Delhi District Court
Also At; vs M/S. Chhikara Oil Carrier on 9 June, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 73/2020
Indian Oil Corporation Ltd.
Through Sh. B.C. Joshi, General Manager (Operations)
World Trade Centre,
Babar Road, New Delhi-110001
(SMITA@INDIAN OIL.IN)
Also At;
G-9, Ali Yavar Jung Marg,
Bandra (E), Mumbai-400051 ...Petitioner
versus
M/s. Chhikara Oil Carrier
Through its Proprietor
H. No. 372, Village & Post Office Jounti
New Delhi-110081
([email protected]) ...Respondent
Date of Institution : 19/09/2020
Arguments concluded on : 23/05/2022
Decided on : 09/06/2022
Appearances : Ms. Savita Rustogi, Ld. Counsel for petitioner.
Sh. Swastik Singh, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner had filed the present petition/objections under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), seeking setting aside of the impugned arbitral award dated 23/12/2019 passed by Ld. Sole Arbitrator Sh. Dinesh Dayal, Additional District Judge (Retired) in case Ref. No. DAC/1892/01-18 titled 'M/s Chhikara Oil Carrier vs Indian Oil Corporation Ltd'. Ld. Sole Arbitrator in the impugned OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 1 of 30 award had (i) set aside the orders dated 23/10/2017 and 24/10/2017 passed by present petitioner of blacklisting of the 7 Tanker Trucks (in short TTs) of the respondent/claimant; (ii) awarded Rs 9,44,000/- with interest @ 12% from 25/10/2017 till realization with costs in favour of respondent/claimant payable by present petitioner.
2. I have heard Ms. Savita Rustogi, Ld. Counsel for petitioner; Sh. Swastik Singh, Ld. Counsel for respondent and perused the record of the case including reply, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of parties and given my thoughtful consideration to the rival contentions put forth.
3. Following is the brief factual matrix of relevant facts of the case of parties. Respondent/claimant entered into a transportation contract for MS/HSD. The work order dated 11/01/2017 was awarded to respondent/claimant with respect to 9 trucks. Petitioner received complaints through emails regarding pilferage of petroleum products from 4 TTs belonging to the respondent/ claimant. Said complaints were accompanied with video of the TTs showing pilferage of oil and removables of fittings from the TTs. Petitioner then set up a committee of three members to investigate the complaints. Said committee found complaints to be genuine and established. Petitioner then issued show cause notices to respondent/claimant and after perusing the reply filed by respondent/claimant and hearing, respondent/claimant personally blacklisted 7 TTs of the claimant/respondent and imposed a penalty of Rs. 8,00,000/-. Respondent/claimant had OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 2 of 30 challenged the penalties imposed and raised following claims against present petitioner:-
"A. Set aside the other dated 23.10.2017 & 24.10.2017 passed by the Respondent, thereby reinstating the blacklisted Tanker Trucks in consonance with the work order / letter of intent and as per the contract entered into between the parties. B. Award amount of Rs. 9,44,000/- along with interest calculated at 18% from 25.10.2017 till the date of realization, in favour of the petitioner.
C. Cost for litigation, to be paid by the Respondent to the petitioner."
Impugned arbitral award records that by order dated 12/01/2018 in ARB.P No. 690/2017, Hon'ble Mr. Justice Yogesh Khanna of Delhi High Court terminated the mandate of earlier arbitrator appointed by petitioner and referred the disputes to arbitration and directed that arbitration shall be conducted according to the Rules of Delhi High Court Arbitration Centre (in short the Centre). The Centre was directed to appoint the arbitrator in the matter. Ld. Sole Arbitrator was appointed by DIAC vide letter dated 23/07/2018 received on 02/08/2018 by Ld. Sole Arbitrator. With respect to above said claims of the respondent/claimant, petitioner alleged before Ld. Sole Arbitrator that action was taken against the respondent/claimant after proper investigation on the basis of video recordings, VTS report and statements of the crew of the trucks. Impugned arbitral award also records that parties to arbitration had agreed that issues shall be as per claims. Arbitral proceedings culminated in the impugned arbitral award.
