Delhi District Court
Delhi Power Supply Company Ltd vs M/S. Swadeshi Cement Ltd on 7 July, 2022
In the Court of Ms. Gurmohina Kaur: Additional District Judge-03/
South District, Saket Court Complex, New Delhi.
ARBTN 276/17
CNR No : DLST01-002085-17
In the matter of :-
Delhi Power Supply Company Ltd
Through its Chief Managing Director,
Shakti Sadan, 2 Kotla Road,
Rouse Avenue, New Delhi-110002. ....... Petitioner
VERSUS
1. M/s. Swadeshi Cement Ltd
501, Laxmi Bhawan, 72, Nehru
Place, New Delhi.
2. Shri Shiv Khorana, Sole Arbitrator
Advocate, F-7, 2nd Floor,
Lajpat Nagar-III,
New Delhi-110024. .......Respondent
Date of institution : 07.01.2011
Reserved for judgment : 21.04.2022
Date of decision : 07.07.2022
JUDGMENT
1. A petition under Section 14 & 17 of the Arbitration Act, 1940 has been filed on behalf of the Petitioner seeking the Award to be made Rule of the Court. It is stated in the Petition that the Petitioner and Respondent No. 1 ARBT No. 276/17 Page no. 1 of 14 entered into an agreement for supply of 9000 MT OPC (cement) and an additional order was also placed on Respondent No. 1 for 15000 OPC cement vide order dated 06.05.1991. It is stated that dispute arose between the Petitioner and Respondent No. 1 regarding non supply and consequential losses suffered by the Petitioner due to risk purchase of goods offered and the matter was referred to Sole Arbitrator Sh. V.P Singh, Office of Chief Engineer (P & C), DESU Nehru Place, New Delhi on 28.05.1993 and on 29.01.1996 the Ld. Sole Arbitrator passed the Arbitral Award. It is submitted that the aforesaid Award was filed before the Hon'ble High Court of Delhi in accordance with Section 14 (2) of the Arbitration Act, 1940 together with the records to make the same the Rule of Court and to this, objections were filed on behalf of Respondent No. 1. The Hon'ble High Court of Delhi disposed of the aforesaid petition vide order dated 27.10.2009 holding that it was a fit case for remitting the award back to the Arbitrator under Section 16 of the Arbitration Act, 1940 for re-computation of damages for risk purchase with respect to 9000 MT less 3952 MT .i.e. 5048 MT of Cement. The Hon'ble High Court of Delhi appointed Sh. Shiv Khorana, Advocate as the Sole Arbitrator to pass fresh award in terms of the contract in accordance with Law. It is stated that the Ld. Sole Arbitrator thereafter heard fresh arguments and after considering the contentions of parties passed the Arbitral Award dated 07.07.2010, wherein it directed the Respondent No. 1 to pay to the Petitioner a recalculated amount of Rs. 6,56,240/- with 9% interest per annum on the awarded amount from the date of actual payment or till passing of the decree whichever is earlier. It is stated that the Ld. Arbitrator further held that the Respondent No. 1 was liable to pay further Rs. 5000/- as less was paid towards its share of administrative charges and also Rs. 2500/-, as less was paid towards cost awarded to the claimant in the arbitration ARBT No. 276/17 Page no. 2 of 14 proceedings but not paid by Respondent No. 1. Therefore, the total amount payable as per the Arbitral Award would be Rs. 6,63,740/- (Rs. 6,56,240/- + 5000/- + 2500/-). It is stated that Respondent No. 1 was liable to pay interest at the rate as decided by Hon'ble High Court of Delhi with respect to the period 29.01.1996 till 06.07.2010 on the amount of Rs. 6,56,240/-. It is stated that as per the award passed by Ld. Sole Arbitrator interest @ 9 % per annum shall be liable on the aforesaid amount of Rs. 6,56,240/- from 07.07.2010 till actual payment or till the date decree was passed whichever is earlier. It is prayed that the award dated 07.07.2010 be made Rule of Court. Original Arbitral Award was requisitioned.
2. This petition was resisted by Respondent No. 1 who filed objections under Section 30 and 33 of Arbitration Act, 1940, wherein it was averred that the Hon'ble High court of Delhi vide order dated 27.10.2009 set aside the order dated 29.01.1996 and remitted the Award for re-computation of claims and counter claims. It is stated that the award dated 07.07.2010 was a non speaking award without appreciation of material on record and without following the directions passed by Hon'ble High Court of Delhi vide its order dated 27.10.2009. It is submitted that the Arbitral Award was challenged on the following grounds namely:-
1. That the award dated 07.07.2010 was a non speaking order without appreciation of material on record and without following directions of Hon'ble High Court of Delhi vide order dated 27.10.2009.
