Delhi District Court
Western India Genuine Ghee Co. Pvt Ltd vs Union Of India on 5 March, 2022
In the Court of Shri Sanjiv Jain, District Judge,
(Commercial Court-03), Patiala House Courts New Delhi
OMP (Comm) No. 03/2018
Western India Genuine Ghee Co. Pvt Ltd
118-P, Hirji Govindji Compound,
T. J. Road, Sewree, Mumbai-400015.
....... Petitioner
versus
1. Union of India
Director General of Supplies & Transports, (ST-9) (DGST)
Quarter Master Generals Branch
Integrated HQs of Ministry of Defence (Army)
3rd Floor, A-Wing, Sena Bhavan,
New Delhi.
2. Principal Controller of Defence Accounts (PCDA)
K. Kamraj Marg, G-Bock,
POL Section, Nirman Bhawan Post Office,
New Delhi. ....... Respondents
Date of institution : 20.10.2018 Date of reserving judgment : 22.01.2022 Date of decision : 05.03.2022 JUDGME NT
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter called the 'Act') challenges OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.1 of 31 the award dated 20.07.2018 passed by Sh. Anshuman Chowdhary, Ld Arbitrator, whereby, respondent has been directed to make payment of Rs. 4,36,278/- to the petitioner within a period of 60 days from the date of the award, failing to pay interest on the said amount @ 10% per annum compounded anually.
Brief facts:
2. The facts leading to this petition are that the petitioner, Western Indian Genuine Ghee Co. Pvt Ltd, a small scale industry, dealing in manufacturing and trading of all types of lubricating oils, gear oils, processed vegetable oils, registered with NSIC, participated in a tender inquiry no.
P/71670/200809/Q/ST-9 (DAFC-50%)/014 vide quotation dated 29.10.2007 for the procurement of DAFC-50% (Glycol Based anti-freeze coolant) floated by the respondent no. 1 i.e. Director General Supplies & Transport (DGST), Ministry of Defence. It was declared L-1. It is stated that the post opening of tender, on 09.05.2008, petitioner was called in a meeting where a new concept of monetary limit was introduced by the respondent no. 1. It was accepted by the petitioner subject to considering the monetary limit given in DGQA registration certificate dated 14.01.2008 issued by the Ministry of Defence reflecting in clause 3 of the contract. The petitioner also OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.2 of 31 clarified the points raised during the meeting vide letters dated 09.05.2008 & 16.05.2008. It is stated that as per the tender clause 16 of DGST form 104 and clause 7.4 of DPM 2006, petitioner was exempted from payment of security deposit irrespective of any monetary limit, however, it agreed to pay the security deposit of Rs. 4,57,652/- only if, the total quantity of 3,00,000 liters order was placed on it. It at that time was registered with DGQA with monetary limit of 1.17 crores.
3. The respondent no. 1 awarded the contract on 11.07.2008 for a partial quantity of 2,33,500 ltrs. The petitioner accepted the contract subject to issuance of amendments vide letter dated 22.07.2008. It expressed its willingness to pay Rs. 45,500/- as security deposit since the quantity was reduced from 3,00,000 ltrs to 2,35,500 ltrs. The respondent no. 1 did not give the due amendments nor cancelled the contract despite the fact that the petitioner had not paid the security deposit within 30 days as per tender / contract clause. The respondent no. 1 accepted the material without any objection. The petitioner submitted the bills D-1 to D-10 for Rs. 1,39,69,571/- in terms of clause no. 18
(c) vide letter dated 30.12.2008 with the submissions that in case, the bills are returned for no fault of it, it shall be entitled to interest as per MSME Act 2006. On this, the petitioner received a letter dated 15.01.2009, whereby, PCDA returned all OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.3 of 31 the 10 bills on the ground that DGST has not amended the contract with respect to clause 10 i.e. security deposit. The petitioner then sent a notice dated 22.01.2009 to PCDA to release the payment at the earliest, failing which, it would take legal action. The petitioner received the payment against bills no. D-11 to D-13 vide letter dated 09.02.2009 wherein, PCDA deducted a sum of Rs. 5,56,529/- towards the security deposit. It is stated that as per clause 19 (t), the store could not be dispatched without the acceptance / release of inspection notes. The petitioner then vide letter dated 23.03.2009 informed the respondent that it has been forced to pay the Toll Tax for all the consignments to the consignee BD Bari despite having Toll Tax exemption certificate from the consignee, since, Government of J & K did not accept the exemption certificate issued by the consignee. It requested PCDA to amend the contract clause and make the reimbursement as per clause 19 (j) of the contract. On 24.03.2009, it received the payment against bill nos. D-1 to D-