4. Petitioner has impugned the arbitral award mainly on the following grounds. Respondent/claimant has not come to Arbitral Forum with clean hands and willfully suppressed the fact that he OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 3 of 30 was not provided with the videos and photographs on basis of which action was taken. Ld. Sole Arbitrator wrongly held that no notice of investigation was given to respondent/claimant. Due notice was given to the respondent/claimant but respondent/ claimant did not appear personally but his crew members were present and their statements were recorded during investigation. Ld. Sole Arbitrator completely ignored the facts on the record, the statement of the driver, cleaner and the members of the crew whereas their signatures were filed on record and it was also established from their photographs of the TTs. Respondent had provided details of his employees along with photographs and signatures which were filed by petitioner before Ld. Sole Arbitrator which clearly established the identity of the members of the crew and their signatures. Ld. Sole Arbitrator failed to appreciate the documentary evidence showing the pilferage by photographs as well as photographs of the crew members clearly established the malpractices. Respondent had not produced the members of the crew whose confessional statements were recorded before the Investigating Officer and made false allegation that the video produced by the petitioner before Ld. Sole Arbitrator were not correct. It was for the respondent/ claimant to prove that the statements recorded were wrong. Respondent had not produced the members of the crew and not got the video examined from any Forensic Laboratory. Ld. Sole Arbitrator ignored the fact that respondent was provided the Google Link and photographs submitted by the complainant along with the complaint vide email dated 11/09/2017 and ought to have held that there was ample opportunity for the respondent/claimant to get the same examined from the Forensic OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 4 of 30 Laboratory. It is not for the petitioner to examine the witnesses which are available to the respondent/claimant and they were the employees of the respondent. Even a question was put to the proprietor of the respondent/claimant as to where were his employees and in response thereto respondent/claimant replied that he was not aware about the whereabout of his employees. Ld. Sole Arbitrator had erroneously held that there was no independent witness in view of the confessional statement and the photographs and CD. From perusal of documents on record it was clear that the crew members of the respondent/claimant had indulged in malpractices and so, Ld. Sole Arbitrator wrongly held that the inquiry was not properly conducted. Ld. Sole Arbitrator wrongly held that inquiry was held without notice to the respondent/claimant and was against the principles laid down in Industry Transport Discipline Guidelines (in short ITDG). Ld. Sole Arbitrator wrongly held that no irregularity was detected in any of the TT. The date of incident was clearly mentioned in the complaint and was also mentioned in the show cause notice with respect to TT No. 6369. The entire approach of Ld. Sole Arbitrator was contrary to law. In view of the malpractices, it was not necessary to prove that there was a loss. Petitioner had acted in accordance with the guidelines as well as in terms of the contract entered between the parties and in the course of investigation by the committee, it was revealed that the datum plates in each compartment of the TT in question were not of the thickness as prescribed in calibration chart. Respondent/claimant had not led any evidence with regard to said malpractices and failed to produce the witnesses himself and did not challenge the veracity of the photographs which clearly established the OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 5 of 30 malpractice. The award passed by Ld. Sole Arbitrator is contrary to settled law and contrary to documents filed on record. Ld. Sole Arbitrator wrongly held that there is no proof that any loss has been caused to the petitioner. The action was taken by petitioner for the malpractices of respondent/claimant which were proved beyond doubt and such award is liable to be set aside. Ld. Sole Arbitrator ignored the contention of petitioner that under ITDG proof of short delivery is not a pre-condition for taking action against the pilferage. Ld. Sole Arbitrator also ignored the fact that under ITDG there are separate penalties for short delivery and pilferage. Ld. Sole Arbitrator completely ignored the documents and evidence filed on record and decided the matter on conjectures, contrary to law. It was for the claimant/ respondent to prove before Ld. Sole Arbitrator that the statements made by its employees were wrong. It was not for the petitioner to prove the case of the claimant/respondent by bringing the drivers to show that they had made the statements. Petitioner had filed the statements of confessions made by the crew members of the claimant/respondent who had indulged in the malpractices. Respondent/claimant never denied the factum of holding of inquiry. Respondent/claimant did not challenge the enquiry even in reply to show cause notice. The findings of Ld. Sole Arbitrator are contrary to documentary evidence, produced video recording and the photographs and the statements made by the crew members; so award is liable to be set aside. The entire approach of Ld. Sole Arbitrator is perverse is not sustainable under law. Ld. Sole Arbitrator ignored the committee report which was formed by petitioner. Investigation was conducted as per guidelines and following the principles of natural justice and the OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 6 of 30 report was submitted along with all documents on record. Impugned award is contrary to law and is liable to be set aside. Petitioner never agreed to pay interest and is not liable to pay any interest. Even otherwise the rate of interest awarded by Ld. Sole Arbitrator is also on the higher side on the prevailing rate of interest. The amount awarded is not payable to claimant/ respondent as respondent/claimant had committed serious malpractices. Petitioner through Ld. Counsel prayed for setting aside of the impugned arbitral award.
