Delhi District Court
Vipin Kumar vs Fruit & Vegetable Project on 20 September, 2018
IN THE COURT OF ANKUR JAIN: ADDL.DISTRICT
JUDGE-10 (CENTRAL): TIS HAZARI COURTS: NEW DELHI
Arbtn. No. 0216 (84268/16)
In the matter of:
Vipin Kumar
Son of Sh. Dharam Pal
Sole Prop. Of M/s. Durga Packers,
Having its office at:
M-127, Prem Nagar,
Uttam Nagar, New Delhi - 110059. .....Petitioner
Versus
1. Fruit & Vegetable Project
Mangolpuri Industrial Area,
Phase - 1, Delhi - 110083.
2. M/s. Tasty Bites Eatables Ltd.
Bhandgaon, Taluka Daund,
District, Pune- 412214
3. Shri Ram Shanker,
Sr. General Manager (CS-II)
National Dairy Development Board
Near Jagannath Mahadev,
Anand Gujarat - 388 001. .....Respondents
Petition filed on : 23.11.2006
Order reserved on : 28.07.2018
Order announced on : 20.09.2018
ORDER:
01. Vide this order, I shall decide the objections filed under Section 34 of Arbitration and Conciliation Act 1996.
02. The brief facts of the present case are that the petitioner entered into an agreement with respondent no.1 for supply of HDBPE Woven bags worth Rs. 22,90,480/- vide two agreements having reference no. 6271 and 6272 dated 23.12.1998 and 08.01.1999 respectively. The material was dully supplied to respondent no.1 as and when demanded to the utmost satisfaction of the official of respondent no.1. It is further stated that illegal and unwarranted deductions were made by respondent no.1 and 2 and they also delayed the payments. The respondent did not place any order after accepting material to the tune of Rs. 9,78,365/-. Although, they were supposed to place order for the agreed amount. The agreement contained on arbitration clause, which stipulated that in case no agreement is reached, the matter shall be referred to sole arbitration of Executive Director, National Dairy Development Board, New Delhi-29 (hereinafter referred to as NDDB). The petitioner feeling aggrieved with the illegal deductions and termination of contract, invoked the Arbitration clause and issued a legal notice dated 21.05.2001 which was replied by respondent no.1 on 28.06.2001 but they failed to comply with legal notice. The named arbitrator failed to enter reference inspite of the letter sent by the petitioner.
03. The petitioner was constrained to file petition before Ld. District & Sessions Judge under Section 11(6) for appointment of Arbitrator which came up for hearing and during the pendency of the proceedings, it was pointed out by respondent that post of Executive Director has been abolished and Regional Director is working in place of Executive Director. Accordingly, vide order dated 12.12.2004, the matter was referred to sole arbitration of Regional Director, NDDB, Mangol Puri. Sh. D.K. Sen, the then Regional Director, entered reference and started the proceedings but no effective proceeding took place. Accordingly, petition was filed by the petitioner for termination of mandate of Ld. Arbitrator and seeking appointment of fresh independent Arbitrator. During the pendency of the said petition, it was brought to the notice of the court that Sh. D. K. Sen had superannuated and Sh. Ravi Shanker has taken over the charge and is willing to conduct the arbitration proceedings. In view of the circumstances, the said petition was disposed off on 30.11.2005 with the direction to the Regional Director to complete the arbitration proceedings within 6 months but not later than 9 months.
04. No effective proceedings took place and ultimately, a contempt petition was filed by the petitioner on 27.04.2006 and notices were issued for 13.07.2006. It is further stated that after receipt of the notices, the arbitration proceedings were started at Anand, Gujarat with the sole object of defeating the arbitration proceedings. Thereafter various correspondences were exchanged between the arbitrator and petitioner. It is further stated that petitioner filed a petition before the Hon'ble High Court for termination of mandate of the arbitrator and seeking appointment of independent Arbitrator. The Hon'ble High Court vide its order dated 22.08.2006 was pleased to stay the passing of award and issued notice to the respondent. However, Ld. Arbitrator passed the order on the same day. The said award has been challenged by the petitioner on the ground that respondent no.3 had no authority to act as a Arbitrator as he was never appointed as Arbitrator in his personal capacity and he became Arbitrator because he assumed office of Regional Director and the place of Arbitration could not be at Anand, Gujarat.