2. That the Ld. Arbitrator while passing the Award dated 07.07.2010 failed to consider that nothing had been brought on record by the Petitioner to show the actual loss suffered by the Petitioner on account of non supply/shortage of cement.
ARBT No. 276/17 Page no. 3 of 14
3. That the Ld. Arbitral failed to consider the fact that the present suit fell within commercial transaction within the category of Section 74 of Indian Contract Act and therefore the parties claiming compensation must prove the losses and nothing had been brought forth by the Petitioner to suggest that the actual losses suffered and therefore the award is liable to be set aside.
4. That the Ld. Arbitrator while passing the impugned Award failed to appreciate that there was no justification in awarding compensation in consequence of breach when no injury had been caused.
5. That the Ld. Arbitrator failed to appreciate the documents filed on behalf of the Respondent wherein the Respondent was asked to stop the further supply of cement to the Petitioner on the ground of shortage of space vide letter dated 23.11.1991 and that it was also requested that the supply may be restored after confirmation from XEN supply of the Petitioner. The Respondent could not be held liable for the lapse of the Petitioner as there was no rebuttal on behalf of the Petitioner to the aforesaid document.
3. The objections have been opposed by the Petitioner, who have filed the reply and stated that the objections deserves to be dismissed in view of the clear mandate of Section 30 of Arbitration Act, 1940. It is further averred that the Award passed by the Ld. Sole Arbitrator dated 07.07.2010 had been passed in terms of the order of Hon'ble High court of Delhi dated 27.10.2009, wherein the Hon'ble High Court had remitted the earlier Award back with the very limited scope only for re-computation of damages for risk purchase. It is further stated that the Hon'ble High Court of Delhi vide its order dated 27.10.2009 did not set aside the award dated 29.01.1996 in its entirety and set aside the award only to the limited extent and the Hon'ble High court of Delhi never set aside the award dated 29.01.1996 in respect of 9000 MT (-
ARBT No. 276/17 Page no. 4 of 14 3952 MT which was supplied by the objector), for which a valid contract was entered between the parties. In the reply, it is further stated that a well reasoned and speaking award dated 07.07.2010 was passed and Ld. Arbitrator had appreciated the material on record as per the directions of the Hon'ble High Court of Delhi and no grounds for interference are made out. It is prayed that the objections filed on behalf of the Respondents may be dismissed.
4. In the rejoinder that was filed by the Respondent No. 1 with the reply it has been stated that Ld. Arbitrator while passing the impugned Award failed to adhere with the directions of Hon'ble High Court of Delhi passed vide its order dated 27.10.2009 and the contents of the reply were denied.
5. Written Submissions have been filed on behalf of both the parties in support of their arguments.
6. I have gone through the record filed on behalf of both the sides and considered the Arbitration Award in original which was requisitioned and filed vide order dated 14.10.2011 and gone through the written submissions.
7. Before adverting to the rival contentions raised by both the parties, it is relevant to reproduce the order of Hon'ble High Court of Delhi dated 27.10.2009 herein:-
"1. This application pertain to the objection filed by the Respondent no. 1 Swadeshi Cement Limited to the award dated 29.01.1996 of the sole arbitrator which is a non-speaking award. By the award, the respondent no. 1/objection has been fastened with the liability of risk purchase of goods in question namely cement.
ARBT No. 276/17 Page no. 5 of 14
2. The facts of the case are that a contract was entered into between the parties on 18.12.1990 whereby respondent No. 1 was to supply the petitioner 9000 metric tone of OPC (cement). The petitioner further claims that it placed an addition order of 15,000 metric tone vide its letter dated 02/6.5.1991. According, to the petitioner, since the objector committed default in supplying the cement as per original contract and the subsequent amendment for additional 15000 metric ton, it called for a fresh tender for the supply of the balance cement not supplied at the risk and cost of the objector. The impugned award grants to the petitioner a sum of Rs. 26,06,240/- on account of risk purchase action of the petitioner due to the breach committed by the respondent.