5. In the filed reply, it was averred by respondent and was so argued by Ld. Counsel for respondent/claimant that filed petition is time barred having been filed beyond the period of limitation and even no application was filed for condonation of delay and petition deserves dismissal. Also was argued that the scope of challenge to an arbitral award under the Act was extremely narrow, in terms of Section 34 of the Act. It was also argued that the basic issue before Ld. Sole Arbitrator was whether the order of blacklisting passed by the petitioner was legally correct or not. Ld. Sole Arbitrator had rightly held that order of blacklisting passed by petitioner was in violation to the ITD Guidelines. It was also argued that notwithstanding the legal objections to the petition under Section 34 of the Act; even on merits award passed by Ld. Sole Arbitrator was sound and sustainable. It was also argued that ITDG 2.2.6 stipulated that the security locking arrangements were to be provided by the Oil Company in order to ensure the absolute/complete safety of the quality and quantity of the product being transported from one place to another; therefore, there could have been no tampering at the end of OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 7 of 30 respondent/claimant. It was also argued that in terms of ITDG 2.2.7, the system to VMU was to be maintained by the Oil Company and that the same can be turned 'Off or On' only at the discretion of the Oil Company; whereas in the case in hand, it was the case of petitioner that it did not receive any information of the alleged misconduct from any VMU but relied its whole case upon the complaints received from an unknown third party. It was also argued by Ld. Counsel for respondent that in terms of ITDG 3.3.2, the carrier was to ensure that the trip time and the VDS route specified for the destination were strictly adhered to; whereas in the case in hand there was no deviations found from the alleged VDS route filed by the petitioner. It was also argued that in case of any irregularity, ITDG 4.2 provided the procedure to be followed by the Oil Company; according to which the Sales Officer needs to be informed of such irregularity and the TT shall be detained; also sample needs to be drawn in terms of ITDG 4.3 for the suspected irregularity and a joint statement needs to be prepared mentioning the compartment wise observed density and the same is to be signed by the Loading Location Officer, TT crew representatives, consignee's representatives and inspecting authority. It was also argued by Ld. Counsel for respondent that bare perusal of the record reveals that nothing of the sort above said was done by the petitioner and so petitioner illegally blacklisted the respondent/claimant. It was also argued by Ld. Counsel for respondent that in terms of Clause 8 of ITDG, the procedure to be followed in case a TT is caught having indulged in adulteration, malpractices and irregularity, the TT is to be immediately suspended by the Location Incharge and thereafter the investigation is to be carried out as per the procedure laid OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 8 of 30 down by the company. Ld. Counsel for respondent argued that no action accordingly was taken by the petitioner showing that there was no irregularity in the first place and the order of blacklisting was malafide. It was argued by Ld. Counsel for respondent that the backbone of the stand taken by petitioner is in the investigation report dated 4/5.09.2017 which does not inspire confidence as (A) it is dated 4th as well as 5th September, 2019; whereas even if investigation is carried on for two days; report could not have been dated for two days; (B) bare perusal of the investigation report reveals that it was done in the absence of the claimant; as is also verified in cross examination of RW1; (C) investigation was sham, as is borne out from order dated 16/10/2017, wherein there is not even a whisper of the said alleged investigation showing that said report was prepared later; (D) the entire case of the petitioner is based upon video evidence and photographs showing the alleged irregularities. Said videos and photographs cannot be relied upon for the benefit of petitioner as (i) said evidence is not accompanied with the affidavit under Section 65-B of The Indian Evidence Act, 1872 (in short IEA); (ii) there is no authenticity of the said evidence;
(iii) said evidence has not been verified by any forensic and could be doctored, fabricated or forged; (iv) the person allegedly providing the said evidence was not examined at any level; (v) said evidence is entirely undated; (E) petitioner had relied upon a halt in route of TT number 3606, however respondent/claimant had explained that the said halt was due to traffic in his evidence, whereas witness of petitioner in his cross examination admitted that no inquiry was done to find out if there was any traffic jam on the route of TT No. 3606; (F) alleged statement of TT crew OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 9 of 30 cannot be relied upon because (i) they did not sign on the investigation report; (ii) the signatures of the said crew cannot be identified, in view of the fact that there was no proof of their identity, whereas respondent/claimant had categorically denied the signatures of the crew. Ld. Counsel for respondent/claimant also argued that petitioner neither followed the procedure while investigating on the alleged complaints received through email; further, there was no record, mandatorily maintained as per ITDG, which would substantiate said contention. It was also argued by Ld. Counsel for respondent that therefore, the impugned blacklisting order was illegal, liable to be set aside, whereas impugned award is correct and in accordance with law. Ld. Counsel for respondent/claimant prayed for dismissal of the petition relying upon following precedents:-
