Bangalore District Court
Prasanna V Ghotge vs M/S Mspl Limited on 25 April, 2024
IN THE COURT OF LXXXIX ADDL.CITY CIVIL &
SESSIONS JUDGE, BENGALURU. (CCH-90)
Present: Sri.S.J.Krishna, B.Sc., LL.B.,
LXXXIX Addl.City Civil &
Sessions Judge, Bengaluru.
Dated: 25th APRIL 2024
Com.A.P.No.12/2023
PLAINTIFF : M/s.MSPL Limited,
A Company incorporated under
the Provisions of
Companies Act, 1956
Having its Corporate Office at
Baldota Enclave, Abheraj
Baldota Road,
Hospet-583 203,
Bellary District,
Represented by Authorised
Signatory
Shri.Amarnath.T.S,
(By Sri.S.Hemanth Bharadwaj,
Advocate)
V/s.
DEFENDANT : Prasanna.V.Ghotage,
S/o Vasudev,
Aged about 57 years,
Residing at No.1088/B,
Prerana Hommes,
Ranade Colony, Hindwadi,
Belgaum-590 011,
Karnataka.
(By Sri.S.Srinivasa Murthy,
Advocate)
/2/
Com.A.P.No.12/2023
Date of Institution of suit : 18.01.2023
Nature of suit : U/Sec.34 of the Arbitration and
(suit on pronote, suit for Conciliation Act,1996
declaration and
possession suit for
injunction, etc.,)
Date of commencement : -
of recording of evidence
Date of judgment : 25.04.2024
Total duration : Year/s Month/s Day/s
01 03 07
(S.J.KRISHNA)
LXXXIX ADDL.CITY CIVIL &
SESSIONS JUDGE, BENGALURU.
(CCH-90)
JUDGMENT
The Plaintiff has filed this petition under Section 34 of Arbitration & Conciliation Act, 1996 praying the Court to set aside the Award passed by the Learned Arbitral Tribunal/Defendant No:2 in A.C.No:86/2016.
02. The plaintiff herein-Sri.Prasanna V.Ghotge is the Respondent and the defendant No:1-M/S.MSPL Limited is the claimant before the learned Arbitral Tribunal/Defendant No:2 herein in A.C.No:86/2016. For the sake of convenience the parties to the Section 34 Proceeding are referred to in the same rank as before the learned Arbitral Tribunal in A.C.No.86/2016.
/3/ Com.A.P.No.12/2023 The Summary of the case of the CLAIMANT before the Learned Arbitral Tribunal in A.C.No.86/2016 is as under:
03. The claimant is a company incorporated under the provisions the Companies Act. The Claimant is engaged in the business of exports of iron ore from ports of Goa, Chennai and other ports. The Respondent is a transport contractor and also engaged in supply of iron ore fines calibrated iron ore lumps.
04. Based on the representations made by the Respondent the Claimant Company had agreed to procure materials from the Respondent and has issued purchase orders which also comprises of terms and conditions of supply of materials as detailed below:
Sl.No. Contract No. Quantity Grade Place of and date (in tons) Delivery Goa 1 MSPL- 70000 56/55 Goa PTR/PVG/EXP -
104/2008-09 dated 21-01- 2009 2 MSPL- 60000 56/55 Goa GNICE/PVG/E XP-101/2008- 09 dated 12- 05-2009 3 MSPL- 6000 56/55 Goa CITIC/PVG/EX P-
101/2008- 09
dated 12-05-
/4/
Com.A.P.No.12/2023
2009
4 MSPL- 30000 57/56 Goa
SINOSTEEL/P
VG/EXP-
102/2009-10
dated 11-06-
2009
5 MSPL/PVG/E 30000 57/56 Goa
XP-101/2010-
11 dated 20-
07-2010
6 MSPL/PVG/E 23000 52/51 Goa
XP-102/2010-
11 dated 18-
08-2010
7 MSPL/PVG/E 50000 54/53 Goa
XP-103/2010-
11 dated 17-
09-2010
05. During the said business transactions the
respondent used to receive the advance amount from the claimant's unit viz., (1) MSPL Exports Oriented Unit -I (EOU-
1), MSPL Exports Oriented Unit-II (EOU-II) and (3) MSPL Exports from time to time for supplying the required goods in accordance with the terms and conditions of the respective purchase orders, and in order to ensure timely fulfillment of its commitments. The claimant has always agreed to his requests and used to make the advance payment from time to time and the amounts were paid in advance as per the request made by the respondent in anticipation of the receipts of iron ore in terms of the purchase orders. Despite payments made in advance the /5/ Com.A.P.No.12/2023 respondent failed to supply the material and committed breach in fulfilling his obligations under purchase orders and that, the claimant has paid the advance amount to the respondents through its bank, and from all the 3 units the claimant has advanced a total sum of ₹.165,28,83,718/-
