Punjab-Haryana High Court
Punjab State Civil Supplies ... vs M/S Diwan Chand Sanjit Kumar And Others on 27 August, 2013
Author: Paramjeet Singh
Bench: Paramjeet Singh
CR No.1485 of 2013 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CR No.1485 of 2013
Date of Decision: 27.08.2013.
Punjab State Civil Supplies Corporation Limited and another
....Petitioners
Versus
M/s Diwan Chand Sanjit Kumar and others
.....Respondents
CORAM: HON'BLE MR. JUSTICE PARAMJEET SINGH
1) Whether reporters of the local papers may be allowed to
see the judgment? Yes
2) To be referred to the Reporters or not? Yes
3) Whether the judgment should be reported in the Digest? Yes
Present: Ms. Deepali Puri, Advocate,
for the petitioners.
Mr. Mukand Gupta, Advocate,
for respondents no.1 and 2.
****
PARAMJEET SINGH, J.
Instant revision petition has been filed under Article 227 of the Constitution of India for setting aside the order dated 22.01.2013 passed by learned Additional District Judge, Union Territory, Chandigarh in CR No.1485 of 2013 2 appeal No.10 dated 15.07.2013 whereby application for staying the operation of the order dated 12.12.2012 passed by respondent no.3 (Arbitrator) has been allowed.
Shorn of unnecessary details, the facts relevant for disposal of the present petition are to the effect that parties entered into an agreement dated 15.10.2010 whereby the respondents no.1 and 2 (millers) undertook to mill the paddy stored by the petitioner (hereinafter referred to as PUNSUP) and supply the resultant rice to the Food Corporation of India on behalf of the PUNSUP. In terms of the said agreement, the millers failed to mill the paddy which was delivered to them by the PUNSUP. As such, clause 26 of the said agreement was invoked and the matter was referred to the sole Arbitrator-respondent no.3. In terms of the said reference, the Arbitrator entered into reference and the PUNSUP filed a statement of claim. Along with the said statement of claim, application under Section 17 of the Arbitration and Conciliation Act, 1996 (in short "the Act, 1996") for disposal of rice stored at the premises of respondents no.1 and 2 and restraining them from shifting or selling rice stocks, was filed. It would be pertinent to mention here that respondents no.1 and 2 failed to deliver the complete rice stocks due against the paddy stored by the PUNSUP with respondents no.1 and 2. The respondents no.1 and 2 against the total due rice could deliver only 23930.37 quintals of rice in 48060 bags to Food Corporation of India and as such failed to deliver the remaining 29905 bags of rice weighing 14952.31 quintals of rice. On physical verification CR No.1485 of 2013 3 of the stocks on 31.05.2012 and 16.09.2012, it was also found that the remaining rice stock of 14953.36.100 quintals of rice in 29242 bags was stored in the premises of the millers.
It is the case of the PUNSUP that rice being a perishable commodity, the Arbitrator can pass the order for disposal of the same at the earliest. The disposal of rice is of paramount importance which overrides the provisions of the agreement as well as in the interest of justice, equity and fair play. Otherwise, it will cause loss to the PUNSUP. It is also averred that the sale of stocks of rice was expedient in the interest of both the parties. In pursuance to the proceedings in application under Section 17 of the Act, 1996, respondents no.1 and 2- millers submitted reply and raised objections about sale and disposal of the above said rice lying at their premises. Respondent no.3-Arbitrator after considering the material on record passed the order for disposal of the rice stock vide order dated 12.12.2012. A relevant portion of this order reads as under:
"The fact is not disputed that the rice stocks lying at the premises of the respondents are a perishable commodity and its earliest disposal is of paramount importance which overrides the provisions of the agreement in the interest of natural justice, equity and fair play. Any delay in the disposal/sale of rice stocks can cause huge loss to Punsup.
The expeditious disposal of rice stocks CR No.1485 of 2013 4 mentioned in the application is highly imperative and expedient in the interests of both the parties. The claimants are hereby allowed to dispose off the 29, 242 bags weighing 14,953-100 Qtls. of rice stocks lying at the premises of the respondents as mentioned in the application by tender process at the earliest. The respondents are also restrained from shifting or selling the above said stocks of their own."
Feeling aggrieved by this order, respondents no.1 and 2 filed application under Section 37 (2) (b) of the Act, 1996 wherein learned Additional District Judge, passed the impugned order dated 22.01.2013 whereby sale of paddy was stayed, however liberty was granted to the PUNSUP to shift the paddy in terms of clause 11 of the agreement. Hence, this revision petition.
I have heard learned counsel for the parties and perused the record.