1. Hans Enterprises vs Airport Authority of India, MANU/DE/0489/2003;
2. McDermott International Inc. vs Burn Standard Co. Ltd.
& Ors., MANU/SC/8177/2006;
3. Delhi Development Authority vs Sahdev Brothers & Ors., MANU/DE/0269/2002;
4. Haryana State Electricity Board vs Sunil Engineering Works, MANU/PH/0003/1998;
5. Devika Mehra vs Ameeta Mehra, MANU/DE/1035/2004;
6. Ld. Counsel for petitioner argued in terms of the grounds for impugning the arbitral award. It was argued that bare perusal of the photographs, Compact Disk (in short CD) filed by petitioner before Ld. Sole Arbitrator as well as consignment tracking route from consigner to consignee of documents of TTs of respondent/ claimant established that crew of TTs of respondent/claimant had unauthorizedly stopped TTs of the respondent/claimant enroute where staff of TTs have stolen the goods being moved in their respective TTs. It was also argued by Ld. Counsel for petitioner OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 10 of 30 that confessional statements of staff of the respondent/claimant established on record that respondent/claimant was guilty of flouting ITDG and accordingly action taken by the petitioner of blacklisting TTs of the claimant/respondent and imposition of penalty on the claimant/respondent was in accordance with ITDG. It was also argued by Ld. Counsel for petitioner that it was for the claimant/respondent to produce his crew members as his witnesses in his defence to rebut evidence put forth by petitioner but claimant/respondent chose not to do so; whereas instead respondent/claimant levelled allegations of video to be editable and lot of addition, deletion, alteration and tampering can be done in the same. It was also argued by Ld. Counsel for petitioner that IEA does not apply to the arbitration proceedings and only the general principles of the evidence will apply. It was also argued by Ld. Counsel for petitioner that Ld. Sole Arbitrator being the creature of the contract had to decide the disputes within four corners of the agreements. Ld. Counsel for petitioner also argued that Ld. Sole Arbitrator had set aside the action taken by the petitioner only on the premise that no notice was served on the respondent/claimant without appreciating that notice was served on the respondent/claimant and pursuant thereto only, the proprietor of the respondent/claimant chose not to join the inquiry but almost all his crew members were present who gave confessional statements to the petitioner. It was also argued by Ld. Counsel for the petitioner that the proprietor of the respondent/claimant had stated in his evidence that he was given video footage on basis of which complaint was lodged against the respondent/claimant. It was also argued by Ld. Counsel for petitioner that impugned arbitral award is in conflict with the OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 11 of 30 public policy of India and disputes were decided by going beyond the terms of the agreement and the award was patently illegal, is opposed to justice, morality and public policy, as well as guidelines laid by petitioner and accepted by the other parties.
Ld. Counsel for the petitioner relied upon the following precedents:-
1. Oil & Natural Gas Corporation Ltd. vs SAW Pipes Ltd., (2003) 5 SCC 705;
2. Associate Builders vs Delhi Development Authority, Civil Appeal No. 10531 of 2014 (Arising out of SLP (Civil) No. 14767 of 2012) decided by Supreme Court on 25/11/2014.
