragraph 10. The CCIC has committed error of arguing Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:34:04 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 44 of 47 approbate and reprobate when it came to the question of delay in supplies made by the petitioner herein.
36 The doctrine of approbate and reprobate is a legal principle that states that a person cannot take inconsistent positions in legal proceedings. It is a type of estoppel that comes from the Latin maxim quod approbo non reprobo, which means "that which I approve, I cannot disapprove".
37 It is no more res integra this principle is approved by Hon'ble Supreme Court in Gosain v. Yashpal Dhir, (1992) 4 SCC 683 and Premalata @ Sunita v. Naseeb Bee, 2022 LiveLaw (SC)
317. In Premalata @ Sunita (Supra), the Hon'ble Court had observed that a litigant cannot be permitted to take two different / contradictory stands before two different forums while applying the doctrine of approbate and reprobate on a revenue matter. In Union of India v. N Murugesan, reported in (2022) 2 SCC 25, the Hon'ble Apex court held that the doctrine of approbate and reprobate is a principle emerging from common law and not Section 115 of the Evidence Act, 1872 now amended as Section 121 of The Bharatiya Sakshya Adhiniyam, 2023. It noted as below:
"A person cannot be allowed to have the benefit of an instrument while questioning the same. Such a party either has to affirm or disaffirm the transaction. This principle has to be applied with more vigour as a common law principle, if such a party actually enjoys the one part fully and on near completion of the said enjoyment, thereafter questions the other part. An element of fair play is inbuilt in this principle.Digitally signed by VINEETA GOYAL
VINEETA Date:
GOYAL 2024.11.26
17:34:14
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It is also a species of estoppel dealing with the conduct of a party. . . . . . ."
38 Coming to the case in hand, it is a matter of record that these contracts of supply of towels were back-to-back wherein petitioner was the manufacturer and supplier while the DGOS were the consumer. In between this process of supply of goods, CCIC was merely a pass-through entity. It is to be noted that the petitioner has brought on record Minutes of Committee of Secretaries (COS) held on 21.06.2023 for Resolution of Commercial dispute between Central Cottage Industries Corporation and Director General Ordinance Services (DGOS) under Administrative Mechanism of Resolution of Disputes (AMRCD) which is not denied by the respondent. It emerges from the Minutes of Meeting above that the dispute between CCIC and DGOS in respect of claim of Liquidated damages emerging from this contract has a long-drawn history of litigation. In the initial phase, DGOS denied referring the matter to arbitration and thereafter CCIC got the Ld. Arbitrator appointed through Hon'ble High Court. The Ld. Arbitrator Brig. A.K. Sharma gave the Arbitration Award on 06.12.2018 with the directions to make the payment. Thereafter, CCIC moved an application for execution of the award and DGOS filed petition challenging the award dated 06.04.2019. Thereafter CCIC invoked settlement of disputes through AMRCD and the matter got amicably settled. This further strengthen that the right of the petitioner herein was not foreclosed and cannot be said to be barred by limitation. The Ld. Arbitrator Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.11.26 17:34:21 +0530 OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 46 of 47 has thus overlooked the terms contained in clause 13 of the contract, which specifically provides that payment of cost of towels by CCIC to the petitioner only after receipt of full and final payment from DGOS in respect of the towels supplied under the contract, hence, the impugned award will become unsustainable.
39 Having discussed above, it is concluded that the impugned award passed by ld. Arbitrator is hit by the grounds covered under Section 34 (2)(b) (ii) and Section 2(A) of the Act.
The petition is allowed and award dated 06.04.2019 is hereby set aside.
40 Parties would be at liberty to avail remedies available in accordance with law.
Parties are made to bear their own costs.
File be consigned to Record Room.
Digitally signedVINEETA by VINEETA GOYAL GOYAL Date: 2024.11.26 17:34:32 +0530 Pronounced in the open Court (VINEETA GOYAL) on 26th November, 2024 District Judge (Commercial-03) Patiala House, New Delhi OMP (COMM): 94/19 M/s. Mittal Processors (P) Ltd. vs. Central Cottage Industries Corporation of India Ltd. Page 47 of 47