3. Before me, Mr. Singla, Sr. Advocate has pointed out that whereas a first contract was entered into between the parties on 18.12.1990, there is no second agreed contract which is alleged only to be in the form of the letter dated 6.5.1991. Mr. Singla further states with reference to the letter dated 6.5.1991 that the said letter is not in the form of an agreed contract between the parties but is merely an intimation for the supply of additional 15000 metric ton of cement. Additionally to this Mr. Singla has pointed the last two lines in this letter, which says that for the purpose of the additional quantity, the objector should deposit an amount of Rs. 2,71,500/- as additional security deposit and which the objector did not deposit and consequently there cannot arise any contract by the letter dated 6.5.1991.
4. I find force in the arguments of Mr. A.K Singla, Sr. Advocate. A government undertaking normally enters into a proper contract in the appropriate format and a mere unilateral information by a letter dated 06.05.1991 cannot be said to be an additional contract between the parties, more so because not only the objector has not acted upon the same, but it did not even deposit the security deposit which was demanded by the said letter. Accordingly, the so called extension letter dated 03.01.1992, extending the period of performance for both the contracts to 31.03.1992 can have no meaning so far as the second alleged contract for supply of 15000 metric ton is concerned. No doubt, this a non ARBT No. 276/17 Page no. 6 of 14 speaking award, however, where the arbitrator misconducts himself and the proceedings i.e. a finding is arrived at for which there is no justifiable basis in law, it is permissible for the court to interfere with such an award under Section 30 and 33 of the Arbitration Act, 1940. In this case, there is a clear cut perversity by the arbitrator holding that there was a contract in terms of the unilateral intimation letter dated 2/6.05.1991. Therefore, at best, the Arbitrator could have awarded risk and purchase cost with respect to the difference of 9000 metric ton of cement as originally contracted and the cement which was supplied by the objector to the petitioner and amount of which actual supply is duly recorded in the award.
5. In this view of the matter, the award is liable to be set aside to the extent, it holds the objector liable for risk and purchase cost for 24,000 metric ton of cement whereas at best the Objector could have been liable only for the difference of 9,000 metric ton minus 3,952 metric ton which was supplied to the petitioner. Since, this matter will involve recalculation and redetermination of the amount to be awarded to the petitioner, as also the adjustments from such amounts awarded in favour of the petitioner with regard to the alleged amount as claimed by the objector which are lying with the petitioner being the security deposit of Rs .1,62,900/- and unpaid bills for goods supplied for Rs. 97,7,40/-. I find that this a fit case for remitting the award back to the arbitrator under section 16 of the Arbitration Act, 1940 for recomputation of damages for risk purchase with respect to 9000 metric ton less 3952 metric ton i.e. 5048 metric ton. The Arbitrator may hear fresh arguments from the parties and determine the amount payable by the objector to the petitioner after considering its contentions with regard to the aforesaid two amounts which are stated to be payable to the objector in accordance with law.
6. The Arbitration Clause between the parties was an arbitration clause between the erstwhile Delhi Electric Supply under taking and the present objector. The arbitration clause entitled appointment of an Arbitrator by the General Manager of the DESU. Since, DESU is non existent today, the Arbitrator cannot be appointed ARBT No. 276/17 Page no. 7 of 14 by the persona designata and consequently, the arbitration clause fails. Thus, I deem it fit to appoint Sh. Shiv Khorana, Advocate F-7, 2nd Floor, Lajpat Nagar- IIII, New Delhi-110024, Office : 29840176, 41006115, Mobiles: 9818306615, 981006115, who is present in Court, as an Arbitrator to pass a fresh award in terms of the contracts as stated in the present order in accordance with law. The objector has fairly agreed to pay the fees of the Arbitrator which is fixed at a lump sum of Rs. 50,000/-. The Arbitrator be paid actual out of pocket miscellaneous expenses. The Arbitrator is requested to pass a fresh award as far as possible within a period of four months from today. Parties to appear before the Arbitrator on 21.11.2009 at 11.00 AM. With the aforesaid observations, this objection petition and the suit are disposed of. The registry is directed to forward the arbitration record by a special messenger to the Arbitrator appointed. The counsel for the parties agree that the petitioner which originally was DESU in the case shall now stands substituted by Delhi Transco Limited".