3. Millennium School vs Pawan Dawar, O.M.P. (Comm) 590/2020 decided by Delhi High Court on 10/05/2022.
7. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
8. Supreme Court in Suo Moto Writ Petition (Civil) no. 3 of 2020, In Re: Cognizance For Extension Of Limitation vide order dated 10/01/2022 has excluded the period from 15/03/2020 till 28/02/2022 for computing the period of limitation for any suit, appeal, application or proceedings and the petition under OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 12 of 30 Section 34 of The Act is also eligible for the same. Accordingly, the present petition filed on 19/09/2020 is within the period of limitation
9. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"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;
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 OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 13 of 30
(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 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- 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.
(2A) 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.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
10. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 14 of 30 when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. 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.
Also was held therein that:
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award....
Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
11. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", 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 decision 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. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 15 of 3012. Relevant clauses of Oil Industry Transport Discipline Guidelines (in short ITDG) read as under:-
"2.2 Fitness of Tank Lorry ........................................................................................................ 2.2.6 Carrier as per the design given by the Oil Company from time to time shall provide the product sealing/security locking/electronic sealing arrangements (security locking system) as advised by Oil Company from time to time. The transporter to ensure that, the integrity of the locking arrangements is maintained against any tampering at all the times.
2.2.7 Carrier shall ensure that the Vehicle Mounted Unit (VMU) along with fittings & fixtures installed on the TT for tracking of the TT is kept always in working condition and its on/off operation is done according to the instruction given by the Oil Company.
........................................................................................................... 3.1 Quality Control ........................................................................................................... 3.3.1 The departure time from the loading location shall be recorded on the invoice/stock transfer document itself by the loading location and the dealer/direct customer/ receiving location shall record the arrival and departure time of the TT on the same document.
3.3.2 Carrier shall ensure that the trip time and the VTS route specified for the destination are strictly adhered to. .......................................................................................................... 8.0 ADULTERATION/MALPRACTICES/IRREGULARITIES/ PENALTIES TT caught for having indulged in adulteration/malpractices irregularities shall be immediately suspended by the location-in-charge. However, an investigation shall be conducted as per the laid down procedure of the company. On investigation, if the adulteration/malpractice/irregularities is established then penal actions stipulated as under shall be taken."
13. In case of any irregularity, ITDG 4.2 provided the procedure to be followed by the Oil Company. According to the laid down procedure, the sales Officer needs to be informed of such irregularity and the TT shall be detained. Further, sample needs to be drawn according to ITDG 4.3 for the suspected irregularity OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 16 of 30 and a joint statement needs to be prepared mentioning the compartment wise observed density/result of the marker test/status of the security locking system and the same shall be signed by the loading location officer, TT crew/carrier's representatives, consignee's representatives and inspecting authority.
14. Impugned arbitral award was passed by Ld. Sole Arbitrator fully appreciating the material, documents, evidences led before the Arbitral Tribunal and in accordance with the agreement of parties to arbitration and applicable ITDG. Ld. Sole Arbitrator appreciated that contract inter se parties to the arbitration was to be executed on the basis of ITDG Ex CW1/2. Said ITDG provided that the carrier shall provide security locking system as advised by the company from time to time. The transporter had to ensure that the integrity of the locking arrangements is maintained against any tempering at all the times. Before Ld. Sole Arbitrator, witness RW1 of petitioner admitted that TTs were fitted with security locks of Godrej or Abloy and there is no allegation that any of the TTs of the claimant/respondent was ever found with any tempered security locking system or with any spurious fittings whereas evidence showed that there was a daily check and quarterly check of all TTs. No tampering with security systems or spurious fittings was ever found on the TTs of the respondent/claimant. Petitioner had not shown how it was possible to commit theft/pilferage from the TTs without tempering with the security system. It was opined by Ld. Sole Arbitrator that if it is admitted that such pilferage is possible, the entire purpose of the security system is defeated. Ld. Sole OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 17 of 30 Arbitrator also appreciated the factum of incidents of alleged theft/pilferage happened days before the enquiry was held and it was not shown that any shortage was detected when the delivery was made after the theft. It is finding of Ld. Sole Arbitrator