Bangalore District Court
Mysore Minerals Limited vs ) M/S.Mukand Limited on 10 January, 2020
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY
(CCCH.11)
Dated this the 10th day of January, 2020
PRESENT: Sri. Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO:69/2014
APPLICANT/ : MYSORE MINERALS LIMITED
PLAINTIFF A Government of Karnataka Undertaking
Registered under the Companies Act, 1956
Having its Registered Office at
TTMC 'A' Block, 5th Floor,
BMTC Building, Shanthinagar,
Bengaluru -560 027.
/Vs/
RESPONDENTS : 1) M/S.MUKAND lIMITED
DEFENDANTS Having its registered office at
Bajaj Bhavan,
226, Jamnalal Bajaj Marg,
Nariman Point,
Mumbai - 400 021.
2) Shri.Hon'ble Justice Shivaraj V.Patil
Former Judge, Supreme Court of India,
Sole Arbitrator, Home/Office at No.254,
'Sparsh', 18th Cross,
Sadashivanagar, Bengaluru -560 080.
--
AS.69/2014
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JUDGME NT
Plaintiff has filed this suit under Section 34 of
the Arbitration and Conciliation Act, 1996, for
setting aside the award dated 28.02.2014 passed
by learned Arbitrator/Defendant No.2.
2) Plaintiff's case [Respondent in arbitral
proceedings] is that, it is a Company incorporated
under the provision of the Companies Act, 1956 and
it is an undertaking of the Government of
Karnataka. It is involved in the business of Mining
and has got mining lease for various minerals
including iron ore. First Defendant is a company
incorporated under the Indian Companies Act, 1956,
engaged in the business of manufacturing Iron and
Steel and Mining and processing of Iron Ore.
3) It is stated that, Plaintiff, being the holder of
mining lease of SUBBARAYANAHALLI IRON ORE MINE
(SIOM), entered into 'RAISING AGREEMENT' on
17.01.2002 with M/s.Kalyani Steel Limited, by
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entrusting the work on contract to Grading,
Screening, Sizing, Sorting and Stacking. Said
M/s.Kalyani Steel expressed its inability to discharge
the work of raising the Iron Ore from SIOM and
agreed to take up Marketing Agreement, under that
circumstances, with the consent of Plaintiff,
M/s.Kalyani Steel entered into a Tripartite MoU with
1st Defendant on 09.03.2005 and became Raising
Contractor of Plaintiff and all the terms and
conditions mentioned in Agreement dated
17.01.2002 remains applicable to 1st Defendant.
4) It is stated that, Plaintiff, being a Government
Undertaking, based on Raising Agreement dated
17.02.2002, paid the prices for raising Iron Ore from
SIOM to 1st Defendant as per Clause 21, Schedule
'D' till 2005. Rate of raising the Iron Ore was revised
on mutual discussion and correspondence, for the
period of 2006-2007 and it was fixed at Rs.223/- to
Calibrated Iron Ore and Rs.25/- to Iron Ore Fines.
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Further, for Iron Ore Fines, Rs.25/- PMT was retained
as there is no change in handling system during
2006-07 and 2007-08. 1st Defendant, having no
changes in expenses of raising Iron Ore and being in
profit, approached for increasing the rate for raising
Iron Ore based on MMTC procurement statement.
Said issue was referred to Sole Arbitrator to
adjudicate and determine the price of the raising of
Iron Ore at SIOM. Learned Arbitrator passed the
award on 28.02.2014 partly allowing the claim
petition and directed Plaintiff to fix the raising rate
for calibrated Iron Ore and Iron Ore fines effective
from 01.04.2007 after considering the
materials/inputs that may be provided by Defendant
No.1 within two weeks and in the light of reasoning
in paragraphs- 14.11, 14.12, 14.13, 14.15 and
14.18, within two months from the date of award.
Being aggrieved, Plaintiff has challenged the
impugned award on the following among other
grounds.
