Delhi District Court
M/S Swastika Industries vs M/S National Reserach Development ... on 20 July, 2018
1
IN THE COURT OF MS VANDANA JAIN
ADDITIONAL DISTRICT JUDGE-07
SOUTH-EAST DISTRICT, SAKET COURTS
NEW DELHI
Arbt No. 20243/16
In the matter of:
M/s Swastika Industries
5/3, Clive Road, (First Floor),
Kolkata-700001 .....Petitioner
VERSUS
M/s National Reserach Development Corporation
20-22, Zamarudpur Community Center,
Kailash Colony Extension,
New Delhi-110048
.....Respondent
Date of Institution : 24.02.2014
Date of Judgment : 20.07.2018
ORDER
1 Vide this order, I shall dispose of the objection petition under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the Award dated 26.10.2013 passed by sole Arbitrator.
2 Ld counsel for petitioner has argued that the claim of the M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 1 of 15 2 respondent in the arbitration proceedings was barred by law as no notice was issued by respondent/NRDC for commencing the arbitration proceedings as required under Section 21 of the Arbitration and Conciliation Act,1963. It is further argued that any reference to the arbitration by judicial authority of an action brought before it does not absolve the party to exempt itself from following the mandatory provisions of the Arbitration and Conciliation Act.
It is further argued that claim of the respondent is barred by limitation as by receipt of notice dated 03.11.2004 issued by petitioner asking for refund of the amount paid and return of the post dated cheques, respondent knew full well that disputes have arisen between them but the arbitral proceedings have been initiated by appointing the arbitrator vide office order dated 08.02.2010 which was received by arbitrator and petitioner herein on 17.02.2010.
It is further argued that Ld Arbitrator had wrongly applied the principles embodied in the Section 14 of the Limitation Act and had not given the finding as to whether the remedy availed by the respondent by filing a suit under Order XXXVII CPC despite receipt of the Arbitration Notice of the petitioner was bonafide or not and in such circumstances giving benefit of Section 14 (1) & 14 (2) of Limitation Act is bad.
It is further argued that order referring the parties to arbitration and not to the arbitrator cannot by any stretch of imagination be construed as continuation of the suit for recovery and M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 2 of 15 3 notice requesting for reference of a dispute to the other party was mandatory which was not given in the present case and, therefore, arbitration proceedings are bad.
It was further argued that examination of the Ld Arbitrator that staff or the employees of the Government of India undertakings would not induce any party for trapping any license agreement as there is no personal monitory gain is erroneous and respondent having defaruded the petitioner, induced it to sign the license agreement.
It is further argued that facts that representations made by NRDC were incorrect and it has been admitted in the evidence of CW-2 Sh S. Dubey in his cross examination which has not been considered by Ld Arbitrator.
It is further argued that recording of the fact that NRDC vide letter dated 22.03.2004 enclosed detailed comparative test reports is contrary to the evidence of CW-2 Sh. S.P. Dubey on record.
He has also relied upon judgment DLF Universal Ltd & Anr Vs. Director Town and Country Planning Haryana and Ors (2010) 14 SCC 1 with respect to interpretation of contract. It is also argued that agreement executed between the parties was unilateral and on the basis of the standard format and there was no occasion for petitioner herein to insist upon inclusion of clause relating to the criteria for saving of gas to the extent of 15 % to 30 % compared to conventional burners in the license agreement. It is argued that M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 3 of 15 4 position of NRDC was dominant and nothing could be incorporated by the petitioner. It is further stated that judgment of Rajasthan State Industrial Development and Investment Corporation & Anr Vs Diamond and Gem Development Corporation Civil Appeal Nos 7252-7253 of 2003, DOD on 12.02.2013 is misplaced by Ld Arbitrator. It is further argued that fraud has been played upon petitioner, therefore, award dated 26.10.2013 passed by Ld Arbitrator be set aside.
Ld counsel for petitioner has relied upon judgments (i) State of Goa Vs Praveen Enterprises 2012 (12) SCC 581 wherein it was held that counter claim is also to be decided by Arbitrator, he has jurisdiction to decide all issues, in both claim as well as counter claim
(ii) K.V. George Vs Secretary, Water & Power Department 1989 (4) SCC 595 wherein it was held that order of arbitrator is not sustainable only if counter claim is not considered.