8. Therefore, in view of the aforesaid order of the Hon'ble High Court, the Ld. Arbitrator was directed to recompute damages for risk purchase with the respect to 9000 Metric Ton less 3952 Metric Ton i.e. 5048 Metric Ton and in-terms of the aforesaid directions the Ld. Sole Arbitrator passed the Arbitral Award dated 07.07.2010.
9. At this stage, it is pertinent to mention the scope and ambit of Section 30 and 33 of the Arbitration Act, 1940. The grounds as mentioned in Section 30 of the Arbitration Act, 1940 are as follows:-
Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely:-
(a) that an arbitrator or umpire has misconducted himself or the proceedings
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after ARBT No. 276/17 Page no. 8 of 14 arbitration proceedings have become invalid under section 35;
(c) that an award has been improperly procured or is other- wise invalid.
The provisions of Section 33 Arbitration Act, 1940 are also reproduced as under:-
3. Arbitration agreement or award to be contested by application. Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits: Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.
10. In case of Kwality Manufacturing Corporation Vs. Central Warehousing Corporation (2009) 5 SCC 142, it has been held by Hon'ble Apex Court, that the scope of interference by Courts in regard to Arbitral Award is limited. A court considering the application under Section 30 or 33 of the Arbitration Act 1940, does not sit in appeal over the findings and decision of the Arbitrator. Nor can it reassess or reappreciate evidence or examine the sufficiency or otherwise of the evidence. The award of the Arbitrator is final and the only grounds on which it can be challenged are those mentions in Section 33 and 30 of the Act. Similarly, in the case of Ravindra Kumar Gupta and Company Vs. Union of India (2010) 1 SCC 409, the Hon'ble Supreme Court has held that the law with regard to scope and ambit of the jurisdiction of Courts to interfere with an arbitration award has been settled in a catena of judgment of the court, the court also placed reliance on the observations made in the judgment of ONGC Limited Vs. ARBT No. 276/17 Page no. 9 of 14 SAW Pipes Limited, (2003) 5 SCC 705, wherein it was held that :-
"It is true that if the arbitral tribunal has committed mere error of fact or law in reaching its conclusion on the disputed question submitted to it for adjudication then the Court would have no jurisdiction to interfere with the award. But, this would depend upon reference made to the arbitrator: (a) If there is a general reference for deciding the contractual dispute between the parties and if the award is based on erroneous legal proposition, the Court could interfere; (b) It is also settled law that in a case of reasoned award, the Court can set aside the same if it is, on the face of it, erroneous on the proposition of law or its application; (c) If a specific question of law is submitted to the arbitrator, erroneous decision in point of law does not make the award bad, so as to permit of its being set aside, unless the Court is satisfied that the arbitrator had proceeded illegally.
11. Now at this juncture in view of the settled position of Law, it is seen whether the impugned award dated 07.07.2010 passed by Ld. Sole Arbitrator was in accordance with direction given by the Hon'ble High Court of Delhi vide order dated 27.10.2009 is to be made the Rule of Court or not. Perusal of the aforesaid Arbitral Award reflects that the Ld. Arbitrator has carefully considered the arguments addressed on behalf of both the parties and has appreciated all the materials available on his record and has passed a reasoned and detailed Arbitration Award. The relevant portion of the arbitration award are reproduced herein under for the sake of brevity:-
Award on risk purchase claim of the Claimant. B. My decision on this is that I am appointed the Arbitrator by remitting the award with the specific direction merely to re-compute the damages for 5048 MT as per the judgment dated 27.10.2009 and my scope under Section 16 of the Arbitration Act 1940 for remittance is to re-compute the damages with respect to 5048 MT unsupplied quantity and I ARBT No. 276/17 Page no. 10 of 14 have to hear the fresh arguments only to determine the amount payable by the Respondent to the claimant with respect of 5048 MT as unsupplied after considering the two amounts which according to respondent are payable to the Respondent and the same are Rs. 1,62,900/- towards the security deposit and unpaid bill of Rs. 97,740/- and the submission of the Respondent that the breach of the contract is not committed by them cannot be entertained and considered by me.
I therefore, as per the judgment of the High Court award being only remitted to limited extent cannot hear on who has committed the breach of contract. I therefore, reject the contention of the respondent and hold that amount of difference of non supplied quantity of 5048 MT is Rs. 6,56,240/- which is payable by the Respondent to claimant.