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(a) Guidelines provided at para 14.11
for ascertaining the actual rate of
deductions and then arrived at the ex pit
head price of MMTC as on 31.03.2005 is
not correct. Raising price fixed at the
rate of Rs.223/- per MT at Ex.C5 and C6
was based on Schedule 'D' of clause 21
of the Raising Agreement dated
17.01.2002, taking into consideration
procurement price of MMTC, but not only
on the basis of procurement price of
MMTC. Fixing the prices for raising Iron
Ore keeping the facts of procurements of
MMTC is different than fixing the prices
for raising the Iron Ore based on MMTC
procurements, therefore, learned
Arbitrator has not appreciated Ex.C5 and
C.6. Hence, guidelines made at para
14.11 is not correct and correct method
of fixing the prices of raising Iron Ore is
Schedule 'D' of the Raising Agreement
and statements of the Cost Accountant
produced at Ex.R.1, R.2 and R.3.
(b) Guidelines given for fixing the
prices of raising Iron Ore based on para-
14.12 is not correct. Discussion is made
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based on Ex.C7 and Ex.C9, both the
statements are not prepared based on
correct and true date of Plaintiff
Company. These two documents
produced by Defendant No.1, contents of
which had not taken at Ex.C.5 & C.6
while fixing the prices of raising of Iron
Ore at the rate of Rs.223/- for the year
2006 and 2007. Fixing raising cost based
on Market price is not correct, hence,
guidelines made at Para-14.12 to fix the
prices of raising Iron Ore is not
sustainable in the eye of law and
procedure.
(c) Prices of raising of Iron Ore be
fixed based on MMTC procurements and
on variation in the four parameters of
Schedule 'D', the raising percentage of
each 4 variation facts has not been
provided, therefore, the guideline made
at para 14.13 is not correct and it is
against raising agreement, procedure
and law.
(d) Guidelines made at para 14.15 is
not correct and it is misunderstanding
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Ex.R.1. Ex.R.1 shows that total cost of
PMT comes at Rs.170.64 of Iron Ore
(cost of Rs.170.64 including Calibrated
and Iron Ore Fine) if it is divided, it can
be taken as Rs.102.38 for Calibrated Iron
Ore and Rs.68.25 for Iron Ore Fine and
Plaintiff, keeping variations in MMTC and
keeping in mind of expenses/cost of
raising Iron Ore, used to revise the
rate/price of raising Iron Ore from time
to time and it is very clear that, as per
Law of Contract, if any voidable contract
taken place between the parties such
terms of contract will not be applied to
parties, therefore, finding at para 14.15
and direction made based on that
findings is not sustainable.
(e) Rate of raising Iron Ore had been
fixed at Rs.188/- for Calibrated and
Rs.25/- for Iron Ore Fines based on
mutual discussion and understanding
from both the parties in keeping
procurements of MMTC, but same had
not been fixed based on MMTC
procurements and 1st Defendant has not
produced any documents to prove that
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Plaintiff fixed the rate based on
procurements of MMTC, therefore, the
award is against the procedure, law and
principles of natural justice.
(f) Paying cost/price of raising of Iron
Ore based on variability of Iron Ore
market price is not scientific, it is
nothing but loss to Plaintiff Company,
because expenses to be incurred to
raising both Iron Ore is same and there
is no variation, therefore, report given by
the Department of Auditor is correct and
the Hon'ble Arbitrator failed in
considering the said document,
therefore, award is unsustainable.
(g) Arbitrator failed to understand that
1st Defendant is demanding price/cost
revision as equal share like business
partner based on profit/procurement of
Plaintiff Company, therefore, award is
unsustainable in the eye of law.
For all these reasons, Plaintiff prays for
setting aside the award.
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5) Defendant No.1 entered appearance through
its counsel and filed written statement contending
that, suit filed by Plaintiff, nowhere, contains any of
the grounds which satisfy the conditions required
under Section 34 for setting aside the arbitral
award, not even a single ground akin to it. Prayer
seeking to fix the rates as descried in Schedule 'D'
to be the rates for the years 2007 onwards until
the tenure of the agreement is not only contrary to
the plain reading of the agreement between the
parties, but also contrary to the conduct of the
parties, who have already revised the raising rate
in 2005. This Court has no powers to pass suitable
orders or give relief beyond the scope of Section
34 of the Arbitration and Conciliation Act.