that it is incomprehensible that there would be no shortage even after some oil has been stolen. All TTs were checked at the time of loading and unloading. Measured quantities are given for supply and the customer measures the quantity which he received. No customer would accept short supply because he has to pay for the quantity received. Had there been any shortage it would have been reported by the customer. Had there been any tempering with the security locking system it would have been detected. Had there been any spurious fittings they would have been detected. Ld. Sole Arbitrator gave the finding that the allegations of pilferage stand disproved by the absence of any reported shortage, absence of tempering with the security systems and absence of any spurious fittings; which is a finding of fact on the basis of evidence led before Arbitral Tribunal and the conclusive finding of Ld. Sole Arbitrator was that there was no evidence of pilferage or theft with the inquiry committee; so inquiry report Ex RW1/4 cannot be upheld. Ld. Sole Arbitrator appreciated the evidence of witness of petitioner namely RW1 and held that during cross examination RW1 had stated that they had asked the Terminal Manager, Bijwasan to call the claimant for investigation and Terminal Manager had informed the claimant on telephone, whereas on the record of Arbitral Tribunal there was no evidence to show that the claimant was given any notice of investigation. It is accordingly finding of Ld. Sole Arbitrator that in the absence of any evidence put on record and proved by the petitioner in OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 18 of 30 arbitral proceedings; the inquiry held by petitioner was without notice to claimant and per contra to the principles laid down in afore elicited ITDG and also in clause 4.2 of the ITDG elicited above. Ld. Sole Arbitrator also gave the finding that the important requirement provided in the procedure in ITDG, above elicited was in ITDG 4.2 for dealing with suspected irregularities i.e., TT had to be retained at the spot where irregularity is detected; joint inspection had to be done at that spot; was not followed in the case in hand. Neither any joint inspection was done at the spot nor any irregularity was detected in any of the TTs of the claimant at the time of inquiry whereas the entire investigation report of the petitioner is based on unverified photographs or video or the alleged statements of the crew. Ld. Sole Arbitrator in para no. 19 onwards of the impugned award appreciated the investigation report Ex RW4/1 and the alleged statements of the crew and had reached the finding that the allegations of pilferage stand disproved, as detailed herein above. Ld. Sole Arbitrator also opined that giving of an opportunity of hearing to respondent/claimant after the inquiry cannot validate the inquiry which was held without notice to the claimant. Ld. Sole Arbitrator also appreciated the case of M/s Parihar Filling Station vs Indian Oil Corporation Ltd. & Ors; Indian Kanoon doc/96121371 relied upon by Ld. Counsel for petitioner before Arbitral Tribunal and observed that in said case the inquiry was held in the presence of carrier and irregularities were found in the TT and said case is of no help to the petitioner as the facts of said case are different and distinguishable to the facts of the case in hand. Edifice was raised by the petitioner, firstly for holding inquiry; thereafter by issue of show cause notices to respondent/ OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 19 of 30 claimant on the premise of receipt of some videos attached with email sent by anonymous person. Sender of email or videos attached with email and down loaded with google link was not examined before inquiry committee or before Arbitral Tribunal by the petitioner. Genuineness, authenticity of those videos was not above board. Every likelihood, possibility exists for tempering in electronic record evidence. It was even so accepted by the legislature when in its wisdom it introduced Section 65-B by Act 21 of 2000 in IEA for admissibility of electronic records to take all safe guards as a matter of abundant precaution for genuineness and reliability of electronic record evidence. True that in terms of Section 1 of the IEA, it is not applicable to proceedings before an Arbitrator, as was held in the case of Millennium School vs Pawan Dawar (supra). It is also true that as per Section 19 of the Act, Arbitral Tribunal is inter alia not bound by the IEA. Fact remains that eyes cannot be shut by Arbitral Tribunal to not to check the genuineness or reliability of any electronic record evidence susceptible to tempering or manipulated by vested interests against parties concerned for own illegal benefits. Author of electronic record evidence put before Arbitral Tribunal was not examined by the petitioner in arbitral proceedings. It was the case of petitioner of having received email containing attachments of certain videos which were down loaded through google drive; regarding pilferage/theft of oil from TTs. Also inquiry was conducted under the aegis of petitioner company only and the inquiry committee recorded the statements of alleged crew members of carrier i.e., respondent/ claimant in the absence of respondent/claimant who was not given any written notice to join the said inquiry. It was own duty OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 20 of 30 of petitioner to produce the relevant evidence i.e., (i) author/ sender of email and said videos about pilferage of oil; (ii) crew members whose statements were recorded in inquiry, aforesaid, under the aegis of petitioner; which evidence could be produced by the petitioner and was not produced before Arbitral Tribunal and would, if produced be unfavorable to petitioner who withheld it. Accordingly, said facet can be safely presumed. Electronic record evidence suspectable to tempering, manipulation was required to be relied upon with great caution and circumspection. No fault can be found with the findings of Ld. Sole Arbitrator accordingly.