10. The petitioner then vide letters as detailed in para 12 of the petition requested the respondent to issue amendments in the contract and release the payments. The respondent in response thereof, vide letter dated 08.08.2011 informed the petitioner to raise the bills for the toll tax directly to PCDA, paying authority of Ministry of Defence along with a note to PCDA to release the toll tax to the petitioner on the submission of bill / proof of OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.4 of 31 payment. The petitioner then raised the bills vide letter dated 17.08.2011 with PCDA but it returned the bills vide letter dated 28.08.2011 on the ground that DGST has not amended the contract with respect to clause 19 (j). The petitioner vide letters (details mentioned in para 16) requested the respondent and PCDA to issue the amendments and release the payment and the security deposit of Rs. 5,56,529/-, unilaterally deducted as warranty / guarantee. PCDA replied to the letters vide letter dated 25.11.2014 demanding pre-receipt contractor bills and no demand certificate from DGST. The petitioner vide letter vide dated 06.12.2014 again requested the respondent to issue the amendment in the contract and release the payments. It also requested PCDA and the respondent to return the amount of Rs. 32,04,946/- with interest as per MSME Act calculated till 31.03.2016, which was the delayed payment interest for returning the bills D-1 to D-10 and the deduction of Rs. 5,56,529/- made towards the security deposit from the bills D- 11 to D-13. Since, the respondent did not release the payments, petitioner raised the dispute under clause 9 of the contract and 7.16 of DPM 2006 and DGS7T-118(A) for adjudication through arbitration. Since, the respondent did not appoint the Arbitrator, it filed the petition under Section 11 of the Act before the High Court for appointment of the Arbitrator. The High Court vide order dated 19.09.2016 appointed the Arbitrator. The petitioner OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.5 of 31 filed the statement of claims on 02.01.2017. The respondent contested the claims by filing the reply. After hearing the parties, the Arbitrator passed the impugned award.
4. The petitioner challenged the award on the following grounds:
A. That the award is against the stipulations contained in the tender enquiry and the contract dated 11.07.2008.
B. That the Arbitrator erroneously dismissed claim no. 1 observing interalia that if the claimant / petitioner has not paid the security deposit, it could not expect timely payment for the supplies. It is stated that this observation is contradictory as the Arbitrator has held that the respondent has wrongly deducted Rs. 5,56,529/- instead of Rs. 3,75,440/- and therefore, its claim is justified and respondent is liable to pay interest on the delayed payment of bill no. D- 1 to D-10 which was wrongly returned by the respondent. It is stated that the total amount against the aforesaid bills was Rs. 1,39,69,571/- against which, the respondent wrongly deducted the security deposit of Rs. 5,56,529/-. When it apprised the respondent that it would take legal action, the respondent released the payments against bill no. D-11 to D13 by wrongly deducting the security deposit unilaterally. It is stated that the petitioner was entitled for the delayed payment interest as per the MSME Act of a sum of Rs.
10,68,290/-, which the Arbitrator failed to appreciate. He wrongly held that the interest rates as stipulated in Section 15 & 16 of MSME Act 2006 are not applicable.
C. That the Arbitrator failed to appreciate that as per clause 10 of the Contract, security deposit was to be released by 30.06.2013, whereas, it was released on 31.05.2016. Therefore, it was entitled for payment of delayed interest as per the MSME Act on the security deposit amount.
D. That the Arbitrator failed to appreciate that money OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.6 of 31 paid by it under claim no. 6 was towards the toll tax to enable the delivery of goods to the consignee on which, he was entitled to interest.