6) It is stated that, 2nd Defendant after taking
into consideration the pleadings and evidence led
by parties, passed the arbitral award holding that
the Raising Agreement between the parties was
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legal and binding on the parties and that as per the
terms of the agreement, 1st Defendant was
appointed as 'Raising Contractor' to undertake
'Processing Operation' in SIOM on independent
contract basis. For undertaking the processing
operations, 1st Defendant was entitled to deploy
required men and machinery, set up screening
plant and lay the roads, etc. It was specifically
held that, 1st Defendant was not an agent or
partner of Plaintiff. Further, Clause 21 of the
agreement was interpreted based on Rules of
construction and a finding was arrived to the effect
that, the revision arrived between the parties in
the year 2005 was based on negotiations and
giving due consideration to MMTC procurement
price and that in addition to the annual revision 1 st
Defendant is also entitled for escalation in the
price on any change in the specified parameters
from time to time. Based on these findings, the
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claim petition of 1st Defendant came to be partly
allowed.
7) It is stated that, learned Arbitrator based on
the clauses of the agreement and the evidence
given by Plaintiff, has passed the award and that
no grounds necessitated as per Section 34 of the
the Act, are made out by Plaintiff to question the
findings of learned Arbitrator.
8) It is stated that, 1st Defendant has led
sufficient evidence to prove that the agreement is
valid and binding upon the parties, which has been
admitted by Plaintiff in para-26 of objections to
statement of claim and para-7 and 8 of the
evidence of Mr.Chandrasekhar filed on behalf of
Plaintiff. 1st Defendant has led evidence to show
that the parties did in fact act upon the commercial
understanding, which is clear from letter dated
21.06.2005 written by 1st Defendant to Plaintiff and
letter dated 15.07.2005 written by Plaintiff to 1 st
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Defendant. In view of this, 1st Defendant is entitled
for revision in raising rate under Revision Clause
and also revision on account of increase in price of
four basic parameters, as rightly held by learned
Arbitrator. Hence, prays for dismissal of suit.
9) Heard. Perused the record.
10) Points that arise for my consideration are:
(1) Whether Plaintiff has made out any
of the grounds as enumerated in
Section 34 of the Arbitration and
Conciliation Act, 1996 to set aside
the award, dated 28.02.2014
passed by learned Arbitrator?
(2) What order?
11) My answer to the above points are :
Point No.1 - In the Negative;
Point No.2 - As per final order, for
the following :
AS.69/2014
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REASONS
12) Point No.1 : This suit came to be filed by
Plaintiff (Respondent in arbitral proceedings) for
setting aside the award dated 28.02.2014, whereby,
learned Arbitrator was pleased to direct Plaintiff to
fix the raising rate for calibrated iron ore fines with
effect from 01.04.2007 after duly considering the
materials/inputs that may be provided by 1st
Defendant [Claimant in arbitral proceedings] within
two weeks in the light of reasoning in paragraphs
14.11, 14.12, 14.13, 14.15 and 14.18 of award.
13) Plaint discloses that, Plaintiff has not taken
any specific grounds as set out in Section 34 of the
Arbitration and Conciliation Act, to say that award
would vitiate on the grounds mentioned in Section
34 of the Act. Plaintiff's contentions in the plaint
are so intertwined, by which, Plaintiff wants this
Court to re-appreciate the evidence, which learned
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Arbitrator appreciated based on materials placed
before him.
14) In P.R.Shah & Stock Broker (P) Ltd., V.
M/s.B.H.H Securities (P) Ltd. [AIR 2012 SC
1866], the Hon'ble Supreme Court was pleased to
hold that :
" 15. A court does not sit in appeal over
the award of an arbitral tribunal by re-
assessing or re-appreciating the evidence.
As award can be challenged only under the
grounds mentioned in Sec.34(2) of the
Act".
15) In NAVODAYA MASS ENTERTAINMENT
LIMITED VS. J.M.COMBINES [(2015) 5 Supreme
Court Cases 698], the Hon'ble Supreme Court was
pleased to hold that :
" 8. In our opinion, the scope of
interference of the court is very limited.