(iii) State of Orrisa Vs Orient Paper & Industries Ltd 1999 (3) SCC 566 wherein it was held that unreasoned award is liable to be set aside
(iv)State of Goa Vs. Western Builders 2006 (6) SCC 239 In this judgment the time given for filing arbitration award has been given as three months further extend able upto thirty days.
Reply to the same was filed by respondent wherein the averments made by the petitioner herein were denied. Ld counsel for respondent has specifically denied the arguments made by counsel M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 4 of 15 5 for petitioner and has stated that petitioner itself had urged before Ld ADJ in the civil suit for recovery and pleaded for arbitration which was accepted by Hon'ble Judge and, therefore, no further notice was required for the appointment of arbitrator and moving of plaint as clause 12 of the license agreement already records agreement of both the parties for appointment of Ld Arbitrator.
Ld counsel for respondent has further argued that claim is not barred by limitation. It is stated that petitioner herein had issued two post dated cheques dated 27.10.2004 & 27.03.2005 which on presentation got dishonoured and thereafter civil suit under Order XXXVII CPC was filed. Therefore, Ld Arbitrator had given benefit of Section 14 of the Limitation act excluding the period/time spent in the proceedings of civil suit. It is argued that Section 14 is well applicable to the arbitration proceedings as well. It is further argued that Ld Arbitrator had already given finding that respondent being Government Body Undertaking cannot be imputed with question of fraud or misrepresentation for personal monetary gain by trapping petitioner to sign the license agreement. It is also argued that no representation as alleged by petitioner were made by respondent herein prior to the contract. He has relied upon judgment National Highway Authority of India Vs. M/s Lanco Infratech Ltd FAO (OS) 34/2006 DOD 07.03.2014 wherein it was held that:-
"In the impugned order, the learned Single Judge, while reiterating the dicta of the Supreme Court in Oil and Natural Gas Corporation Ltd Vs. Saw Pipes Ltd, 1 held that the court, when M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 5 of 15 6 exercising jurisdiction under Section 34 of the Act, ought to not sit in appeal over the findings of the arbitral tribunal. It was reiterated that the Court ought to not reappraise evidence or facts merely because the Court could have come to a different conclusion on the basis of the material available and that short of absurdity or patent illegality, a view of the arbitral tribunal, so long as it is a plausible view, ought to not be interfered with by the Court."
It is stated that averments made by petitioner are false and frivolous and Ld Arbitrator has passed a well reasoned and legal order which requires no interference and, therefore, objections be dismissed.
I have heard the arguments and have perused the entire record carefully.
As far as the limitation for filing objection is concerned, as per Section 34 (3) of Arbitration and Conciliation Act, it is three months from the date of which the party making the application had received the arbitration award and can further be extended to the period of another thirty days on the satisfaction of the court concerned. Therefore, the total period of limitation at the maximum can be three months + thirty days. The impugned award was passed on 26.10.2013 and same was received by petitioner on Rs. 31.10.2013 and petition under Section 34 of the Act has been filed on 22.02.2014 which is within the stipulated time period after granting M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 6 of 15 7 extension which is discretionary. In order to decide the objections on merits, this court exercise its discretion and, therefore, objections are held to be within the period of limitation.
The brief facts in order to decide the present objections are that parties had entered into the license agreement dated 26.05.2004. Under this agreement respondent had licensed a new technology of manufacturing LPG burners to the petitioner herein for 10 years on the initial premium of Rs. 8,00,000/- (Eight Lacs) which was to be paid by the petitioner in three installments. One installment of Rs. 3,00,000/- (Three Lacs) was paid, however, other two post dated cheques of Rs. 2,50,000/- each were dishonoured. The petitioner has stated that he was assured by the respondent in the license agreement and other correspondence that technology would save 20 % LPG consumption and 30 % time and on being so represented it entered into the license agreement with respondent. Upon testing the same, it was found that it was consuming more gas than the conventional burner already available in the market and claims of the respondent was found to be false.
In order to decide the ground taken in the objection petition here, it is necessary to give certain dates which as follows:-
Respondent has filed a civil suit under Order XXXVII CPC claiming the amount for which two cheques were dishonoured and same was filed on 07.02.2007. On 30.08.2007, the letter was written by advocate for the petitioner herein to NRDC calling upon them to M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 7 of 15 8 appoint an Arbitrator within thirty days. Thereafter the petitioner herein moved an application u/s 8 of the Arbitration and Conciliation Act before the court where the civil suit under Order XXXVII CPC was pending which was decided in favour of the petitioner herein on 02.09.2009 and parties were directed to resort to Arbitration. In view thereof, sole Arbitrator was appointed as per clause 12 of the license agreement and notice was sent to the petitioner herein and the Arbitrator and respondent preferred his claim petition to which reply was given by the petitioner and, therefore contested the case before the Arbitrator and also filed a counter claim. Ld counsel for petitioner has argued that notice u/s 21 invoking arbitration proceedings was not given and therefore the entire arbitration proceedings before Arbitrator are null and void and impugned order is liable to be set aside in view of Section 34 (2) (iii) of Arbitration and Conciliation Act.
