Delhi District Court
Laxmi Oil Carrier vs M/S Indian Oil Corporation Limited on 14 January, 2020
OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020
: IN THE COURT OF :
DR. V.K. DAHIYA
ADDITIONAL DISTRICT JUDGE01:
SOUTHWEST DISTRICT: DWARKA COURTS:
NEW DELHI
OMP (Comm.) No. 2213/2018
In the matter of:
Laxmi Oil Carrier
(Through Proprietor)
Mahavir Singh Rana
H. No. 552A, VPO Bijwasan,
New Delhi 110061
.....Petitioner
Versus
1. M/s Indian Oil Corporation Limited
World Trade Centre, 2nd Floor,
Babar road, Barakhamba Lane,
Connaught Place, Delhi 110001
2. Sh. B.K. Pandey,
(Sole Arbitrator)
3079/3 Sadiq Nagar,
J.B. Tito Marg,
New Delhi 110049
....Respondents
Date of Institution of Petition : 22.12.2018
Date of reserving judgment : 14.01.2020
Date of pronouncement : 14.01.2020
Page No. 1 of 35
OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020
Appearance:
(i) Sh. Akil Rataeeya, Advocate, Learned Counsel for petitioner
(ii) Ms. Mala Narayan Advocate, Learned Counsel for
respondent
APPLICATION UNDER SECTION 34 OF THE ARBITRATION &
CONCILIATION ACT FOR SETTING ASIDE
IMPUGNED AWARD DATED 25.10.2018
J U D G M E N T:
1. This is a petition under Section 34 of Arbitration & Conciliation Act 1996, filed by the petitioner/nonclaimant/objector, seeking setting aside of Arbitral Award dated 25.10.2018, passed by Sh. B.K. Pandey, the Sole Arbitrator (hereinafter referred to as the "impugned Award"). The record from the office of learned Arbitrator has been received. The Objector/petitioner/claimant and nonclaimant/respondent no. 1 are herein after referred to as the petitioner and respondent no. 1 respectively.
Petitioners Case
2. It is averred petitioner entered into a contract/ agreement with respondent no. 1 on 11.01.2017 and thereafter, Tender dated 13.01.2017 for transportation of petroleum products via land in terms of agreement. On 08.07.2017 Tank Truck (hereinafter referred to as "TT') No. DL1GC 3563, which was one of eight TTs of the petitioner, was filled with 12 KL HSD for delivery from Bijwasan to the consumer i.e. M/s Maruti Suzuki India Ltd., Manesar, Haryana.
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3. It has been averred that there was a suspicion regarding the said TT, therefore, the vigilance department and the IOC Field Officers were requested to investigate the TT. On 10.07.2017, the said TT was checked by the concerned officers of respondent no.1 in the presence of representative of petitioner Sh. Amit Rana and it was found short by 2000 liters. The petitioner took steps and asked the driver of the said truck, Sh. Deen Badhu Kumar about the details of the aforesaid incident, who has admitted that he enroute had pilfered a quantity of 2000 liters for the ulterior motives. The petitioner terminated the services of the said driver and also filed a complaint in the police station Kapashera.
4. It is averred that consequent thereupon the respondent no. 1 issued a show cause notice to petitioner on 11.07.2017, which was duly replied by petitioner vide its reply dated 27.07.2017. The respondent no. 1 wrote a letter dated 01.09.2017 to petitioner informing that the reply was not satisfactory and therefore, petitioner was directed to appear in person in order to clarify his explanation. The said personal hearing of petitioner was scheduled on 04.09.2017, which was rescheduled and held on 11.09.2017.
5. It has been averred that, in the meantime, on 01.09.2017, the respondent ordered the stoppage of the filling of the other seven TTs and completely seized the petitioner's operations. On 11.09.2017, petitioner presented his explanations and submitted that he has already taken action against the Page No. 3 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 offending driver, therefore, there is no need to blacklist the petitioner and imposing any penalty. The petitioner had issued the letter dated 16.09.2017 pursuant to Clause 16 of the agreement to initiate arbitration proceedings (hereinafter referred to as the "invocation letter").
6. It has been averred that the petitioner sent the letter dated 13.09.2017 and sent a reminder on 20.9.2017 seeking explanation as to why respondent had stopped the operation of the petitioners other TTs. The petitioner on 24.09.2017 received the termination letter dated 21.09.2017 blacklisting all the TTs of petitioner for two years along with an order for recovery of Rs. 79,33,920/. It is averred that subsequent thereto the arbitration proceedings were initiated and the Ld. Arbitrator through the impugned Award and affirmed all the penalties being levied upon petitioner.
7. The respondent no.1 filed reply to this petition and contended that petitioner has not disclosed true facts and the relevant true facts are disclosed by respondent no. 1 as under :
(i) That the bid of petitioner in terms of the tender dated 16.05.2016 was accepted and respondent no. 1 issued a letter of acceptance dated 26.12.2016 intimating petitioner that his bid has been accepted for transportation of bulk petroleum products w.e.f.
16.01.2017 as per terms and conditions of tender. The tank trucks offered by petitioner in their bid have been allocated for issuance of LOA.
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(ii) The respondent no. 1 through Bulk Petroleum Products Road Transport Agreement appointed petitioner as one of its transporters for providing transportation of bulk petroleum products through petitioner's eight tank trucks by road, from respondent's various storage points (Bijwasan Depot in the present case) to customers/other storage points. The subclause (a) of Clause 9 of the Transport Agreement provided petitioner, shall be responsible for quantity and quality of the products received by him for transportation and further, that petitioner shall be responsible to check the quantity and quality of the products received by him at the Dispatch Storage Point before acknowledgment of the products.