5. On getting notice of the petition, respondent filed its reply denying the averments made in the petition and stated that there is no infirmity in the impugned award. It admitted that a meeting was held, which the petitioner had attended but it denied that the petitioner was exempted from payment of security deposit irrespective of any monetary limit. It is stated that the petitioner in its letter dated 09.05.2008 had estimated the contract value as Rs. 2.085 crores. Applying the monetary limit of Rs. 1.17 crores given in DGQA registration certificate, the petitioner had requested to levy the security deposit on the balance of the contract amount @ 5% (5% of Rs. 91,53,045/- = Rs. 4,57,652/-) with a condition of placing an order on it for a total quantity of 3,00,000 ltrs. It is stated that the condition was completely arbitrary and against the contract. The quantity was dependent on the requirement of the department. It is stated that the petitioner did not perform its contractual obligation regarding submission of security deposit and malafidely made the representation. It is stated that the bills D-1 to D-10 were rightly returned due to non submission of security deposit and the petitioner was not entitled to any interest for the delay caused by it in performing the contractual obligation. It is stated OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.7 of 31 that initially the petitioner had sought amendment to reduce the security deposit from Rs. 5,56,529/- to Rs. 45,450/- on the basis of DGQA registration but DGST clarified to the petitioner vide letter dated 30.10.2008 that the monetary limit mentioned in the NSIC registration certificate is for the firm / unit and the security deposit upto monetary limit is exempted and accordingly exemption on Rs. 51,00,000/- was adjusted in the three ATs placed on it. It is stated that the petitioner in its letter dated 22.01.2009 had asked the department to deduct the security deposit from the bills and release the balance amount, so at this stage, it cannot make a claim qua interest. It is stated that as per the NSIC registration certificate, exemption of security deposit is permissible upto the monetary limit, which provision exists in NSIC policy letter dated 28.08.2008. It is stated that in this case, the petitioner was provided full benefit of exemption upto Rs. 51 lakhs, so, for the balance amount, security deposit of Rs. 5,56,529/- was realised.
6. As regards payment against toll tax levied by the Government, it is stated that admittedly the petitioner had written letter and sent copies of the receipts for an amount of Rs. 38,896/- and requested for issue of amendment in the AT followed by reminders but DGST vide its letter dated 26.02.2015 had informed the petitioner that no such provision OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.8 of 31 exists either in RFP or AT. It had advised the petitioner to approach the State Authorities for refund of the toll tax.
7. I have heard the arguments advanced by Ld. Counsel Sh.
S. K. Chaturvedi for the petitioner and Sh. Sanjeev Yadav, Ld. Counsel for the respondent.
8. Ld. Counsel for the petitioner reiterated what has been stated in the petition. He contended that the respondent delayed the payments of about Rs. 1,40,00,000/- against bills D-1 to D- 10 for which, it was entitled to interest but the Arbitrator wrongly rejected the claim without assigning any reason. He referred Section 16 of MSME Act 2006 and contended that the petitioner was entitled to interest. Ld. Counsel further argued that the security deposit was not released within time for which it was entitled to interest. Ld. Counsel referred the tender documents and submitted that the petitioner being a SSI unit registered with NSIC was exempted from submitting the security deposit but the respondent wrongly deducted the security deposit. Ld. Counsel stated that the Defence Procurement Manual provides that SSI is exempted from paying the security deposit. Ld. Counsel also stated that defence supplies are exempted from payment of toll tax but the OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.9 of 31 petitioner was made to pay the toll tax, which was never refunded by the respondent. Ld. Counsel stated that the petitioner was entitled to interest @ 1.5 % per month on delayed payments being a SSI unit but the Arbitrator wrongly rejected its claim for interest. In support of his contention Ld. Counsel referred the case of Steel Authority of India Limited Vs. M/s Jaldhi Overseas Pvt Ltd, 2021 (4) R.A.J. 660 (Del) to contend that compound interest cannot be held to be falling foul of the fundamental policy of the Indian Law. In commercial contracts, interest to be awarded must be considered keeping in view the commercial practice. Ld. Counsel also referred the case of GE T & D India Limited Vs. Reliable Engineering Project & Marketing 2017 (3) AD (Del) 217 to contend that MSME Act to the extent it provides for a special forum for adjudication of a dispute involving a supplier registered thereunder overrides the Arbitration & Conciliation Act 1996. It is a special statute, which would be preferred over a general one where it is beneficial.