As far as this agreement is concerned, dates already given are very important. The license agreement was entered into between the parties on 26.05.2004, two post dated cheques were dishonoured on 26.11.2004 & 26.05.2005 respectively. The recovery suit could have been filed within three years, though recovery suit was filed for claiming the amount for which the cheques were dishonoured but it was filed in February 2007, even before expiry of three years from the date of entering into license agreement which is very base or the foundation of the cause of action. The application u/s 8 of Arbitration and Conciliation Act was moved referring the parties to Arbitration, however, at that time petitioner herein did not make any plea with M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 8 of 15 9 respect to claim being barred by limitation. Application under Section 8 of the Act was contested/opposed by respondent NRDC stating that this dispute does not fall within the purview of arbitration clause, however, the then court decided Section 8 of the Act in favour of the petitioner herein and refer the parties to arbitration.
Clause 12 of the license agreement provides as under:-
Arbitration and Jurisdiction A (I) If any dispute or difference arises between the parties hereto as to the construction, interpretation, effect and implication of any provision of this License including the rights or liabilities or any claim or demand of any party against other or in regard to any other matter under these presents but excluding any matters, decisions or determination of which is expressly provided for in this license such disputes or differences shall be referred to the Sol Arbitration of the Secretary of the Administrative Ministry of the Licensor Company or that of his nominee. A reference to the Arbitration under this clause 12(A) shall be deemed to be submission within the meaning of the Arbiration and Conciliation Act 1996 and the rules framed thereunder for the time M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 9 of 15 10 being in force.
(ii) If however, the Licensee does not make any claim or demand or raise any dispute or difference in terms of subclause (I) of this clause 12 within one year from the date on which such claim or demand arises, the Licensee shall deem to have waived and abandoned such claim or demand or the right to raise such dispute or difference against the Licensor.
(iii) a) the venue of the arbitration shall be at Delhi
b) The parties hereby agree to consent to the extension of time for making the award by the Sole Arbitrator, if the Sole Arbitrator so requests.
c) Each party shall bear and pay its own cost of the arbitration proceedings unless the Arbitrator otherwise decides in the award.
d) The provisions of this clause 12 (A) shall not be frustrated, abrogated or become inoperative, notwithstanding this Licence expires or ceases to exist or is terminated or revoked or declared unalwful.
B) The High Court of Delhi and Courts M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 10 of 15 11 subordinate to it shall have exclusive jurisdiction in all matters concerning this License including any matter arising out of the Arbitration Proceedings or any Award made therein.
As far as clause 12 is concerned, Ministry referred the dispute to the Ld Arbitrator and petitioner herein duly filed its reply before Ld Arbitrator along with his counter claim. Therefore, saying that no notice of arbitration/reference to arbitration was sent to the petitioner herein is completely misconceived and it cannot be said that provision of Section 21 of the Act have not been complied with. Since the dispute was referred to arbitration only at the pursuance of petitioner herein. Therefore, now this plea cannot be raised that notice of reference of arbitration was not sent to it. The notice u/s 21 is required to be sent to opposite party when it has no knowledge that the other party is going to raise its claim before Arbitrator but here it was the petitioner who urged before the court of the Ld ADJ that the dispute can be decided by Arbitrator only in view of clause 12 of the license agreement. The copy of plaint/substance of dispute was already know to the petitioner. Ld Arbitrator has very well dealt with the contention of the petitioner and, therefore, same calls for no interference as there is no perversity in the findings of the Ld Arbitrator. The contention of counsel for petitioner is turned down.