15. Section 31 (7) and (8) of the Act read as under:-
"31. Form and contents of arbitral award.--. ........................................................................ (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.
Explanation.- The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978).
(8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31A"
16. In the case of Ashi Limited vs Union of India, O.M.P. 200/2015 decided by Delhi High Court on 19/05/2020, Hon'ble Ms. Justice Jyoti Singh had also appreciated law laid by Supreme Court in the case of Sree Kamatchi Amman Constructions vs The Divisional Railway Manager (Works) OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 21 of 30 Palghat & Ors. MANU/SC/0625/2010 and inter alia held as follows:
"54. In so far as the grant of interest by an Arbitrator is concerned, the law is no longer res integra, Section 31(7)(a) of the Act clearly stipulates that unless otherwise agreed by the parties, where the Award is for payment of money, the Tribunal may grant such rate as it deems reasonable, on the whole or any part of the money and for the whole or any part of the period between the date of cause of action and the date of the Award. In the case of Jaiprakash Associates Ltd. (Jal) v. Tehri Hydro Development Corporation India Ltd., MANU/SC/0157/2019, the Supreme Court after noticing the provisions of the 1996 Act and various judgments on the issue of interest, more particularly, the recent judgment in the case of Reliance Cellulose Products Ltd. v. ONGC Ltd., MANU/SC/0777/2018: (2018) 9 SCC 266, summed up the law on interest as under:
"13. Insofar as power of the arbitral tribunal in granting pre- preference and/or pendente lite interest is concerned, the principles which can be deducted from the various judgments are summed up below:
(a) A Constitution Bench judgment of this Court in the case of Secretary, Irrigation Department, Government of Orissa vs G.C. Roy exhaustively dealt with this very issue, namely, power of the arbitral tribunal to grant pre-
reference and pendente lite interest. The Constitution Bench, of course, construed the provision of the 1940 Act which Act was in vogue at that time. At the same time, the Constitution Bench also considered the principle for grant of interest applying the common law principles. It held that under the general law, the arbitrator is empowered to award interest for the pre- reference, pendente lite or post award period. This proposition was culled out with the following reasoning:
"43 The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 22 of 30 name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point).
All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas [Seth Thawardas Pherumal v.
Union of India, MANU/SC/0070/1955 : (1955) 2 SCR 48: AIR 1955 SC 468] has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case [MANU/SC/ 0004/ 1987: (1988) 1 SCC 418: (1988) 1 SCR 253] almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 23 of 30 feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred."
It is clear from the above that the Court decided to fall back on general principle that a person who is deprived of the use of money to which he is legitimately entitled to, has a right to be compensated for the deprivation and, therefore, such compensation may be called interest compensation or damages.
(b) As a sequitur, the arbitrator would be within his jurisdiction to award pre-reference or pendente lite interest even if agreement between the parties was silent as to whether interest is to be awarded or not.
(c) Conversely, if the agreement between the parties specifically prohibits grant of interest, the arbitrator cannot award pendente lite interest in such cases. This proposition is predicated on the principles that an arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement. This position was made amply clear in G.C Roy case in the discussion thereafter:
"44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 24 of 30 ends of justice in view."
(d) Insofar as 1940 Act is concerned, it was silent about the jurisdiction of the arbitrator in awarding pendente lite interest. However, there is a significant departure on this aspect insofar as 1996 Act is concerned. This distinction has been spelt out in Sayeed Ahmed case in the following manner:
"Re: Interest from the date of cause of action to date of award
7. The issue regarding interest as noticed above revolves around Clause G1.09 of the Technical Provisions forming part of the contract extracted below:
"G. 1.09. No claim for interest or damages will be entertained by the Government with respect to any money or balance which may be lying with the Government or any become due owing to any dispute, difference or misunderstanding between the Engineer-in- Charge on the one hand and the contractor on the other hand or with respect to any delay on the part of the Engineer-in-Charge in making periodical or final payment or any other respect whatsoever."