Learned counsel for the petitioners has contended that storage of the paddy with the millers is not in dispute. The rice and paddy are the property of PUNSUP. The millers have only to mill it and covert into rice. After milling a part of the paddy, rice has been delivered to Food Corporation of India in the account of the PUNSUP. Some of the rice is lying at the premises of the millers. Besides this, the paddy is also lying which has been ordered to be shifted, however, the sale of the rice has been stayed by learned Additional District Judge, Chandigarh vide CR No.1485 of 2013 5 impugned order dated 22.01.2013. The learned counsel has further contended that the rice is a perishable item with prolonged storage it becomes brittle and loses its oil contents. In case the same is not disposed of or sold at the earliest, then irreparable loss will be caused. Disposal of the rice stock by way of sale is imperative and expedient in the interest of both the parties, therefore, in terms of Section 17 of the Act, 1996, interim order is required to be passed. The learned counsel has further contended that liberty can be granted to respondents no.1 and 2-millers that they can participate in the sale of rice which will be by way of auction and they can bring the buyers for this purpose so that maximum price could be fetched for the rice. The sale of rice will be in open auction after its due publication in the newspaper etc. On the other hand, learned counsel for respondents no.1 and 2 has contended that no interim relief can be granted by the Arbitrator. There is no provision in the agreement providing for sale of the rice which has been processed after milling. The learned counsel has further contended that rice is not a perishable item and has relied upon M.D.Army Welfare Housing Organization vs. Sumangal Services Pvt. Ltd. 2004 AIR (SC) 1344 to contend that the Arbitrator cannot pass interim order.
I have considered the rival contentions of learned counsel for the parties.
Before considering their contentions, it would be appropriate to refer to clauses 9, 11 and 26 of the agreement which read as under: CR No.1485 of 2013 6
"9. At the time of delivery, the stocks of rice shall be subjected to the inspection as per provisions of the Punjab Rice Procurement (Levy) order, 1983. Any quality allowance determined at the time of inspection according to the specifications shall be recovered from the miller's bill.
11. The miller shall deliver rice on the total quantity of paddy stored with him, at regular intervals, not later than 31.3.2011. The miller shall ensure milling of paddy and delivery of rice as per the following schedule :-
October, 2010 5%
November/December, 2010 20% +20%
January/February, 2011 20% + 20%
March 2011 15%
In case a rice miller fails to adhere to the
monthly milling schedule interest @ 12% on the amount equivalent to the cost of rice delivered less by him will be charged. The quantity of paddy milled less by the miller during the month will be shifted to other millers at the risk and cost of the miller and after due notice in this regard. Also the penalty, if any, imposed by the Government of India on the state agencies due to delayed/non-delivery of rice, will have to be paid by the rice miller.
26. All the disputes and difference arising out of or CR No.1485 of 2013 7 in any manner touching or concerning this agreement what so ever (except as to any matter the decision of which is expressly provided for the contract ) shall be referred to sole arbitrator of the Managing Direcot or any person appointed by him in this behalf. There will be no objection to any such appointment that the person appointed is or was an employee of PUNSUP or that he had to deal with the matter to which the contract relates and that in the court of his duties such an employee of the food and Supplies Department, Punjab/Agency had expressed views on all or any of the matter in dispute of difference. The award of such arbitration shall be final and binding on the parties to this contract. It is a term of this contract that in the event of the arbitrator being transferred or vacating his office or being unable to act for any reason, the Director/Managing Director at the time of such transfer, vacation of office, death or inability shall appoint another person to act as arbitrator. Such a person shall be entitled to proceed with reference from and the stage where it was left by his predecessor. "
It would also be appropriate to refer to Section 17 of the Act, 1996 which reads as under:
"Section 17. Interim measures ordered by Arbitral Tribunal-
(i) Unless otherwise agreed by the parties, the CR No.1485 of 2013 8 arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute.
(ii) The Arbitral Tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).
The perusal and analysis of Section 17 of the Act, 1996 make it clear that in absence of any agreement to the contrary, an arbitral tribunal may at the request of a party, order a party to take any interim measure of protection in respect of subject matter of the dispute. The Court has been given extensive power under Section 9 of the Act, 1996 to give directions by way of interim measures. A part of that power has also been given to the arbitral tribunal under Section 17 of the Act, 1996 i.e. an arbitral tribunal may order a party to take any interim measure of protection in respect of the subject matter of the dispute.