05. Reply to the present objection petition was filed by respondent no.1 in which it was stated that due to restructuring of the NDDB, Sh. Ravi Shankar was transferred from post of Regional Director to Head Office at Anand, Gujarat as Senior General Manager and as such there was no post of Regional Director. The Arbitrator continued the arbitration proceedings in Anand, Guajrat on various dates in the presence of officer of respondent no. 1. It has further stated that since the petitioner was not co-operating and was not participating in any of the Arbitration proceedings, the Ld. Arbitrator passed a speaking award on 22.08.2006. It is further stated that the order passed by the Hon,ble High Court was received by respondent no. 1 on 31.10.2006.
06. Respondent no. 2 had also filed its reply, in which it was stated that only the nominated authority had the jurisdiction which was situated in Delhi. It was stated that Ld. Arbitrator had erroneously concluded that there was no agreement regarding place of arbitration and therefore the same can be determined by Arbitral Tribunal. On merits it was stated that there was no privity of contract between the petitioner and respondent no. 2.
07. Ld. Counsel for the petitioner as argued that agreement was in Delhi. The goods were supplied from Delhi and Arbitrator had no authority to pass the award as he had ceased to be the nominated authority. He submits that as per Arbitration clause, the post of Executive Director was the nominated authority and it was only the authority which could pass the award. He submits that the place of Arbitration was New Delhi and no reason has been mentioned as to how it was taken to Anand, Gujarat. On the other hand, ld. Counsel for the respondent no.1 has argued that there is no clause that the place of Arbitration would be Delhi. The only condition was that it was a post. He submits that the place of Arbitration was not fixed and this issue was never agitated by the petitioner in its earlier petition. No arguments have been addressed on behalf of respondent no. 2.
08. I have heard the ld. Counsels for both the parties and perused the records.
09. In order to appreciate the rival contention it is important to note under what circumstances, the court can intervene and set aside the award. The Hon'ble Supreme Court in ONGC Vs. Saw Pipes (2003) 5 SCC 705 has held that award could be set aside if it is contrary to:-
a) Fundamental policy of Indian law; or
b) the interest of India; or
c) justice or morality, or
d) in addition, if it is patently illegal.
10. The Hon'ble Supreme Court in DDA Vs. R.S. Sharma (2008) 13 SCC 80 the Hon'ble Supreme Court summarized the law and held that:
a) An award, which is:-
(i) contrary to substantiate provisions of law; or
(ii) the provisions of Arbitration & Conciliation Act 1996; or
(iii) against the terms of the respective contract; or
(iv) patently illegal or
(v) prejudicial to the rights of the parties is open to interference by the court under Section 34 (2) of the act.
b) The award could be set aside if it is contrary to:-
a) Fundamental policy of Indian law; or
b) the interest of India; or
c) justice or morality, or
c) The award could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of the court.
d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.
11. In view of above said judgment it has to be seen whether the award is liable to be set aside or not. In the present case clause 13 of the agreement contains an arbitration clause, as per the said clause in the event of any dispute in the interpretation of the terms or difference of opinion arising out or in connection with accepted purchase order, the parties shall use their best efforts to settle such disputes or difference by mutual negotiations. In case no agreement is reached, the matter shall referred for the sole arbitration of Executive Director, NDDB, New Delhi-29.
12. In the present case petitioner had filed a petition u/s 11 (6) of Arbitration and Conciliation Act for appointment of arbitrator and during the course of the proceedings it was pointed out that the post of Executive Director has been abolished and Regional Director has been working in place of Executive Director. Accordingly on 12.02.2004, Sh. Pradeep Chaddha, the then ADJ referred the matter to the sole arbitration of Regional Director NDDB. Sh. D.K. Sen who was working as Regional Director entered the reference and started the proceedings, however, he could not complete the proceedings and petitioner filed a petition for terminating the mandate of the ld. Arbitrator. It is also relevant to note that in the said petition, objection was taken by respondent No. 1, herein that arbitrator is a designated arbitrator and the Hon'ble Court of Sh. Pradeep Chaddha, Ld. ADJ had referred the dispute between the parties to the designated sole arbitrator and Sh. D.K. Sen had entered reference but on account of superannuation could not complete the proceedings. However, subsequently Sh. Ravi Shanker who has become Regional Director has entered the reference and it is in this context, the said petition was disposed of with the directions that respondent No. 3, Regional Director would complete the arbitration proceedings within a period of 6 months, but not later than 9 months. It is un-disputed fact that Regional Director was transferred to Anand, Gujarat and conducted the proceedings from there and passed the impugned award.