(iii) Upon execution of the Transport Agreement, the respondent no. 1 through letter dated 13.01.2017 informed petitioner for transportation of bulk petroleum products w.e.f 16.01.2017 as per the terms and conditions of tender. The concerned TT bearing registration No. DL 1GC 3563 formed a part of the fleet of TTs offered by petitioner and approved by the respondent no. 1 corporation against the subject tender.
(iv) On 08.07.2017, one of the petitioner's Tank Truck bearing No. DL 1GC 3563 reached M/S Maruti Suzuki India Limited ("MSIL"), Manesar, Haryana, one of the customers of the respondent for delivery of 12 KL HSD at 16.07 hours.
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(v) That the said TT was checked at around 17.00 pm by one Shri Raj Kumar. In the meantime, the Vigilance Department of the customer of respondent no. 1 intervened and decided not to decant the same till further investigations. Thereafter, upon some deliberations at around 21.20 hours, it was finally decided to decant the said tanker. However, before even the first chamber of the lorry could be decanted fully, some person contacted the head of vigilance of the customer with an offer to settle the matter unofficially which authenticated the suspicions of pilferage/ malpractice. The concerned officer of MSIL then stopped the decantation and contacted the officer of respondent no. 1. The respondent no. 1 then constituted a team comprising of two officials of the respondent no. 1 to inspect the tanker and conduct inquiry in the said matter.
(vi) The team went to the premises of MSIL on 10.07.2017 and inspected the concerned TT, whereupon it was discovered that petitioner had made unauthorized alterations in the standard fittings of the said TT by breaking the weld joint between the dip pipe and fill pipe in all the four chambers and by slipping an additional hollow pipe with a closed end (with a small hole at the bottom) over the dip pipe by inserting the same through the said broken weld joint and by tightening the said hollow pipe with the help of a screw in all the four chambers of the said TT. A nut was also welded on top of the hollow pipe to match it with the hole in the dip pipe and tightened with the help of a screw so that the hollow pipe does not slip out of the dip nose. By the aforesaid Page No. 6 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 actions, the petitioner had manipulated the dip levels in all the chambers of the said TT and, by doing so, tampered with the calibration of the said TT.
(vii) It became clear that the aforementioned malpractice, adopted by petitioner, affected the quantity of the product. Thereafter, upon refitting the chamber dome covers of all the chambers, dips were again taken and a mathematical calculation was done, whereupon, it was found that an approximate quantity of 500 litres in each chamber of the said Truck was short as petitioner had manipulated the dip levels in all the four chambers of the said TT and, by doing so, petitioner had tampered with the calibration of the said TT. The officials of the respondent no. 1 captured on camera the aforementioned unauthorized alterations in the standard fittings of the said TT affecting quantity of the product as well as leading to tampering with calibration of the said TT. The aforementioned enquiry was conducted by the officials of respondent no. 1 in presence of the officials of vigilance team of MSIL and a representative of petitioner, namely, Sh. Amit Rana.
(viii) The report prepared by the officials of respondent no.1 depicts that it was recorded that upon investigation of the said TT, it was observed that petitioner has unauthorizedly altered the standard fittings of the said TT by breaking the joint between the dip pipe and fill pipe in all the chambers and slipping a hollow pipe over the dip pipe through this broken portion in order to deliver less product. It became apparent that the aforementioned malpractice Page No. 7 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 adopted by petitioner had affected the quantity of the product. It was also recorded that since it was not possible to obtain VTS report at that point of time, therefore, it could not be ascertained whether or not there was a halt enroute.
(ix) It was further incorporated in the said report that the driver of the said Truck, Sh. Deen Bandhu Kumar, has accepted that he had stolen a quantity of 2000 litres from the tanker enroute for selling, therefore, it leads to a conclusive inference that it was a regular practice with petitioner to hoodwink respondent no. 1 in respect of quantity of the oil carried and delivered to the customers' destinations and further to cause losses not only to respondent no.1 but also to the customers of respondent no. 1 who were taking the said supplies on the bonafide belief that since the products are being supplied by the respondent no. 1, there was no reason to doubt the quality and quantity of the said products supplied to them. As such, the petitioner has also damaged the reputation and goodwill of the respondent Corporation.
(x) The respondent no. 1 issued a show cause notice dated 11.07.2017 to petitioner whereby it were informed that during the investigation of the said TT, conducted on 10.07.2017 by the officials of respondent no. 1, it was observed that there were unauthorized alterations made in the standard fittings of the said TT. Thus, it became apparent that the aforementioned malpractice adopted by the petitioner, affected the calibration of the TT leading Page No. 8 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 to supply of less quantity of the product to the customer. It was further mentioned that upon refitting the chamber dome covers of all the chambers, dips were again taken and a mathematical calculation was done, where upon it was found that an approximate quantity of 500 litres in each chamber of the said Truck was short as petitioner had manipulated the dip levels in all the chambers of the said Truck and, by doing so, they had tampered with the calibration of the said TT. It became clear that petitioner had been engaged in various malpractices, interalia, of making unauthorized fittings/alterations, in standard fittings of said TT affecting quantity of the product, making short delivery of product as well as tampering with calibration of the said TT, which is in violation of the terms and conditions of the Transport Agreement and the ITDG, thereby causing harm to the good name and image of the respondent no. 1.
(xi) The petitioner on 27.07.2017, replied to the aforesaid show cause notice by stating that since he was not keeping well and had been hospitalized, he could not personally supervise the TTs and Sh. Deen Bandhu Kumar, the driver, in collusion with his competitors, had committed the malpractices as mentioned in the Show Cause Notice dated 11.07.2017. The petitioner has categorically admitted tampering with the standard fittings of the said TT in order to pilfer the product and has requested respondent no. 1 not to terminate the transport agreement and also not to blacklist his TTs. The petitioner has, in his aforementioned reply, made a categorical request to respondent Page No. 9 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 no. 1 to recover their losses caused on account of the aforementioned malpractices.