The court would not be justified in
reappraising the material on record and
substituting its own view in place of the
arbitrator's view. Where there is an error
apparent on the face of the record or the
arbitrator has not followed the statutory
legal position, then and then only it would
be justified in interfering with the award
published by the arbitrator. Once the
arbitrator has applied his mind to the
matter before him, the court cannot
reappraise the matter as if it were an
AS.69/2014
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appeal and even if two views are possible,
the view taken by the arbitrator would
prevail".
16) In the light of the ratio as laid down by the
Hon'ble Supreme Court, contentions taken by
Plaintiff have to be assailed within the limited scope
of Section 34 of the Arbitration and Conciliation Act,
1996.
17) Plaintiff contends that, guidelines made at
Para-14.11 is not correct. Correct method of fixing
the prices of raising iron ore is Schedule 'D', Clause
21 of the Raising Agreement and statements of the
Cost Accountant produced at Ex.R.1, Ex.R2 and R.3.
Fixing raising cost based on market price is not
correct and therefore, guidelines made at para
14.12 is not sustainable in the eye of law. Prices of
raising of iron ore be fixed based on MMTC
procurement and based on variation within four
parameters of Schedule 'D' and therefore,
guidelines made at para 14.13 is not correct. Ex.R.1
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was misunderstood. Ex.R.1 shows total cost of iron
ore including calibrated and iron ore fines, hence,
guidelines made at para-14.15 is not correct.
18) On the contrary, Defendant No.1 contends
that, fixing the price for raising iron ore keeping the
facts of procurement of MMTC is different than
fixing the price for raising iron ore based on MMTC
procurement as contended by Plaintiff makes no
difference. Plaintiff has simply refuted the method
given by Defendant No.2 in his award for calculating
and determining the percentage/component of
difference in ex pit head price and the raising rate
of calibrated iron ore. Agreement very clearly sets
out the parameters. Learned Arbitrator has directed
Plaintiff to consider these parameters. Basic
parameters are not part of Schedule 'D'. In Clause
21, Schedule 'D' only describes the raising rates. It
is the first time, Plaintiff is arguing that contract
between the parties is voidable. It does not say how
it is voidable. Arbitrator has clearly observed that,
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the covenants in the contract is unambiguous
leaving no room for any voidable contract.
Defendant No.1 is not claiming any right over the
fines. Though fines are bye-product, there is a cost
in extracting them. Initially, there was a rate fixed
for this, which was subject to revision in terms of
Clause 21 of the agreement. However, even though
its revision was not insisted in 2005, it does not
mean that further revision cannot be made or
should not be made, as the contract provides for
fixing of rates for fines as well. Hence, the
Arbitrator is right in giving a direction for fixing the
rate for iron ore fines, which is in accordance with
law.
19) Relief claimed by 1st Defendant before the
learned Arbitrator in claim statement is as follows :
" (i) That the raising rate for calibrated
iron ore and iron ore fines for the purpose
of "Raising agreement" for the current
year and in future be determined in
accordance with and on the basis of
particulars contained in Exhibit "K" hereto
and the same basis be applied for revision
in the raising rate for iron ore Fines."
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20) Learned Arbitrator, after considering Clause
21 and Schedule 'D' of Agreement at Ex.C.2, has
held as follows :
" 14.3 The aforesaid terms of the raising
contract show that Ex.C2 is a self contained
document containing all agreed terms
between the parties for raising ore from
SIOM. Claimant was appointed as a "raising
contractor" to undertake "processing
operation" in SIOM, on independent contract
basis. For undertaking the "Processing
operations" the claimant is required to
deploy required men and machinery, set up
screening plant and lay the roads etc. the
claimant is not an agent or partner of the
respondent. ................ Said Clause 21
Reads :
"...................
..................
.....................
It is agreed between the
parties that the rates so described in
the SCHEDULE "D" herein under shall
be firm for two years. Thereafter the
prices shall be reviewed and re-fixed
on 1st April each year taking into
consideration the revision in
procurement prices, if any, by MMTC
for sale of iron ore.
....................