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14. The decisions of this Court with reference to the awards under the old Arbitration Act making a distinction between the pre-reference period and pendente lite period and the observation therein that the arbitrator has the discretion to award interest during pendente lite period in spite of any bar against interest contained in the contract between the parties are not applicable to arbitrations governed by the Arbitration and Conciliation Act, 1996."
............................................................................
56. In the case of Union of India v. Bright Power Projects (India) (P) Ltd., MANU/SC/0712/2015 : (2015) 9 SCC 695, Supreme Court held that when agreement between the parties bars interest on the amounts from cause of action to the date of the Award, the Arbitrator is bound by it and cannot award interest as Section 31 (7)(a) clearly begins with the words 'unless otherwise agreed by parties'.
57. In State of Haryana v. S.L Arora & Co., MANU/SC/ OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 25 of 30 0131/2010 : (2010) 3 SCC 690, Supreme Court has held that it is not open to the courts to interfere in the discretion exercised by an Arbitrator in granting the rate of interest. This is purely the domain, power and prerogative of the Arbitrator. Relevant part of the judgment reads as under:-
"23. The difference between clauses (a) and (b) of Section 31(7) of the Act may conveniently be noted at this stage. They are:
(i) Clause (a) relates to pre-award period and clause
(b) relates to post-award period. The contract binds and prevails in regard to interest during the pre-award period. The contract has no application in regard to interest during the post-award period.
(ii) Clause (a) gives discretion to the Arbitral Tribunal in regard to the rate, the period, the quantum (principal which is to be subjected to interest) when awarding interest. But such discretion is always subject to the contract between the parties. Clause (b) also gives discretion to the Arbitral Tribunal to award interest for the post-award period but that discretion is not subject to any contract; and if that discretion is not exercised by the Arbitral Tribunal, then the statute steps in and mandates payment of interest, at the specified rate of 18% per annum for the post-award period.
(iii) While clause (a) gives the parties an option to contract out of interest, no such option is available in regard to the post-award period.
In a nutshell, in regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract, as per discretion of the Arbitral Tribunal. On the other hand, in regard to the post-award period, interest is payable as per the discretion of the Arbitral Tribunal and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum."
17. Accordingly, for pre-award period, interest was to be awarded as specified in the contract and in the absence of any term for interest in the contract, as per discretion of the Arbitral Tribunal. Ld. Counsel for Petitioner could not show any term in the agreement that the parties had agreed for no claim for interest on their future claims, on arising of disputes. Post-award period OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 26 of 30 interest is payable as per the discretion of the Arbitral Tribunal and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum. So, on the facet of award of interest @ 12% for pre-award period and post-award period, on awarded principal sum, also no fault can be found with the findings of Ld. Sole Arbitrator accordingly, since neither it is excessive nor exorbitant but is in accordance with the terms of agreement inter se parties as well as in accordance with the terms of The Act.
18. The proceedings under Section 34 of the Act are summary in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specified grounds for setting aside only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 27 of 30 of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award is not to be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence; as was held by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt.Ltd. & Ors., (2012) 1 SCC 594. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India, 2010 (11) SCC
296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 28 of 30 High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be corrected. An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC
63.
19. Precedents relied upon by Ld. Counsel for petitioner are not applicable in the present case as they embody facts and circumstances entirely different and distinguishable to the facts and circumstances of case in hand.
20. The impugned award was passed by an experienced Additional District Judge (Retired), Ld. Sole Arbitrator whereas the findings were given, based on appreciation of facts, evidences and law after giving all reasonable opportunities to the parties to present their case. Not only the reasonings of Ld. Sole Arbitrator are logical but all the material and evidences were taken note of by the Ld. Sole Arbitrator. This Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of the Ld. Sole Arbitrator, as per the law laid in the precedents, elicited herein above. Cogent grounds, sufficient reasons have been assigned by the Ld. Sole Arbitrator in reaching OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 29 of 30 the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Ld. Sole Arbitrator. The conclusion of the Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act.
21. For the foregoing reasons, the petition is hereby dismissed.
22. The parties are left to bear their own costs.
23. File be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL SINGH
PAL SINGH Date: 2022.06.09
15:32:11 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
On 09th June, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 73/2020 Indian Oil Corporation Ltd. vs M/s Chhikara Oil Carrier Page 30 of 30