(xii) The respondent issued a letter dated 01.09.2017 to the petitioner wherein it was stated that since the reply to Show Cause Notice, given by petitioner through his letters dated 20.07.2017 and 27.07.2017, was found to be unsatisfactory, and an opportunity of personal hearing before CGM (OPS) DSO was being given to him for making his submissions on 08.089.2017 at 11:30 AM at the office of respondent no. 1.
(xiii) The malpractices / irregularities mentioned in the Show Cause Notice stood established, therefore, the respondent no. 1 issued the letter of termination dated 21.09.2017 terminating the Transport Agreement dated 11.01.2017 and blacklisting all the 8 TTs of petitioner for a period of 2 years w.e.f. 15.09.2017, on industry basis as per the provisions contained in the Transport Agreement and the ITDG, the security amount of Rs. 8,00,000/ was also forfeited.
(xiv) The petitioner had, by breaking the joint between the dip pipe and fill pipe in all the chambers and slipping a hollow pipe over the dip pipe through his broken portion, manipulated the dip levels in all the chambers of the said Truck and, by doing so, tampered with the calibration of the said Truck, the respondent no.1 also demanded recovery of a sum of Rs. 79,33,920/ from the petitioner towards product losses suffered by the respondent no. 1 Page No. 10 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 calculated from the date when last calibration was done, i.e. from 20.05.2017.
(xv) Aggrieved by the aforesaid order of blacklisting of all his 8 TTs on industry basis, the petitioner raised a dispute and invoked the arbitration clause i.e. Clause No. 16 of the Transport Agreement.
(xvi) The respondent no. 1 issued a letter dated 27.09.2017 to the petitioner whereby his consent for authorizing EDDSO to appoint any officer of the respondent as an Arbitrator for adjudication of disputes raised by the petitioner, was sought. The petitioner on 25.10.2017 gave his consent for authorizing EDDSO for appointing an officer of respondent no. 1 as an arbitrator for adjudicating upon the disputes raised by the petitioner.
(xvii) On receipt of the aforementioned letter of the petitioner, the EDDSO of the respondent issued a Letter dated 02.11.2017 informing the petitioner of the appointment of Shri B. K. Pandey as the Sole Arbitrator for adjudication of the disputes raised by petitioner. The Ld. Sole Arbitrator on 06.11.2017 passed an Order whereby he entered into reference and gave a declaration about his impartiality or independence as per the provisions of the said Act.
(xviii) The petitioner on 21.11.2007, filed their statement of claims before the Ld. Sole Arbitrator in the arbitration proceedings Page No. 11 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 conducted between the parties. Thereafter, respondent no. 1 submitted their statement of defense with the Ld. Sole Arbitrator and petitioner submitted a rejoinder to the statement of defense with the ld. sole Arbitrator.
8. The Ld. Sole Arbitrator framed various issues on 16.02.2018, and passed the impugned order.
9. The petitioner during the course of arguments raised the following grounds to challenge the impugned award.
(i) The impugned award is not only bereft with the infirmities but also is not in consonance with the provisions of the Arbitration & Conciliation Act and the impugned award is bad and not sustainable in the eyes of law, therefore, deserves to be set aside.
(ii) It is the obligation upon the Ld. Arbitrator to pass the Arbitral Award within 12 months from the date of receiving the notice of appointment i.e. September 2018, by virtue of Section 29A of the Act however, the impugned Award was passed on 25.10.2018 much after expiry of the statutory period of one year in as much as the Ld. Arbitrator was appointed in the end of September 2017. Even the Ld. Arbitrator has not taken consent of the parties to seek extension of time to pass the impugned award.
(iii) The Impugned Award is also hit by virtue of section 12 of the Act in as much as Section 12(5) of the Act stipulates that the appointment of Arbitrator shall be set aside if his relation falls with any of the parties under VII (Seventh) Schedule of the Act. The Ld. Arbitrator is employee of the respondent no. 1, therefore, Page No. 12 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 consent of the petitioner was mandatory, as such, award is liable to be set aside on this ground alone.
(iv). That the Ld. Sole Arbitrator has neither appreciated the correct factual position of the case nor the entire documents related with the case has been carefully perused before passing the said award and the same is liable to be set aside on this ground alone.
(v) The Ld. Arbitrator has failed to notice that driver of petitioner had manipulated the standard fittings only which is covered under Clause 8.2.2.11 and the said clause stipulates about blacklisting of single TT involved in the manipulation, therefore, the blacklisting order passed by the respondent regarding all TTs on the ground of tampering with calibration of vehicle is against the contract entered between the parties.
(vi) The Ld. Arbitrator has not passed the impugned award without any cogent proof for invocation of clause 2.3.6 ITDG which deals with tampering with calibration of vehicle. Therefore, the Ld. Arbitrator has wrongly passed the impugned award by invoking Clause 2.3.6.
(vii) The respondent no. 1 had wrongly saddled the petitioner with hefty penalty of Rs. 79,33,920/ and the impugned award is also devoid of necessary explanation and calculations which can justify the amount of penalty being imposed upon petitioner.
(viii) The Ld. Arbitrator has not appreciated that the calibration was done in the month of May, 2017 and from 18.05.2017 to 01.09.2017 no complaint has been filed qua the service provided Page No. 13 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 by petitioner and the respondent has not placed on record any document or evidence showing that the petitioner was negligent or have received any complaint with regard to petitioner. The penalty amount is liable to be set aside in as much as the same is imposed in violation of the interpretation of Section 74 of Indian Contract Act, propounded by the Superior Court.
(ix) The Ld. Arbitrator has not appreciated the fact that the blacklisting of all TTs is not provided under Clause 8.2.2.16 as alleged by respondent no. 1 in as much as the said clause did not stipulate any fix liability, otherwise, it is based on the discretion of respondent. The said discretion was arbitrarily exercised and the ld. Arbitrator failed to take note of the same which further pinpoint to the impartial behaviour of Ld. Arbitrator.