9. Ld. Counsel for the respondent per contra argued that admittedly, the petitioner was SSI unit registered with NSIC but its limit was upto 50.0 lakhs. The contract was for Rs. 1.17 crores, so, it was liable to pay the security deposit on the balance amount. Ld. Counsel stated that MSME Act is not OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.10 of 31 applicable for delay in releasing the security deposit. Ld. Counsel stated that the respondent had issued the certificate regarding exemption from payment of toll tax. The petitioner may approach the Authority for releasing the toll tax. Ld. Counsel stated that there is no infirmity or illegality in the impugned award and the petition deserves to be dismissed.
10. I have given my thoughtful consideration to the rival contentions and perused the award and the documents.
11. Section 34 of the Arbitration and Conciliation Act reads as:
"34.Application for setting aside arbitral award-
(1)Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3). (2)An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.11 of 31 Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
ii) It is in contravention with the fundamental policy of Indian law;
iii) It is in conflict with the most basic notions of morality or justice.
Explanation-II- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
[2 (A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
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12. Normally, the general principles are that the decision of the Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different conclu- sion on the same facts. The court cannot reappraise the evi- dence and it is not open to the court to sit in appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be cancelled are those men- tioned in the Arbitration Act. Where the arbitrator assigns co- gent grounds and sufficient reasons and no error of law or mis- conduct is cited, the award will not call for interference by the court in the exercise of the power vested in it.
13. In the case of Associate Builders v/s Delhi Development Authority, (2015) 3 SCC 49, it was held that interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when con- science of the Court is shocked or when illegality is not trivial but goes to the root of the matter. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
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14. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has held that under Section 34 of the Act, a decision which is perverse while no longer being a ground for challenge under public policy of India but would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a de- cision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse.
15. There is no objection or dispute relating to the appointment of the Arbitrator to whom the petitioner had submitted its statement of claims. The arbitral proceedings confirm that the parties had regularly appeared before the Arbitrator and were given due opportunities to plead / defend their cases. The Arbitrator thereafter passed the impugned award dealing with the claims and the rival contentions of the parties. The legislative mandate clearly bars the Court to re- appreciate the evidence for deciding an objection under Section 34 of the Act. The parties are also not allowed to expand the scope of defences raised before the Arbitrator to get fresh OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.14 of 31 adjudication from the Court. However, in order to see whether the Arbitrator has passed the award against the basis notions of justice or it is patently illegal as alleged by the petitioner, I deem it appropriate to consider the real controversy between the parties, which gave rise to the cause of action for filing the claims and the manner in which it were appreciated by the Arbitrator in reference to the terms & conditions of the contract.
16. A perusal of the arbitral record reveals that the petitioner is engaged in the business of manufacturing, trading and supplying of various types of lubricating oils etc. It falls under the category of Small Scale Industry (SSI) under the Micro, Small and Medium Enterprise Act, (MSME) 2006. Under the said Act, SSI is entitled to waiver / exemption of security deposit to be paid for any contract upto the monetary limit specified in the National Small Industries Corporation (NSIC) / Director General of Quality Assurance (DGQA) Registration. It is also entitled to interest on delayed payments under Section 15 / 16 of the MSME Act at the rate three times the RBI rate to be compounded at monthly basis.
17. Record reveals that the petitioner participated in the tender enquiry floated by the respondent DGST / PCDA for the procurement of DAFC (50%). Being lowest / L-1, it was OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.15 of 31 awarded the contract. In terms of the contract, the respondent placed several orders to the petitioner against which the petitioner made the supplies. In this case, on the date of tender enquiry i.e. on 04.10.2007, the petitioner had only the NSIC registration with a monetary limit of Rs. 51,00,000/-. DGQA registration with its monetary limit of Rs. 1.17 crores was not in existence on the said date. It was obtained by the petitioner in 2008. The value of the contract was Rs. 1.26 crores exclusive of tax and duties, however, after including tax & duties, the contract value became Rs. 1.62 crores. Taking the monetary limit of Rs. 51.0 lakhs as per NSIC registration and the contract value as Rs. 1.62 crores, the respondent deducted the security of a sum of Rs. 5,56,529/- [5% of (Rs. 162.0 lakhs - Rs. 51.0 lakhs)]. The petitioner raised the disputes alleging that the respondent wrongly deducted the security deposit of Rs. 5,56,529/- from the payments due to it and further, the payments were delayed against the supplies. It claimed that it was entitled to full exemption from payment of security deposit as per DGQA registration or at the most, it was liable to pay security deposit @ 5% on (Rs. 1.26 crores - Rs. 1.17 crores), which comes to Rs. 45,500/-. It also claimed interest on the amount of Rs. 5,56,529/-, which was refunded to it and also on the delayed payments against the supplies made by it as per the contract plus toll tax.