(One Hundred Sixty Five Crores Twenty Eight Lakhs Eighty Three Thousand Seven Hundred Eighteen only) to the respondent on various dates. As per the purchase orders the respondent was to supply the cargo/iron ore free on board (FOB), and the price included, port charges, Stevedore charges, custom duty, cess, sampling and any other charges which were to the account of the respondent, as supply was FOB and that, the respondent has accepted the purchase orders, and generally supplied the materials, and raised the invoices, but however, against many of the supply orders, the respondent has not supplied full materials/iron ore, and the respondent has supplied the low grade material/iron ore, and the respondent did not make payment under various heads as per the purchase orders for getting the clearance, and the respondent has not fulfilled the various terms and conditions of the purchase orders, and the respondent has committed the breach of the contracts on various counts and that, since the respondent did not pay various charges such as customs duty, sampling charges etc, to complete the delivery of the cargo, i.e, FOB as per the contract, the claimant has paid these charges and took delivery of the cargo FOB and the claimant was constrained to pay these amounts on behalf of the respondent otherwise, the /6/ Com.A.P.No.12/2023 claimant would have committed breach of export commitments made to foreign buyers and the respondent deliberately failed to pay the due amounts and committed breach of contract. The representatives of the claimant company requested the respondent to repay the advance amount failing which to deliver the materials ought to be supplied under the purchase orders/contracts and also refund the amount paid on behalf of the respondent towards customs, sampling etc., The respondent failed to comply with the request of the claimant company and failed to make the payment on one pretext or the other without sufficient and valid reasons and the respondent used to make promise regarding payment but kept on postponing when it came to actual fulfillment of his promises, and the respondent is liable to refund huge sums of advance amount received from the claimant company along with various other charges such as custom duty, cess, demurrage sampling charges, additional ocean freight/dead freight, difference of provisional and final invoices, detention charges, both hire charges, L.C.Amendment Charges, Interest on early payments, penal plot rent bank charges, bill discounting charges, ocean charges, sampling and analysis at Discharge port.
06. The advance payment was made to the respondent from time to time totaling to the tune of ₹.165,28,83,718/-. However, the respondent has supplied the materials to the tune of ₹.146,40,38,850.73 only and /7/ Com.A.P.No.12/2023 thereby retained an amount of ₹.23,540,4546.00 without any justification, and the respondent has neither repaid the remaining amount of ₹.23,540,4546.00 nor made any attempts to repay, and in addition to this the debit notes were raised by the claimant company on the respondent towards the demurrage charges, loss of cargo, export and other levies, sampling charges, customs duty.
07. As per the contractual terms the respondent has to pay demurrage charges, loss of cargo, export and other levies, sampling charges, customs duty, etc, which have been mentioned in the debit notes, and the respondent has failed to supply the ordered quantity of iron ore fines and calibrated iron ore lumps and has not repaid the advance amount nor the stocks of iron ore fines and calibrated iron ore lumps to the claimant to the tune of ₹.38,82,11,099.26 and therefore the claimant has issued a letter dated 4-8- 2011. The Claimant Company made repeated requests and demands to the respondent to repay the outstanding amount. The respondent has neither paid remaining advance amount and dues, nor supplied material to the tune of ₹.38,82,11,099.26.
08. The Claimant Company issued a legal notice dated:27.08.2012 calling upon the respondent to repay balance amount due to the tune of ₹.37,20,70,493.06 along with interest at 18% within 5 days from the date of receipt legal notice. The Respondent has neither replied nor /8/ Com.A.P.No.12/2023 complied with the notice demand and copy of legal dated 27-8-2012. The respondent is liable to pay the balance of ₹.38,82,11,099.26 as on today. Despite issuing the notice, the respondent has neither paid the money nor complied with notice demands.
09. The claimant issued a notice dated:11.09.2012 informing the respondent that matter is being referred to arbitration to the sole arbitrator and also requesting the respondent to do the needful, as per the provisions of the Arbitration and Conciliation Act, 1996. The respondent failed to comply with the demand.
10. The Claimant has filed CMP No:501/2013 seeking appointment of an arbitrator. The Respondent consented for appointment of an arbitrator to resolve the dispute. The Hon'ble High Court of Dharwad Bench has appointed an Arbitrator vide order dated:18.03.2016.