10. During the course of arguments, the Ld. Counsel for respondent no. 1 has raised the following contention to support the impugned order :
(i) the impugned award has been passed upon a careful consideration of the terms of Transport Agreement and the impugned award is reasoned one, therefore, did not call for any interference.
(ii) This court has no territorial jurisdiction to entertain this petition in view of the law laid down by Hon'le Supreme Court in IMDP Ltd v. Datawind Innovation Pvt. Ltd. AIR 2017 SC 2105.
(iii) By placing reliance on S.P. Puri vs. Alankit Assignments Ltd. 2008 (3) ArbLR 465 (Delhi), it it submitted that the Arbitrator Page No. 14 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 is not supposed to give elaborated judgments dealing with each and every aspect, ground or reason. Arbitrator have to consider the entire facts in proper perspective and give an indication of the grounds and the reasons that prevailed upon them to decide the matter. Law requires the Arbitrator to give reasons and nothing more and if the reasons are clear and indicate the basis for the decision, the award should be upheld and cannot be set aside.
Law does not require Arbitrators to give detailed judgment dealing with each and every contention raised by the parties.
(iv) The impugned award was passed in terms of Section 29A of the Act, which speaks about the time limit for passing of an Award. The appointment of the Sole Arbitrator does not suffer any infirmity and illegality in as much as the petitioner vide letter dated 25.10.2017 consented to appointment of an employee of the respondent no. 1 Corporation, and therefore, petitioner is estopped for raising this contention.
(v) The petitioner, through letter dated 25.10.2017 specifically consented to the appointment of an officer of respondent no. 1 as an arbitrator and having done so, cannot at this stage take up the false plea that the Ld. Arbitrator was not competent to preside on account of his being an officer of the respondent. Therefore, it is clear that petitioner with malafide and dishonest intention has raised false and frivolous pleas because he was unable to obtain an award in his favour. No party can be allowed to approbate and reprobate at the same time. In this regard reliance is placed in Bharti Cellular Limited vs. Union of India (2010) 10 SCC 174, and Panna Lal vs. State of Rajasthan, (1975) 2 SCC 633.
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vi) Any objection as to the ineligibility of an Arbitrator on account of his being an employee of the respondent corporation, has to be raised within fifteen days from the date of becoming aware of the constitution of the Arbitral tribunal as per Section 13 of the said Act which was not done by the petitioner, otherwise, petitioner through its letter dated 25.10.2017, specifically consented to the appointment of an officer of the respondent no. 1. The petitioner has voluntarily and without any protest participated in the arbitral proceedings the petitioner cannot and is, in fact, estopped from objecting to the said appointment for the first time, in its petition under Section 34 of the said Act.
(vii) The view taken by the Ld. Sole Arbitrator in the impugned award is a plausible one and does not suffer from any infirmity and the Hon'ble Supreme Court has, while explaining the phrase 'public policy' used in Section 34(2) of the said Act, held Associate Builders v. Delhi Development Authority AIR 2015 SC 620 that if the approach adopted by the Arbitrator does not suffer from any arbitrariness and/or is not capricious, then the award ought not to be interfered with as the arbitrator is the last word on facts.
(viii) The Ld. Sole Arbitrator has, upon a careful consideration of the averments made, evidence/material placed on record and submissions advanced by both the parties, rightly formed the view that in the instant case complicity of petitioner is deemed to be existent as the quantity of product stood affected on account of the alterations made by petitioner in the standard fittings of the said TT and as such, the respondent corporation has rightly, in terms of the note appended to Clause 8.2.2 of the ITDG terminated the Page No. 16 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 Transportation Agreement entered between the parties; forfeited the security deposit; and also blacklisted the petitioner carriers for a period of two years.
(ix) The shortage, if any, in the quantity and or variation in quality of product is found at any stage after TT leave the dipatch storage point up to the receiving location, the carrier shall be responsible for the same and recovery shall be made at the retail selling price at the dispatch location on non subsidized market determined price of such product as per Clause 9 of the Transport agreement. The Clause no. 12 of the Transport Agreement stipulates that the carrier shall be responsible for any damage or loss caused to product of respondent no. 1. The respondent no. 1 has taken against petitioner as per agreement and law, therefore objections of petitioner are to be dismissed.
(x) The Clause No. 15 of the Transport Agreement stipulates that the validity period of the transport agreement is for a period of three years from the effective date as given in the LOI/work order, i.e. 16.01.2017, with an option at the sole discretion of respondent no. 1 to extend the same up to two more years on same terms and conditions. The agreement further provided the respondent no. 1 the right to terminate the transport agreement by giving two months advance notice without being liable to give any reason or pay any compensation.
(xi) The respondent no. 1 has also been provided the right to terminate the transport agreement immediately upon, or at any time after happening of any of the events mentioned/detailed therein which, interalia, included breach of any of the terms or Page No. 17 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 conditions of the transport agreement or if the petitioner commits or suffers to be committed any act which in the opinion of the respondent no. 1, whose decision shall be final, is prejudicial to the good name/image of the respondent no. 1 or its products or its services.
(xii) None of the objections as agitated by the petitioner is falling within the purview of Section 34 of the Arbitration & Conciliation Act, which may warrant interference in the impugned award and the Impugned Award has been passed in consonance with the settled principles of law. In addition to it, on merits, there is nothing to interfere as the Ld. Arbitrator has passed the Award after due appreciation of documents filed by the respondent no. 1. The role of the court in interfering with the Award is very limited and finding of fact recorded by the Arbitrator cannot be interfered with. In this regard he has relied upon :
i) Associate Builders v. Delhi Development Authority, AIR 2015 SC 620
ii) McDermott International Inc. v. Burn Standard Co. Ltd.