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18. Per contra, it was alleged by the respondent that the payments for the supplies were delayed because the petitioner did not pay the security deposit. It was stated that when the petitioner did not pay the security deposit, the respondent deducted the same from the payments against the bills due to the petitioner for the supplies made, which security deposit was refunded in 2016 without any interest as the same by its nature was refundable.
19. In this case, the Arbitrator framed the following issues:
1. Whether for the purpose of exemption of security deposit payment, NSCI monetary limit of Rs. 51 lakhs should be taken into consideration or DGQA monetary limit of Rs. 1.17 crores should be taken into consideration?
2. Whether claimant was liable to pay the security deposit amount of Rs. 5,56,529/- as demanded by respondent? If not, what amount were they liable to pay?
3. Each of the 7 claims of the claimant one by one.
4. Whether respondent is liable to pay costs to the claimant for Arbitrator's fee and legal expenses?
20. A careful perusal of the contract and the documents would show that on the date of tender enquiry i.e. on 04.10.2007, the petitioner only had the NSIC registration with a monetary limit (for exemption) of Rs. 51.0 lakhs. It obtained the DGQA registration with monetary limit (for exemption) of OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.17 of 31 Rs. 1.17 crores on 14.01.2008. It was rightly held by the Arbitrator that the tender enquiry and other communications / correspondences between the parties till 14.01.2008 would show that the contract was based / premised on the NSIC registration, which had the monetary limit of Rs. 51.0 lakhs, which should have been taken into consideration for the purpose of security deposit. There is nothing on record to indicate that on the day of tender enquiry, the petitioner had registration / monetary limit (for exemption) of more than Rs. 1.17 crores. Record shows that DGQA registration of the petitioner was subsequent to the tender enquiry on the basis of which the contract was entered into. That being the position, the petitioner was not entitled to full exemption of payment of security deposit and it was only entitled to exemption to the limit upto Rs. 51.0 lakhs.
21. As regards the value of the contract, a perusal of record shows that amount of Rs. 1.62 crores included taxes & duties, however, the amount of Rs. 1.26 crores was the net figure. The Arbitrator has rightly taken the net contract value as Rs. 1.26 crores for calculating the security deposit. He after subtracting the monetary limit of Rs. 51.0 lakhs as per the NSIC registration, calculated the amount of security, which came to Rs. 3,75,450/- [(5% of (Rs. 1.26 crores - Rs. 0.51 crore)]. The OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.18 of 31 Arbitrator has correctly held that the petitioner was not liable to pay the security deposit of Rs. 5,56,529/- but was only liable to pay Rs. 3,75,450/-. He has rightly held that an amount of Rs. 1,81,079/- was overcharged by the respondent for which it is liable to pay interest.
22. The Arbitrator also considered the claims of the petitioner i.e. claim no. 1 i.e. delayed payment interest on the bills D-1 to D-10, amounting to Rs. 10,68,290.46. He observed that though the respondent has admitted that these payments were delayed but those were due to non submission of requisite security deposit amount by the petitioner, which fact has not been denied by the petitioner. The record also reveals that despite letters / reminders, the petitioner did not pay the security deposit. It was logically / rightly held by the Arbitrator that if the petitioner had not paid the security deposit, it could not expect to receive the timely payment of its supplies. It was held that the respondent is a Government entity, which is bound to follow set of rules and procedures and it cannot be expected to act otherwise. Record reveals that the payments were released after deducting the security deposit amount. It had also written letter dated 15.01.2009 informing that the bills have been returned since DGST has not amended the contract with respect to clause 10 i.e. security deposit. Admittedly, the OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.19 of 31 respondent had deducted Rs. 5,56,529/- from the aforesaid bills and later it has been held that only Rs. 3,75,450/- could have been deducted but from this, it cannot be said that the payments against the bills were illegally with held by the respondent as alleged. The parties are bound by the terms & conditions of the contract and the contract clearly provided for deposit of the security deposit, which the petitioner initially did not follow.