The second contention is with respect to giving benefit of Section 14 (1) & 14 (2) of the Limitation Act to the respondent. In this M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 11 of 15 12 regard the finding given above assumes importance. Respondent had filed a civil suit before Ld ADJ bonafidely and immediately after deciding Section 8 petition, the reference was made and notice to sole arbitrator was served on 17.02.2010. It is pertinent to mention here that letter issued on behalf of the petitioner herein by their advocate on 30.08.2007 claiming upon NRDC to appoint Arbitrator was much later in time than the date of filing of civil suit in the court by NRDC which was in February 2007. Therefore, there is no delay in referring the dispute to Arbitrator. Section 14 of the Limitation Act is very clear and excludes the period which has been taken by the party in contesting its case before appropriate forum in its best wisdom and for the reasons stated above the period i.e. 07.02.2207 till 02.09.2009 has to be excluded for counting the period of limitation from the date when the cause of action has arisen.
Ld counsel has argued that Section 14 of the Limitation Act is not applicable to Arbitration proceedings. In the own judgment State of Goa Vs Western Builders 2006 (6) SCC 239 relied upon by petitioner it is held that "Therefore, in the present context also it is very clear to us that there are no two opinions in the matter that the Arbitration and Conciliation Act, 1996 does not expressly exclude the applicability of Section 14 of the Limitation Act. The prohibitory provision has to be construed strictly. It is true that the Arbitration and Conciliation Act, 1996 M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 12 of 15 13 intended to expedite commercial issues expeditiously. It is also clear in the Statement of Objects and reasons that in order to recognize economic reforms the settlement of both domestic and international commercial disputes should be disposed of quickly so that country's economic progress be expedited. The Statement of Objects and Reasons also nowhere indicates that Section 14 of the Limitation Act shall be excluded. But on the contrary, intendment of the legislature is apparent in the present case as Section 43 of the Arbitration and Conciliation Act, 1996 applied the Limitation Act, 1963 as a whole. It is only by virtue of subsection (2) of Section 29 of the Limitation Act that its operation is excluded to that extent of the area which is covered under the Arbitration and Conciliation Act, 1996. Our attention was also invited to the various decisions of this court interpreting subsection (2) of Section 29 of the Limitation Act with reference to other Acts like the Representation of the People Act or the provisions of the Criminal Procedure Code where separate period of limitation has been prescribed. We need not overburden the judgment with reference to those cases because it is very clear to us by virtue of sub section (2) of Section 29 of the Limitation Act that the provisions of the Limitation Act shall stand M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 13 of 15 14 excluded in the Act of 1996 to the extent of area which is covered by the Act of 1996. In the present case under Section 34 by virtue of subsection (3) only the application for filing and setting aside the award a period has been prescribed as 3 months and delay can be condoned to the extent of 30 days. To this extent the applicability of Section 5 of the Limitation Act will stand excluded but there is no provision in the Act of 1996 which excludes operation of Section 14 of the Limitation Act. If two Acts can be read harmoniously without doing violation to the words used therein, then there is no prohibition in doing so.
The next objection is with respect to counter claim. The counter claim has been considered by Ld Arbitrator and after giving findings the same was declined. As far as judgment of petitioner State of Goa Vs Praveen Enterprises (Supra) & K.V. George (Supra) are concerned, Ld Arbitrator has himself dealt with this point and has mentioned that he is competent to deal with the counter claim and had accordingly dealt with the same extensively and has given his findings by passing the award and has categorically stated that claims made in the counter claim are not found. Therefore, judgment relied upon by petitioner i.e. State of Goa (Supra) & K.V. George (Supra) are not applicable to the case in hand.
M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 14 of 15 15 Even though none of the arguments set forth by counsel for petitioner had fallen within the ambit of the Section 34 of the Arbitration and Conciliation Act, however, in order to clarify the same, same has been taken up and decided above. The other grounds taken by the petitioner requires re-appreciation of evidence which is not allowed u/s 34 of the Arbitration and Conciliation Act. Ld counsel for petitioner has relied upon State of Orrisa (Supra). This judgment says that where Arbitrator has not applied its mind, award is liable to be set aside. However, in the instant case each and every aspect has been dealt with by the Ld Arbitrator comprehensively. Therefore, this judgment is not applicable to facts. However, ratio of this judgment is not disputed.
Ld Arbitrator has passed the well reasoned and legal order which does not suffer from any perversity. Objections are not maintainable and hence dismissed. Digitally signed by File be consigned to Record Room. VANDANA VANDANA JAIN JAIN Date:
2018.07.21 14:42:04 +0530 Announced in the open ( VANDANA JAIN) court on 20.07.2018 Additional District Judge-07 South-East, Saket Courts, New Delhi.
M/s Swastika Industries Vs. M/s National Research Development Corporation Page no. 15 of 15