(2006) 11 SCC 181
iii) MSK Projects (I) (JV) Ltd. v. State of Rajasthan, (2011) 10 SCC 573,
iv) Rashtriya Ispat Nigam Ltd. v. Dewan Chand ram Saran, (2012) 5 SCC 306
v) National Highways Authority v. ITD Cementation India Ltd. (2015) 14 SCC 21 Lastly, it is submitted that Hon'ble High Court of Punjab & Haryana High Court in Ravi Oil Carriers v. Union of India in CWP no. 21882 of 2014 dated 11.03.2015 has upheld the imposition of such penalty upon the carrier.Page No. 18 of 35
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11. I have heard Ld. Counsel for the parties and have gone through the Arbitral record and Ld. Counsel for parties have vehemently argued on merits of this objection petition as well as the territorial jurisdiction of this court to entertain this petition.
12. The law with regard to the interference by the court under Section 34 of the Arbitration & Conciliation Act, has been laid down by Superior Courts, though not quoted but reliance is placed upon the following judgments :
i) National Highways Authority of India v. M/s JSC Centrodorstroy, 2016(12) SCC 592.
ii) Fiza Developers & Inter Trade Pvt. Ltd. v. AMCI (I) Pvt. Ltd., 2009 (4) RCRC (Civil) 288.
iii) M.P. Power Generation Co. Ltd. & Anr. v. Ansaldi Energia SPA & Anr. 2018 (4) (SCC) 71.
iv) Oil and Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd., AIR 2003, Supreme Court, 2629,
v) Hindustan Zinc Ltd. v. M/s Friends Coal Carbonisation in 2006 (L) R.A.J. 1.
vi) Oil & Natural Gas Corporation Ltd. v. Western Geco International Ltd. AIR 2015 SC 363.
13. The sum and substance of law laid down by the superior courts has been summarised in the case laws cited above and it has been summarised in case of M.P. Power Generation (supra), in para No. 18 & 19, wherein it has been held that :
"18. It is necessary to refer to the settled law on the scope of Sections 34 of the Act. In this case we are concerned with the point as to whether an arbitral award can be set aside for being in conflict with the public policy of India. An arbitral award can be set Page No. 19 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 aside if it is contrary to (a) fundamental policy of Indian law, or (b) the interest of India, or (c) justice or morality. (Renusagar Power Co. Ltd. v. General Electric Co.,(1994) Supp. 1 SCC 644) Patent illegality was added to the above three grounds in ONGC v. Saw Pipes Ltd. (2003) 5 SCC 705. Illegality must go to the root of the matter and incase the illegality is of trivial nature it cannot be held that the award is against the public policy. It was further observed in the said judgment (ONGC v. Saw Pipes (supra)) that an award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. In Delhi Development Authority v. M/s. R.S. Sharma & Co., (2008) 13 SCC 80 it was held that an award can be interfered with by the Court under Section 34 of the Act when it is contrary to :
a) substantive provisions of law; or
b) provisions of the 1996 Act; or
c) against the terms of the respective contract; or
d) patently illegal; or
e) prejudicial to the rights of the parties.
The fundamental policy of India was explained in ONGC Ltd. v. Western Geco International Co. Ltd. (2014) 9 SCC 263 as including all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. It was held inter alia, that a duty is cast on every tribunal or authority exercising powers that affect the rights or obligations of the parties to show a 'judicial approach'. It was further held that judicial approach ensures that an authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and its decision is not actuated by any extraneous considerations. It was also held that the requirement of application of mind on the part of the adjudicatory authority is so deeply embedded in our jurisprudence Page No. 20 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 that it can be described as a fundamental policy of Indian law. This Court further observed that the award of the Arbitral Tribunal is open to challenge when the arbitrators fail to draw an inference which ought to be drawn or if they had drawn an inference which on the face of it is untenable resulting in miscarriage of justice. The Court has the power to modify the offending part of the award in case it is severable from the rest according to the said judgment (Western Geco ltd. (supra)).
19. The limit of exercise of power by Courts under Section 34 of the Act has been comprehensively dealt with by Justice R.F. Nariman in the case of Associate Builders v. Delhi Development Authority (2015) 3 SCC 49. Lack of judicial approach, violation of principles of natural justice, perversity and patent illegality have been identified as grounds for interference with an award of the Arbitrator. The restrictions placed on the exercise of power of a Court under Section 34 of the Act have been analyzed and enumerated in Associated Builders (supra) which are as follows:
a) The Court under Section 34(2) of the Act, does not act as a Court of appeal while applying the ground of "public policy" to an arbitral award and consequently errors of fact cannot be corrected.
b) A possible view by the arbitrator on facts has necessarily to pass muster as the Arbitrator is the sole judge of the quantity and quality of the evidence.
c) Insufficiency of evidence cannot be a ground for interference by the Court. Reexamination of the facts to find out whether a different decision can be arrived at is impermissible under Section 34 (2) of the Act.
d) An award can be set aside only if it shocks the conscience of the Court.
e) Illegality must go to the root of the matter and cannot be of a trivial nature for interference by a Court.
A reasonable construction of the terms of the contract Page No. 21 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 by the arbitrator cannot be interfered with by the Court. Error of construction is within the jurisdiction of the Arbitrator. Hence, no interference is warranted.
f) If there are two possible interpretations of the terms of the contract, the arbitrator's interpretation has to be accepted and the Court under Section 34 cannot substitute its opinion over the Arbitrator's view. Application of the Law"
14. With the above said principles of law, I would like to advert to the facts of the present case. First of all I would deal with the objections regarding territorial jurisdiction of this court to deal with this petition. It is pertinent to mention here that in the present case the seat of arbitration is Delhi and the respondent has invoked the jurisdiction of the Ld. Arbitrator for interim relief in Delhi, therefore, this court has territorial jurisdiction to entertain this petition in as much as in the IMDPL (supra) it was held that once the seat of arbitration has been fixed, it could be in the nature of an exclusive jurisdiction as to the court which exercise supervisory powers over the arbitration, therefore, this objection of the respondent no. 1 is hereby rejected.