Award of counter claims of Respondent towards refund of security and balance amount In letters at 07.02.1992 (page 40) and 06.05.1992 relied by the respondent the respondent had demanded the release of Rs. 97,740/- only but not of security of Rs. 1,62,400/- and in letter dated 29.04.1992, page 25 respondent has demanded Rs. 97,740/- short paid and also without stating how much amount of security is with claimant only submitted that cancellation by claimant is invalid and levy of penalty due to late supplies and forfeiture of security is against canons of natural justice.
In the written submission filed by the respondent before previous arbitrator dated 06.07.1994 (page no. 130), the respondent again has submitted in para 8 of withholding of security amount of Rs. 1,62,900/- and balance amount of Rs. 97,740/- and Rs. 21,000/- of advance, which is again reiterated in page no. 127.
The claimant has in their written submission dated 15.09.1994 on page 141 filed by them before the previous arbitrator as available on the file, has claimed their claim of Rs. 26,06,240/- with 21 % interest per annum and also has further contended that it is the claimant who has to in addition to damages to receive Rs. 2,65,652.63 paisa given to respondent as advance but without disclosing the details ARBT No. 276/17 Page no. 11 of 14 how it has been calculated and in para 9 of the written submission it has been submitted that claimant that there is no claim of respondent as the claimant is entitled to adjust the loss from the amount lying with the claimant again the submission of claimant are equally vague and without any details.
Both the parties have failed to file the evidence through for counter claim it was for respondent to file details of balance amount payable with supply wise detail and for the security of Rs. 1,62,900/- the respondent was to prove the mode of deposit of security whether by cash or by bank guarantee extra and whether the same is still not released or not. The same are not filed/produced by the Respondent.
I allow the claimant of adjustment of the amount if any out of these two amounts in whole or part if same are still lying with the claimant towards awarded amount to claimant. The claimant may by 30.07.2010 intimate to the respondent about any amount lying with them and adjust the same and in that case claim the balance out of awarded sum of Rs. 6,56,240/- will be payable. In case claimant intimates no amount out of two or part of its is with them by 30.07.2010 the respondent is directed to pay the awarded sum of Rs. 6,56,240/-.
I further awarded 9% interest per annum on the awarded amount to the claimant from date of award till actual payment or till passing of the decree whichever is earlier.
12. Perusal of the aforesaid Arbitral award clear reveals that the grounds agitated by the Respondent No. 1 that the Ld. Arbitrator has passed the impugned award without any speaking order is devoid of merits. The Ld. Arbitrator has considered the documents placed on record during the arbitration proceedings and has accordingly passed the Arbitration Award. The scope of this court in terms of Section 30 & 33 of the Arbitration Act, 1940 is limited and has been discussed above. The contention of Respondent ARBT No. 276/17 Page no. 12 of 14 No. 1 that the Ld. Arbitrator has failed to consider that the Petitioner did not bring forth the actual loss suffered while passing the arbitration award is also not tenable at this stage, as the Ld. Arbitrator has also observed that no evidence had been brought forth by any of the party and that the Respondent has failed to file any details of balance amount payable or any document to show that it had deposited security and whether the same was released or not. The Ld. Arbitrator has duly complied with the directions of the Hon'ble High Court of Delhi dated 27.10.2009 as the arguments were heard afresh on behalf of both the parties as per the directions and thereafter the Arbitral Award was passed accordingly.
13. Accordingly, in view of the settled proposition of law and on the consideration of entire facts and circumstances of the matter as well as in view of the directions of the Hon'ble High Court of Delhi vide order dated 27.10.2009, pursuant to which the Ld. Sole Arbitrator had re-heard afresh and considered the material placed before it before passing the Arbitral Award dated 07.07.2010. In the considered opinion of this Court, there appears to be no ground to interfere with the Arbitration Award and the objections raised by the Respondent are not maintainable.
14. At this stage, it is pertinent to mention that under Section 17 of the Arbitration Act, 1940, judgment is to be pronounced according to the Award. Accordingly, the application filed on behalf of the Petitioner is heard and allowed. The present petition is allowed and Arbitration Award, 1940 is made the Rule of Court.
ARBT No. 276/17 Page no. 13 of 14
15. Let decree-sheet be prepared in terms of the arbitration award dated 07.07.2010 as per law.
File be consigned to record room.
Pronounced in the Open Court on 07.07.2022 (GURMOHINA KAUR) ADJ-03/South/Saket New Delhi/07.07.2022 ARBT No. 276/17 Page no. 14 of 14