In case of Firm Ashok Traders and another vs. Gurumukh Das Saluja and others AIR 2004 SC 1433, the Hon'ble Supreme Court has held in para no.18 as under:
"Under the A&C Act 1996, unlike the predecessor Act of 1940, the arbitral tribunal is empowered by Section 17 of the Act to make orders amounting to interim measures. The need for Section 9, in spite of Section 17 having been enacted, is that Section 17 would operate only during the existence of CR No.1485 of 2013 9 the arbitral tribunal and its being functional. During that period, the power conferred on the arbitral tribunal under Section 17 and the power conferred by the Court under Section 9 may overlap to some extent but so far as the period pre and post the arbitral proceedings is concerned the party requiring an interim measure of protection shall have to approach only the Court. The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the 'proximately contemplated or 'manifestly Intended' arbitral proceedings itself. If arbitral proceedings are not commenced within a reasonable time of an order under Section 9, the relationship between the order under Section 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made 'before', i.e. in contemplation of arbitral proceedings. The Court, approached by a party with an application under Section 9, is justified in asking the party and being told how and when the party approaching the Court proposes to commence the arbitral proceedings. Rather, the scheme in which Section 9 is placed obligates the Court to do so. The Court may also while passing an order under Section 9 put the party on terms and may recall the order if the party commits breach of the terms."
In case of M.D. Army Welfare Housing Organisation vs. CR No.1485 of 2013 10 Sumangal Services Pvt. Ltd. AIR 2004 SC 1344, the Hon'ble Supreme Court has held as under:
"A bare perusal of the aforementioned provisions would clearly show that even under Section 17 of the 1996 Act the power of the arbitrator is a limited one. It cannot issue any direction which would go beyond the reference or the arbitration agreement. Furthermore, an award of the arbitrator under the 1996 Act is not required to be made a rule of court; the same is enforceable on its own force. Even under Section 17 of 1996 Act, an interim order must relate to the protection of subject matter of dispute and the order may be addressed only to a party to the arbitration. It cannot be addressed to other parties. Even under Section 17 of the 1996 Act, no power is conferred upon the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof. The said interim order of the learned Arbitrator, therefore, being coram non judice was wholly without jurisdiction and, thus, a nullity."
Admittedly for preserving the subject matter when it is perishable commodity, appropriate order can be passed by the Arbitral Tribunal as well as by the Court. One peculiar fact of this case is that the paddy was supplied by the PUNSUP to the millers for milling purpose. After processing the paddy, respondents no.1 and 2-millers have to deliver rice to the PUNSUP or to the Food Corporation of India CR No.1485 of 2013 11 in the account of PUNSUP. It means the entire stock i.e. the paddy as well as rice are the ownership of the PUNSUP. The paddy has been stored with respondents no.1 and 2 only for the purpose of milling/processing i.e. to make rice from paddy. The only right of respondents no.1 and 2-millers is to charge for milling/processing the paddy into rice, meaning thereby that respondents no.1 and 2 have no ownership over paddy and rice, so whether such condition exists or not, in the agreement will be irrelevant. The property in all paddy as well as rice vests in PUNSUP and it can act with respect to paddy/rice in any manner. The only question that arises with regard to the loss, if any, suffered will be determined by the Arbitrator in due course. Since with the passage of time the rice become dry, brittle, loses its oil contents and its market value diminished, it thus being a perishable item, the Arbitrator can pass the interim award for its sale, moreso, when such an order is to protect the subject matter from losing its value and resultant further loss. This is obviously intended to take care of the situation where a party to the arbitration proceedings may not suffer losses on vexatious claim raised by the other party as in the present case is being raised by respondents no.1 and 2.
Now, the question arises whether case law M.D.Army Welfare Housing Organization (supra) cited by learned counsel for respondents no.1 and 2 is applicable to the facts of the present case. To my mind, the said case law (supra) will not be applicable to the facts of the present case. The entire property i.e. rice and paddy are the ownership of the CR No.1485 of 2013 12 petitioner and only right of respondents no.1 and 2 is to recover milling charges. If for any reasons delay is caused by millers with resultant losses caused due to prolonged storage and non-milling of paddy in time as per terms of agreement by respondents no.1 and 2 i.e failing to deliver the rice to the PUNSUP or deposit in the stock of Food Corporation of India as per the terms of the agreement, the same can be determined by arbitrator. The interim order to sell is in the interest of both the parties to arbitration. The interest of respondents no.1 and 2 can be saved by putting a condition that they will be at liberty to be present at the time of sale of rice in open auction which will be conducted after due publication by the petitioners. Respondents no.1 and 2 will also be at liberty to bring their own buyers so that maximum price could be fetched.
In view of above, the impugned order dated 22.01.2013 passed by learned Additional District Judge is set aside. The petitioners will be at liberty to sell the rice in open market after due publication in various newspapers and conducting open auction in the market. Notice of the date auction shall also be given to respondents no.1 and 2.
In the aforementioned terms, the instant petition is allowed.
(Paramjeet Singh) Judge August 27, 2013 parveen kumar