15. The next contention of the counsel for petitioner is that Ld. Arbitrator has passed Award beyond the prescribed period, but this contention appears to be attractive but same is fallacious in as much as the period of one year provided under Section 29A of the Act commences from the dated on which Arbitrator entered upon reference and in the present case the notice of appointment was issued on 02.11.2017 and Ld. Arbitrator entered into reference through his letter dated 06.11.2017 and therefore, the impugned Page No. 22 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 Award has been passed within the statutory period, as such this contention is hereby rejected.
16. So far as the contention of petitioner regarding eligibility of ld. Arbitrator u/s 12(5) of the Act is concerned, suffice is to say that petitioner through letter dated 25.10.2017 consented to the appointment of employee of respondent no. 1 as an Arbitrator, otherwise petitioner was entitled to file any objection U/s 13 of the Act regarding ineligibility of the Arbitrator and petitioner failed to raise any such objection within statutory time and consented to the appointment of Arbitrator as stated above. As such this contention is devoid of merits and is hereby rejected.
17. It may be noted that before proceeding further, I would like to mention the relevant clause nos. 9, 12 & 16 of the Transport Agreement, which are reproduced as under:
"9(a) The Carrier shall be responsible for quantity and quality of the products received by him for transportation. It shall be responsibility of the Carrier to check the quantity and quality of the products received by him at the Dispatch Storage Pointbefore acknowledgement of the products. Acknowledgement by any member of Crew of the Tank Truck or by any other authorized person of the Carrier by way of signing on the Challan or any other Dispatch Document shall be sufficient proof of acceptance on product quantity and quality by the Carrier and the Carrier shall be responsible of the products till the products are acknowledged at the Receiving location.
(b) If any shortage in quantity and/or variation in quality of product is found at any stage after Tank Truck leaves the Dispatch Storage Point up to Receiving Page No. 23 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 location, the Carrier shall be responsible for the same irrespective of reason and Company would be entitled to following.
C xxxxxxx C(i) in case of quantity shortage of MS/HSD/Branded Fuels or any other POL product, recovery shall be made at the retail selling price at the dispatch location on non subsidized market determined price of such product, whichever is higher and transportation charges for the storage quantity;
(ii) in case of variation in quality, the Company at its discretion may dispose off the contaminated product and all expenses/losses and cost of product in this connection as determined by the Company shall be recoverable from Carrier.
XXXX 12(a). Carrier shall be responsible for any damage or loss caused to the Company's product or property by negligence or default of its Crew, authorized representative or Tank Truck. This shall also include confiscation of Company's product delivered to the Carrier by any statutory authorities.
(b) The carrier should strictly adhere to "Industry Transport Discipline Guidelines" (ITDG) as enumerated in AnnexureA to this agreement and to any amendment issued from time to time.
XXXX 15(e) Breach of any of the terms or conditions of this Agreement by the Carrier.
(f) If the Carrier commits or suffers to be committed any act which in the opinion of the Company whose decision shall be final, is prejudicial to the good name/image of the Company or its products or its services.
XXXX
16. All questions, disputes and differences arising Page No. 24 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 under or in relation to this Agreement shall be referred to the sole arbitration of the Director (Marketing) of the Company. If such Director (Marketing) is unable or unwilling to act as the sole arbitrator, the matter shall be referred to the sole arbitration of some other officer of the Company by such Director (Marketing) in his place, who is willing to act as such sole arbitrator."
18. It may be noted that the sub clause (a) of Clause 9 of the transport agreement provides that acknowledgement by any member of crew of the TT or by any other authorized person of the carrier by way of signing on the challan or other dispatch document shall be taken to be a sufficient proof of acceptance of product's quantity and quality by the carrier and that the carrier shall be responsible for the products till the products are acknowledged at the receiving location. The Sub clause(c) of clause no. 9 of the transport agreement stipulates that if any shortage in quantity and/or variation in quality of product is found at any stage after tank truck leaves the dispatch storage point up to receiving location, the carrier shall be responsible for the same irrespective of reason behind it and the respondent would be entitled to take actions as provided under clause c (i) & c(ii).
19. The Subclause (a) of Clause No. 12 of the Transport Agreement stipulates that the Carrier shall be responsible for any damage or loss caused to the product or property of respondent no. 1 by negligence or default of its Crew, authorized representative or TT. The Subclause (b) of Clause No. 12 makes it obligatory for the Carrier to strictly adhere to "Industry Transport Discipline Guidelines" (ITDG) to the Transport Agreement Page No. 25 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 appended as AnnexureA to this Transport agreement and to any amendment thereto issued from time to time.
20. At this stage, this court would like to mention the relevant Clauses of ITDG, which are as under :
"2.3 Calibration of Tank Lorry 2.3.6 Tampering with calibration of vehicle in any manner shall be construed as a malpractice and penal action will be taken against the carrier as outlined under Clause no. 8. Further alleged product losses will be recovered from the carrier from the date of last calibration.
XXXX 8.0 Adulteration/Malpractices/irregularities/penalties XXXXX 8.2. Penalties for malpractices/irregularities 8.2.1 Malpractices/irregularities will cover any of the following :
a. Unauthorised deviation from specified route /unauthorised delay /unauthorised enroute stoppage/not reaching destination/over speeding/enroute switching off VMU/unauthorised removal of VMU/use of VMU on other vehicles.
(b) ....XXXX k. Tampering with standard fittings of TT including the sealing, security locks, security locking system, calibration, vehicle Mounted Unit or its fittings/fixtures.
XXXX q. Pilferage/short delivery of product r. Any act of the carrier/carrier's representative that may be harmful to the good name/image of the Oil Company, its products or its services."
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21. 8.2.2. Penalties upon detection of malpractice/ irregularities.