23. Claim no. 2 i.e. delayed payment interest for the bill D-14 amounting to Rs. 23,903.41. In this case, the Arbitrator referred the written submission filed by the respondent, wherein, it was stated that the petitioner had raised the above bill without getting the receipt of the stores from the consignee, which was the responsibility of the petitioner. It was stated that if the inspection notes were lost, there was a procedure for issuance of duplicate inspection note. The petitioner could raise bill no. 14 for 95% on 25.02.2009 after going through the procedure for issuance of duplicate inspection note. It was stated that the bill was paid on 30.03.2009 immediately without any delay. Per contra, it was stated by the petitioner that the specimen signature of the concerned officer namely Lt. Col. P. K. Tiwari was not in the records of PCDA.
The Arbitrator has rightly accepted the contention of the petitioner after perusing the documents and held that cause of OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.20 of 31 delay cannot be attributed to the petitioner. It was rather the responsibility of the respondent to make available the signature of the concerned officer on record. He held that by no stretch of imagination, the petitioner can be fastened with such a responsibility, which was an internal matter of the respondent. He rightly allowed the claim of Rs. 23,903.41 in favour of the petitioner and against the respondents.
24. Claim No. 3 i.e. delayed payment interest for bill D-15 for Rs. 19,480.22. He rightly rejected the contention of the respondent that corrected CRV no. and date should be attested by the consignee, which led to delay in payment, accepting the contention of the petitioner that it was the mistake of the dealing clerk of the respondent. He correctly held that the petitioner cannot be saddled with the responsibility for the delay in payment. He rightly allowed the claim in favour of the petitioner.
25. Claim no. 4 i.e. delayed payment interest amounting to Rs. 36,628.03 for faulty issuance of road permit by the consignee / respondents for bill no. D-16. It was claimed by the petitioner that it had incurred demurrage charges for no fault of it. Although, the respondents had alleged that bill D-16 raised by the petitioner was paid on 27.04.2009 without any OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.21 of 31 delay but the Arbitrator held that the respondents cannot escape responsibility for this claim because the very delay in raising the bill was due to the fault of the consignee, who for all intents and purposes, was an agent of the respondent under the law of contract. Since, the consignee issued a faulty road permit, the petitioner incurred / suffered demurage charges for several months. The Arbitrator also noted that the petitioner had raised the bill within the stipulated time after the delivery. He thus rightly allowed this claim in favour of the petitioner.
26. Claim no. 5 i.e. delayed payment interest for wrongly deducting the security deposit of Rs. 5,56,529/- from the petitioner's bill no. D-11 to D-13 amounting to Rs. 14,96,672.76. While deciding this claim, the Arbitrator referred the findings on issue nos. 1 & 2 and held that the correct amount of security deposit, which should have been payable under NSIC registration is Rs. 3,75,450/-. Since, an amount of Rs. 5,56,529/- has been deducted as the amount of security, so, there is an excess deduction of Rs. 1,81,079/- on which, the petitioner is entitled to interest. The Arbitrator referred Section 15 & 16 of MSME Act 2006 and held that since, the matter relates to security deposit and not for the payments for the supplies of goods and services, the interest rates as stipulated under the above sections are not applicable to the facts & OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.22 of 31 circumstances of this case. The Arbitrator, therefore, allowed the simple interest @ 1% per month i.e. 12% per annum for the full period of 87 months on the excess deduction amount of Rs. 1,81,079/-, which came to Rs. 1,57,539/-.
27. Section 15 of MSME Act 2006 provides liability of buyers to make payment. Where any supplier, supplies any goods or renders any services to any buyer, the buyer shall make payment therefore on or before the date agreed upon between them provided that in no case the period shall exceed forty-five days from the day of acceptance. Section 16 of MSME Act 2006 provides that where any buyer fails to payment of the amount to the supplier, as required under Section 15, the buyer shall, notwithstanding anything contained in any agreement between the buyer and supplier be liable to pay compound interest with monthly rests to the supplier on that amount at three times of bank rate notified by the Reserve Bank.