The rates quoted shall have the following
basic parameters.
i) Rate of HSDC Rs.12.16 per litre
ii) Ore to burden ratio 1:0.87 max
iii) Drilling & blasting 25% of overall mining
iv) Minimum wages as on date as
applicable in the State
of Karnataka.
It is agreed between the parties that
any charge in the above parameters shall
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result in a revision in the price as
described in SCHEDULE "D" from the
time as applicable. The above price
escalation is in addition to the price
revision on first April each year, if any, as
provided hereinabove."
Schedule 'D' to the Raising Agreement,
referred in the above clause 21 reads as
under :
SCHEDULE "D"
Different grades of iron ore and rate for
extraction
Description of Material Rate Rs/Tonne
Calibrated Rs.188 per tone
Iron Ore Rs.25 per tone
BHQ Rs.100 per tone
14.4 The said clause 21 fixed the base
rate for raising cost payable to claimant at
Rs.188/PMT of calibrated iron ore and Rs.25
PMT of iron ore fines. This base price is to
remain firm for two years. Thereafter the
price is to be reviewed and re-fixed on 1 st
April each year, taking into consideration
the revision in procurement prices, if any,
by MMTC for sale of iron ore. Any change
in specified basic parameters is to result in
revision in price and such price escalation
is to be in addition to the price revision on
first April each year. The language of
clause 21 is plain and clear in that regard.
14.5 When Ex.C2 in express terms
provides that the raising rate has to be
fixed by taking into consideration the
revision in procurement prices, the
contention of the respondent that the
provision is unscientific or that Raising Cost
has no nexus with procurement price of
MMTC, cannot be accepted. Whether
raising cost has nexus to procurement
price of MMTC or not, can be no basis to
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disregard express terms of contract.
Contrary to Ex.C2 the respondent also
cannot be heard to say that the marketing
cost derived should be as per input
cost/market condition only. Every term in
clause 21 has to be given effect to and
none can be discarded as "unscientific".
Here it needs to be borne in mind that
raising "rate" is not the same in raising
"cost". The Raising Contractor is not
entitled to recover just the cost of raising.
It being a commercial contract between the
parties, the claimant has not agreed to
undertake the raising of ore on cost basis,
but for agreed incentive, in addition to
reimbursement of the actual cost. The
respondent also concedes that entitlement
of the claimant is for the cost involved in
raising plus "reasonable profits" thereon.
The "cost" component of the Raising Rate
is to be determined on the basis of
variation in the four specified parameters,
from time to time. The parties have agreed
to ascertain the "profit"/incentive
component of claimant by annually re-
fixing the raising rate by taking into
consideration the MMTC procurement price.
Therefore the contention of the respondent
that occasion like recession may occur
where the market price may be less than
raising cost, is not well founded. The
revision based on four specified
parameters assures that the raising rate
does not go below the actual cost. It is true
that claimant is not a commission agent or
a partner of the respondent. But for giving
effect to understanding as per clause 21,
the relationship of agent/partner is not
essential. Merely because originally the
Raising Rate was fixed based on tender or
subsequently there was a substantial rise
in MMTC procurement price, the same
cannot be a basis of curtailing the
contractual entitlement of the claimant.
The expressly agreed terms of per clause
21 also cannot be given a goby on the
ground that claimant earned high profits or
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because the respondent was questioned in
the legislative houses, in courts of law, by
Government Auditors or in the media. The
fact that both the parties are corporate
entities involved in mining business cannot
be lost sight of. Their association
commenced in the year 1999. If such
parties having experience and expertise in
the field knowing fully well that MMTC
procurement price may not have nexus to
raising cost, have agreed to raising rate
being fixed by taking into consideration
MMTC procurement price, one of the
parties cannot wriggle out of such term by
citing lack of nexus.
14.6 Ex.C2 agreement vide clause 35
provides that no modifications, alterations
or amendment of the said agreement or
any of its terms of provisions shall be valid
or legally binding on the parties, unless
made in writing and duly executed by all
the parties. Vide clause 36 it further
provided that it constituted and
represented the entire agreement between
the parties thereto with regard to the
subject matter thereof and all matters
dealt with therein and cancels and
supersedes all prior agreement(s), or
understanding(s), if any, whether oral or in
writing between the parties thereto on the
subject matter thereof or in respect of any
matters dealt with therein. These
provisions in Ex.C2 are not in dispute. It is
not in dispute that Ex.C2 has not been
modified to delete the provision requiring
fixing of the raising rate by taking into
consideration the revision in procurement
prices."