The carrier shall attract penalties for the malpractice /irregularities as given below and the TT mentioned in the following instances shall be suspended/blacklisted along with TT crew. However, an investigation, wherever required, shall be conducted and if the malpractice is established then penal as such as stipulated as under should be taken including black listing.
Clause Type of malpractice/irregularity Penalty against number of
No. instance
First Second Third
8.2.2.8 Established case of pilferage/non TT shall be
delivery of product. blacklisted
8.2.2.11 Tampering with standard fittings of TT shall be
TT including the sealing, security blacklisted locks, security locking system, calibration.
8.2.2.16 Any act of the carrier/ carriers As decided by representative that may be harmful the company.
to the good name/image of the Oil
Company, its products or its
services.
XXXX
22. However, in case of complicity of the transporter is established even in first instance of malpractice, the entire fleet will be blacklisted, contract terminated and carrier blacklisted along with forfeiture of SD.
The blacklisting of TTs shall be on industry basis.
In the following irregularities, the complicity of the carrier shall be deemed to be existent and the whole contract comprising of all the TTs belonging to the concerned carrier shall be terminated, security deposit forfeited and the concerned carrier and their all TTs shall be blacklisted on industry basis :
Page No. 27 of 35OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020
(i) False/hidden compartment, unauthorised fittings or alteration in standard fittings affecting Quality and Quantity.
(ii) Illegal/unauthorised duplicate keys of security locks.
(iii) Duplicate dip rod/calibration chart.
8.2.3 Period of blacklisting The period of blacklisting for the carrier & TTs shall be minimum 2 years or as per the respective corporation's assessment depending upon seriousness of the offence, but not exceeding 5 years. The TTs on completion of Blacklisting period, can ply under the same contract in case the validity of contract exists and the company so desires."
23. It is relevant to mention that sub clause (b) of Clause 12 of the Transport Agreement makes it obligatory for the petitioner to strictly adhere with the terms and conditions of the ITDG. It may be relevant to mention that clause No. 8.2.2.1 of the ITDG defines malpractices to include, interalia, unauthorized deviation from specified route/unauthorized delay and clause No. 8.2.2.11 provides for tampering with standard fittings of TT including the sealing, security locks, security locking system, calibration, as one of the malpractice/irregularity. In addition to Clause 15(e) of the transport agreement provides for that pilferage/short delivery of product and any act of the carrier/carrier's representative that may be harmful to the good name/image of the Oil Company, its products or its services, will be treated as breach of the terms and conditions of the Transport Agreement.
24. Apart from that, a bare perusal of the various Sub Clauses of Clause 8.2.2 of the ITDG stipulates various penalties Page No. 28 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 for various types of malpractices / irregularities. It is pertinent to mention that as per the note appended to Clause 8.2.2, as reproduced in the foregoing paras of this order, it is categorically stated that in case of false hidden compartment, unauthorized fittings or alterations in standard fittings affecting quality and quantity, the complicity of the carrier shall be deemed to be existent and the whole contract comprising of all the TTs belonging to the concerned carrier shall be terminated, security deposit forfeited and the concerned carrier and their all TTs shall be blacklisted on an industry basis in the following three conditions :
"1. False/hidden compartment, unauthorised fittings or alteration in standard fittings affecting Quality and Quantity.
2. Illegal/unauthorised duplicate keys of security locks.
3. Duplicate dip rod/calibration chart."
The case of the petitioner case is falling within two conditions i.e. condition nos. 1 & 3.
25. It is relevant to state that a conjoint reading of Sub Clauses (a) & (c) of clause no. 9 of the Transport Agreement and relevant clauses of ITDG including Clause No. 8.2.2 of the ITDG makes it clear that it is the carrier, who is responsible for safe delivery of the petroleum products petitioner to the destination and that in case of certain malpractices, as stated above, the complicity of the carrier/petitioner is deemed to be existent leading to termination of the whole contract, along with forfeiture of security deposit and the concerned carrier and their all the TTs are to be blacklisted on industry basis. In addition to it, the carrier/petitioner also liable to pay for product loss from the date of last calibration Page No. 29 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 as provided under Clause 2.3.6 of ITDG. The respondent no. 1 has taken the legal action against petitioner as per the terms and conditions of the agreement as well as the ITDG guideline and Ld. Arbitrator has taken a plausible view of the admission of petitioner including admission of petitioner's driver and thereafter, action taken by respondent no. 1 against petitioner as per rules and regulations.
26. It may be noted that Ld. Arbitrator has to take a plausible view of the material on record. The Ld. Arbitrator has taken into the consideration the fact situations and is supposed to place a construction on the various clauses which according to Arbitrator was a correct one and such view taken by Ld. Arbitrator cannot be substituted by the court while exercising the jurisdiction under Section 34 of the Arbitration & Conciliation Act, otherwise, the said will tentamount to sitting in appeal. In the judgment ITD Cementation India Ltd. (supra), it was observed as under :
"25. It is thus well settled that construction of the terms of a contract is primarily for an arbitrator to decide. He is entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the contract. The court while considering challenge to an arbitral award does not sit in appeal over the findings and decisions unless the arbitrator construes the contract in such a way that no fairminded or reasonable person could do".
27. In addition to it, it may be pertinent to mention here that in Ravi Oil Carriers (supra), it is held that :
Page No. 30 of 35OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 ".......13. We entirely agree with the findings recorded by the learned Single Bench in the aforesaid case that the petitioner, who has been found guilty of a misconduct, is not entitled to say that the punishment should be proportionate. Even in terms of the Wednesbury principle of reasonableness, this Court in exercise of its power of judicial review cannot return a finding that the punishment or penalty imposed is disproportionate. The petitioner, as a custodian of the public property, was expected to show utmost diligence. The penalty, in the present case, may be a deterrent for other transporters to ensure complete delivery of the petroleum products. Therefore, we do not find any ground to interfere in the matter of penalty or the fact that there is any violation of the Guidelines.