28. In the instant claim, the petitioner has claimed interest on the excess deduction of security deposit and not against the delay in payments for the supply of goods and services. Section 15 & 16 of MSME Act 2006 do not provide payment of interest on the security deposit but provide interest on the delayed OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.23 of 31 payments in respect of supply of goods & services. The Arbitrator has rightly applied the principles of justice and equity and allowed the simple interest on the excess deductions made by the respondents on the security deposit.
29. Claim no. 6 i.e. refund of toll tax paid by the petitioner and delayed payment interest on the same amounting to Rs. 2,23,069.46 (Principal amount Rs. 38,890/- + interest Rs. 1,84,179.46). It is not in dispute that the toll tax amounting to Rs. 38,890/- was paid by the petitioner. The Arbitrator has observed that though, in this case, toll tax exemption certificates were issued to the petitioner by the respondent but it cannot be said that the respondent cannot be faulted for non acceptance of certificates by the concerned authorities. He held that the petitioner cannot be held responsible nor be expected to run from pillar to post for getting back the refund from the Authorities. The responsibility falls on the respondent. He referred the contractual clauses and stated that in this case, the respondent had conveyed that the certificates would exempt the petitioner from payment of toll tax, so at this later stage, it cannot be allowed to go back on its promise. He, therefore, righly allowed the petitioner's claim towards refund of toll tax amounting to Rs. 36,890/-.
As regards interest, he allowed the interest @ 1% per OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.24 of 31 month i.e. 12% per annum for 86 months on original toll tax (F-
1) of Rs. 12,156/-, for 97 months on original toll tax (F-2) of Rs. 16,604/-, for 96 months on original toll tax (F-3) of Rs. 10,130/- total amounting to Rs. 36,285/- on the similar lines with respect to claim no. 5 holding that this matter does not come under the category of supply of goods & services for claiming interest under Section 15 & 15 of MSME Act 2006.
I am of the view that the Arbitrator has rightly allowed the refund of the toll tax assessing the reasonable / justified rate of interest.
30. Claim no. 7 i.e. release of payment for excess supply of stores due to non acceptance of partially filled containers along with delayed payment interest amounting to Rs. 51,773/-. Perusal of the record reveals that initially the petitioner has claimed Rs. 51,773/- but later it raised the figure to Rs. 71,289/-. It was rightly held by the Arbitrator that since, this figure was raised at the belated stage of final arguments and the respondent did not get any opportunity to rebut the same, the same cannot be allowed.
The Arbitrator has also considered the contention of the respondent that this claim was never raised before it. He after going through the documents finding force in the contention of the respondent observed that in this case, the factum of excess OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.25 of 31 supply has not been denied by the respondent, so the petitioner must have been paid for the supplies made by it. It is immaterial that the claim was not raised before it. Since, this is a direct question of supply of material, the petitioner would be entitled to interest as per Section 15 & 16 of the MSME Act. Since, the petitioner has not submitted month-wise interest calculation for this claim, he directed the petitioner to submit the same within a fortnight. He also directed DIAC to verify the same. He allowed the claim of Rs. 51,773/- with interest.
I am of the view that the Arbitrator has given this finding after considering the documents and the contract.
31. Now coming to arbitration fee / cost, it was observed by the Arbitrator that the petitioner has paid an arbitration fee of Rs. 56,780/- in addition to the miscellaneous expenses of Rs. 5000/- and the total comes to Rs. 61,780/-. He observed that the petitioner had to pursue judicial and / or arbitral remedies and incur expenses on the same, due to refusal / denial by the respondent to make just payment for the claims. Had the petitioner got its dues, it could have saved the fees / costs. He, therefore, allowed Rs. 61,780/- towards arbitration fee & cost in favour of the petitioner. He also awarded Rs. 10,000/- towards legal aid and other costs.
I am of the view that the Arbitrator has taken a logical & OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.26 of 31 reasonable view while allowing the arbitration costs and the expenses, which do not call for interference.