13. Ld. counsel for the petitioner has vehemently argued that sole arbitration was to be conducted by nominated authority and not by individual, therefore, respondent No.3 could not have conducted the proceedings. I find force in the submission of Ld. Counsel for the petitioner in as much as the arbitration clause clearly states that Executive Director of NDDB would be the sole arbitrator, after the post of Executive Director stood abolished and was renamed as Regional Director, then the post of regional director was the nominated authority. Respondent No. 1 has not disclosed as to whether the post of Regional Director was abolished or given any other name. The record of the arbitrator reveals that a letter was sent by Respondent No. 3, on 24 th August 2005, for conducting the arbitration proceedings and the next date of hearing was fixed as 17.9.2005 but what transpired on 17.9.2005, is not clear. Be that as it may be, on 30.11.2005, the petition was disposed off by the Hon'ble Court of Sh. S.K. Sarwaria, Ld. ADJ with directions to complete the arbitration proceedings in time bound manner. The record of arbitrator further reveals that from 30.11.2005 till 22.6.2006, no proceedings were conducted. It seems only when notice was issued in the contempt petition filed by the petitioner, the arbitrator woke up from the deep slumber and issued notice to the parties and the entire proceedings were completed within two months. Respondent No. 3 was transferred on 31.3.2006, no communication was sent to the petitioner informing him about the transfer. This in itself shows that the entire proceedings were conducted under the pressure of contempt proceedings, the arbitrator had thus not acted judiciously. Interestingly, respondents have filed the copy of muster roll for the month of August, 2006, in respect of F&V Unit, Mother Dairy Foods Processing Ltd., Mangol Puri. The record shows that Janak Raj, Dy. Manager and Debashish Sanaddar, Manager were present in Delhi on 22.8.2006, the day award was passed. However, the proceedings of the arbitrator conducted on 11.8.2006 and 18.8.2006 shows that Sh. Janak Raj was present on both these dates before Sh. Ld. Arbitrator. Interestingly, as per the attendance sheet / muster roll so placed on record, on both these dates Sh. Janak Raj has been shown to be present in Delhi which is not possible and thus, this proves that the record before the Ld. Arbitrator was forged and manipulated. The entire purpose of arbitration is defeated if the records are manipulated in this manner. The circumstances under which the award is passed comes under grave suspicion and has a vide ramification and is against the public policy.
14. The arbitrator could not have conducted the proceedings at Anand Gujarat. The petitioner never agreed for arbitration to be conducted in Gujarat. The agreement clearly stipulates that it is the nominated authority which would be the sole arbitrator, in the absence of any contract to the contrary. There can be no presumption that parties had agreed for conducting the arbitration proceedings other than Delhi. The findings of the Ld. Arbitrator are completely erroneous in this regard. The Ld. Arbitrator fell into grave error in coming to the conclusion that he was appointed by the court. The order dated 30.11.2005 is very categorical in this regard, as directions were issued to respondent No. 3, and respondent No. 3, was not the arbitrator but Regional Director. Thus, on being transferred the Arbitral Tribunal had lost jurisdiction to decide the issue. Thus the present petition is liable to be allowed. The award dated 22.08.2006 is set aside. The petitioner will be at liberty to initiate fresh arbitration proceedings, in accordance with law, if so advised.
15. In view of the aforesaid discussion the petition is allowed. The award dated 22.8.2006 is set aside.
16. File be consigned to record room along with the record of the arbitration proceeding.
Announced in the open Court on 20th September, 2018.
ANKUR Digitally signed by
ANKUR JAIN
JAIN Date: 2018.09.20
16:44:31 +0530
(Ankur Jain)
Addl. District Judge-10 (Central)
Delhi