14. Though learned counsel for the petitioner argued that it was the revised Guidelines, which have been pressed to raise the demand of over Rs. 2 crores, but the fact remains that such revised Guidelines have not been actually pressed by the respondents against the petitioner. Even then the unrevised Guidelines, which have been reproduced above, empower the respondents to impose penalty/punishment of kind, which has been imposed upon the petitioner. Though the impugned order does mention that the penalty is being imposed as per the revised Guidelines, but that fact alone will not make the impugned order as vitiated in law, as even under the unrevised Guidelines, penalty can be imposed upon the Petitioner."
28. So far as the contention for setting aside the recovery of amount of Rs. 79,33,920/ sought to be recovered by the respondent no. 1 towards the product losses suffered from the date of last calibration, the ld. sole Arbitrator had, after taking into consideration the fact that were categorical admissions of the petitioner as well as the driver of the said TT about the malpractices of tampering with standard fittings affecting the Page No. 31 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 quantity of the product and also ample evidence/material on record, such as, the Statement of the driver of the said TT, Inspection Report dated 10.07.2017, photographs taken during inspection conducted on 10.07.2017, etc. which clearly go to show that the standard fittings of the said TT were altered by the driver of petitioner in such a manner that it affected the quantity of the product and as well as calibration of the said TT. The Ld. Arbitrator has observed that Clause 2.3.6 of the ITDG is squarely applicable to the case and the respondent has rightly sought to recover a sum of Rs. 79,33,920/, the same being the amount recoverable as product losses from 20.05.2017 as the said TT was last inspected/calibrated on 19.05.2017, as per the calculation sheet. It may be noted that Clause No. 2.3.6 of the ITDG stipulates that tampering with calibration of vehicle in any manner shall be construed as a malpractice and penal action will be taken against the carrier as outlined under Clause No. 8. It further provides that alleged product losses will be recovered from the petitioner from the date of last calibration. This amount of damages has been calculated as per the calculation sheet filed by respondent no. 1 and during the course of arguments Counsel for petitioner could not point out as to how there calculation are contrary to the record available with respondent. In addition to it, it may be relevant to note here that these damages/calculation is permissible as per law laid down in ONGC Vs. Saw Pipes Ltd. AIR 2005 SCC 2426.
29. As far as the contention of the petitioner that the entire fleet of petitioner's TTs should not have been blacklisted and only Page No. 32 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 the defaulting TT should have been blacklisted, suffice is to say that a careful comparison of Clause 8.2.2.16 with Clause 8.2.2.11 of the ITDG alongwith the note appended to Clause 8.2.2 makes it abundantly clear that the Clause 8.2.2.11 is clearly applicable to the case in hand as in much as the unauthorized fittings and/or alteration in standard fittings were made in such a manner that the calibration of the said TT as well as the quantity of the product stood affected. It is relevant to observe that the said Clause 8.2.2.16 is applicable only in cases where tampering with standard fittings of TT including the sealing locks and/or security locking system and/or calibration without affecting quality and/or quantity is resorted to. The Ld. Sole Arbitrator has rightly held, that the complicity of the petitioner's carrier is deemed to be existent in terms of the note appended to Clause 8.2.2 and further, that the respondent no. 1 has, rightly blacklisted the entire fleet of petitioner's TTs for a period of 2 years after terminating the Transportation Agreement; and, forfeited the security deposit. These findings of the facts has been recorded by Ld. Arbitrator after appreciating the facts on record as well as the various clauses of the Transport Agreement & ITDG guidelines. The said findings of facts cannot be interfered with as per the law law laid down by Superior Courts detailed in the foregoing paras of this orders.
30. So far as condition of petitioner's claim towards the dues payable to them for transportation of product for a period of 15 days, alongwith accumulated toll tax is concerned, the Ld. Sole Arbitrator has rightly held that the respondent no. 1 shall first adjust Page No. 33 of 35 OMP (Comm.) No. 2213/2018 Laxmi Oil Carrier v. Indian Oil & Ors. DOD : 14.01.2020 the amount recoverable by petitioner towards transportation service for 15 days and accumulated toll tax payable to petitioner as per terms of contract and thereafter recover the balance payable from out of the sum of Rs. 79,33,920/ only held to be recoverable by the respondent. It has further been held that if the balance amount so found payable by the petitioner is not paid within the stipulated period of 60 days, the respondent shall also become entitled to interest on the said balance sum @ 8% for the period of delay thereafter.
31. From the above said discussion it can be safely concluded that petitioner has admitted in his letter that his driver in connivance with other transporters has done the misconduct in relation to the TTs engaged by respondent in violation of the terms of the contract/tender and this admission is sufficient to hold that there was a misconduct on behalf of the petitioner as produced under the various clauses of the agreement as discussed above specifically clause no. 9 & 12 of the agreement as well as the various clauses of the ITDG.
32. The Ld. Arbitrator has found that misconduct of the petitioner is falling within the category of blacklisting of TTs on basis in terms of the guidelines reproduced above and such findings of fact recorded by Ld. Arbitrator after going through material on record including the agreement ITDG did not deserve any interference under the provisions of Section 34 of the Arbitration & Conciliation Act, as per the mandate of law laid down by the superior courts.
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33. Therefore, this petition being devoid of merits deserves to be dismissed and is hereby dismissed.
No order as to costs.
File be consigned to record room.
VIJAY Digitally signed
by VIJAY
Announced in the open court on KUMAR KUMAR DAHIYA
Date: 2020.02.18
14th Day of January, 2020.
DAHIYA 16:22:32 +0530
(V.K. DAHIYA)
ADDL.DISTRICT JUDGE01 (SOUTH WEST)
DWARKA DISTRICT COURTS: NEW DELHI
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