32. As regards interest on the arbitral award, the Arbitrator has held that if the payment is not made within a period of 60 days from the date of award, the respondent shall be liable to pay compound interest on the total sum i.e. Rs. 4,36,278/- @ 10% per annum compounded annually. Since, the transactions were commercial in nature, I am of the view that the Arbitrator has given a reasonable rate of interest on the award, which was within the competence of the Arbitrator in terms of Section 31 (7 ) of the Act and Section 3 of the Interest Act 1978.
33. I do not find force in the contention of the petitioner that the award is against the stipulations contained in the tender enquiry and the contract. In this case, the Arbitrator has clearly & logically interpreted the terms of the tender enquiry and the contract and given the findings qua the security deposit, interest on the delayed payments of bills, refund of toll tax, application of Section 15 & 16 of the MSME Act and the interest payable on the security deposit. The petitioner has failed to show that there is any error apparent on the face of award or the award suffers from any patent illegality or the findings of the OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.27 of 31 Arbitrator are perverse or the award shocked the conscience of the Court. I am of the view that the Arbitrator has given a well reasoned award, which does not call for interference. He has dealt with all the claims, considered the rival contentions and thereafter, passed the award. The legislative mandate clearly bars the Court to reappricate the evidence for deciding an objection under Section 34 of the Act.
34. In the case of Patel Engineering Ltd Vs. North Eastern Electric Power Corp Ltd, 2020 (7) SCC 167, it was observed that in paragraphs (39) & (40) of Ssangyong Engineering (supra), the Court reiterated paragraphs (42.2) & (42.3) of Associate Builders (supra), wherein, it was held that construction of the terms of a contract is primarily for Arbitrator to decide, unless the Arbitrator construes a contract in a manner, which no fair minded or reasonable person would take i.e. if a view taken by the arbitrator is not even a possible view to take. It was held that the ground of patent illegality is a ground available under the statute for setting aside a domestic award, if the decision of the arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at the same; or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view.
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35. It was held in the case of State Trading Corporation of India Ltd Vs. Teopfer International Asia PTE Ltd FAO (OS) 242/2014 that Section 34 proceeding which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. Finality of the award is very important. An interpretation placed on a contract is a matter within the jurisdiction of the Arbitral Tribunal and even if an error exists, this is an error of fact within jurisdiction which cannot be re-appreciated by the Court under Section 34 of the Act. Legal position is no more res integra that the Arbitrator having been made the final Arbiter of resolution of dispute between the parties, the award is not open to challenge on the ground that Arbitrator has reached at a wrong conclusion. If we were to start analyzing the contract between the parties and interpreting the terms and conditions thereof and which will necessarily have to be in the light of the contemporaneous conduct of the parties, it will be nothing else than sitting in appeal over the arbitral award and which is not permissible.
Conclusion:
36. Now to sum up, in the instant case, most of the grounds raised by the petitioner to challenge the award are factual in nature which have been already considered and adjudicated in OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.29 of 31 the impugned award. It is outside the scope of Section 34 of the Act to reappreciate the entire evidence and come to conclusion because such an approach would defeat the purpose of arbitration proceedings.
37. Having examined the various contentions of the petitioner on the touchstone of the parameters of interference as explicitly laid down by the Supreme Court in several judgments referred to above, I am of the view that the impugned Award, does not suffer from any infirmity or error apparent on the face of record. It is not for this Court to sit in appraisal of the evidence led before the learned Arbitrator and this Court will not open itself to the task of being a judge on the evidence placed before the Arbitrator which was subject matter of dispute. In the present case, the Arbitrator has deliberated on the issues under reference which were within his competence and as per the agreement entered into between the parties. The Arbitrator has duly explained the reasons for arriving at his decisions. There is nothing to indicate that award is in conflict with the basic notions of justice and the fair play and fundamental policy of Indian law or in contravention of the terms of the agreement or it lacks reasoning.
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38. For the aforesaid discussions, no interference is called for in the impugned award.
39. The petition is accordingly dismissed with no orders as to costs.
40. File be consigned to record room.
Announced in open court today i.e. 05.03.2022 (Sanjiv Jain) District Judge (Commercial) - 03 Patiala House Courts, New Delhi OMP Comm No. 03/2018 Western India Gunine Ghee Co. Vs. VS. UOI & Ors Page No.31 of 31