21) Having gone through the findings of the
learned Arbitrator, it is crystal clear that, learned
Arbitrator was pleased to interpret the clauses of
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Raising Agreement at Ex.C.2 in a perspective
manner and such interpretation is in accordance
with its true spirit. Plaintiff, having entered into
Agreement contains unambiguous terms with
Defendant No.1, thereafter, it cannot wriggle out of
its true sense by saying that fixing the prices for
raising iron ore keeping the facts of MMTC is
different than fixing the prices for raising the iron
ore based on MMTC procurement. Said statement
makes no sense.
22) In para 14.12 of the award, learned Arbitrator
was pleased to hold that, "'Z' factor will be applied
for determination of raising rate for subsequent
annual revisions". In para 14.13 and 14.14, it is
held that, "In addition to annual revision based on
MMTC's price, the claimant is entitled for revision in
raising rate based on variation of specified four
parameters, from time to time". And, it is further
held that, "The Respondent has not demonstrated
that price fixed by it took into account the revision
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in four parameters specified in Clause 21 from time
to time and not just of 1st April. As such, the rate
fixed by the Respondent cannot be accepted".
23) In para 14.15 of the award, learned Arbitrator
was pleased to hold that " In view of express terms
of Ex.C.2 contract the revision in raising rate for
fines cannot be denied. In fact, Ex.R.1 produced by
the Respondent fixes the rate Rs.68 PMT for Iron
ore fine, but the Respondent has not shown any
valid justification for not paying the same to the
Claimant. The raising rate of iron ore fines will also
have to be determined based on the method
mentioned in paragraphs 14.11 and 14.12 above."
24) Learned Arbitrator, in para 14.18, has held
that, "Respondent is required to revise and re-fix
the raising rate for calibrated iron ore as well as
iron ore fines with effect from 1/4/2007 by taking
into consideration the MMTC procurement prices as
on 31/3/2007, in the light of discussion made
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above. In addition, the price will be revised, by
taking into account the revision in rates of the
following parameters that prevailed as on on the
date of first revision i.e. 13/3/2005".
25) Said findings of learned Arbitrator are based
on materials, which have been appreciated in a
perspective manner. Mere refutation of the
findings, which are based on reasons without any
substantiation as to how the said findings would
vitiate the award does make the reasoned award to
be suspected.
26) Having gone through the award, it is crystal
clear that, learned Arbitrator has meticulously
assailed disputes referred to him in a perspective
manner having regard to the materials placed
before him. Plaintiff neither pleaded any specific
grounds as set out in Section 34 of the Arbitration
and Conciliation Act, nor canvassed any such
grounds on which award can be set aside, nor made
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out any grounds as such, to set aside the award. In
ONGC Ltd. Vs. Saw Pipes Ltd. [(2003) 5 SCC
705], the Hon'ble Supreme Court was pleased to
hold that "award could be set aside if it is contrary
to (a) fundamental policy of Indian law; or (b)
Interest of India; or (c) Justice or morality; or (d) in
addition, if it is patently illegal. Illegality must go to
the root of the matter and if the illegality is of trivial
nature it cannot be held that award is against the
public policy". In the instant case, award passed is
based on reasons. Reasons assigned by learned
Arbitrator are intelligible. No illegality or perversity
can be attributable to award. Merely because award
is not in accordance with the wishes of the parties,
same cannot be termed as illegal. Hence, this Court
opines that, suit of Plaintiff fails, accordingly, I
answer the above point in the negative.
27) Point No.2 : In view of the foregoing
discussion and answer to Point No.1, I pass the
following :
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ORDER
(1) Suit filed by Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the arbitral award dated 28.02.2014; is hereby dismissed.
(2) No order as to costs.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court, dated this the 10th day of January, 2020.) (RAMA NAIK) VI Addl.City Civil & Sessions Judge, Bengaluru City.