11. The Claimant has prayed the Learned Arbitral Tribunal to allow the claim petition by directing the respondent to pay the claimant a sum of ₹.38,82,11,099.26/- (Rupees Thirty Eight Crores Eighty Two Lakhs eleven Thousand Ninety Nine and Twenty Six Paise only) together with interest 24% (Twenty Four only) per cent per annum; the cost of the Arbitration proceedings including the incidental charges; and pass such other order/relief as /9/ Com.A.P.No.12/2023 deemed fit and proper in the circumstances of the case to meet the ends of justice.
The respondent has filed statement of objections and also preferred Counter Claim against the the Claimant.
12. The Respondent has disputed the validity of the authorization granted to Sri.Mohit J Ratolikar stating that he has no authority to represent the claimant in arbitral proceeding and disputed the validity of the resolution passed by the Claimant Company.
13. The Respondent has stated that there are multiple contracts entered into between the claimant and the respondent in the nature of Jetty Infrastructure contracts, Road Constructions contract as also the transportation contracts including the contracts for transportation from Hospet to Tinaighat in respect of certain materials for which the permits had to be arranged and transported besides transportation of other ores which was claimed to have been purchased by the claimant to Tinaighat by road. The contention of the claimant that the respondent had to pay the demurrage charges, loss of cargo, export and other levies, sampling charges and the same has been mentioned in the debit notes is a unilateral act on the part of the claimant and the contract as such is not capable of being meddled with unilaterally and such unilateral demands or /10/ Com.A.P.No.12/2023 unilateral debit notes is not binding and would not affect the contract. The respondent is under no liability to address to the unilateral demands or debits in this regard, but the claimant itself is liable to make payments in relation to the unilateral debits made by the claimant company and further contention that the respondent has failed to supply the ordered quantity of the iron ore fines and calibrated iron ore lumps and has not repaid the advance amount nor the stocks of iron ore fines to the tune of ₹.38,82,11,099.26 is absolutely false and baseless and is rather mutually destructive of the plea set up in the claim statement.
14. The contention that the claimant had no option but to issue a letter dated 4-8-2011 besides making several requests and messages and that the respondent failed to respond and the same received but no amounts have been paid is absolutely false and baseless. The respondent would however admit the contention that the respondent has accepted the purchase orders and generally supplied the materials and raised invoices is true. The contention of the claimant that indicates that the payments are allegedly made to the tune of the ₹.165,28,83,718 and that there is also a reference that the respondent has supplied materials worth ₹.146.40.38.850.73 and there is a reference to advance paid from each unit as per Annexure 1, 2 and 3 will refer to the payments said to have been made between the 23.02.2007 up to 22-4-2013, and the reference is regarding the payments allegedly made from MSPL.EOU-1 to the /11/ Com.A.P.No.12/2023 respondent and a reference in this regard requires to be made to what appears to be ledger account as claimed to be maintained by the claimant though contents of the same is not admitted which is from MSPL Ltd from 1-4-2003 to 31- 7-2007, and the payments which are reflected in terms of Annexure-1 is nothing to do with the transaction in questions (contracts), and the document No.9 will clearly indicate that it is with reference to transportation and loading and unloading charges besides other handling charges etc, and not relatable to the contracts in question, and further, the transactions are for the period 13-1-2009 to 17-7-2010 and the payments which are stated to have been made is for the period from 23-2-2007 to 22-4-2013 and the payments therefore which are said to have been made though it is not admitted are not relatable to the transactions at all and more specifically the same does not relate to the purchase order dated 20-7-2010 based on which the present arbitration proceedings is said to have been instituted and that when the cause of action for the basis of the claim is that certain amounts were paid and there has been a short supply of materials and the reliance on Annexure-1 and document No.9 is with reference to the payments made, which are not in relation to the transaction in question under which the arbitration clauses are invoked there is no way that this dispute can be adjudicated as to whether the amounts are paid in relation to a specific transaction or to ascertain towards which transactions the payments were made and of arbitration, and that, there is /12/ Com.A.P.No.12/2023 also a reference to Annexure-2 which is allegedly the payments made from MSPL-EOU-2 and there is another ledger entry produced from 01.04.2006 to 31-1-2007, and document Nos.9 and 10 are relating to the ledger entries when the contract itself has not come into existence and ledger entries are produced to show the amounts as having been paid, and as can clearly be made out, not even a single rupee has been paid in relation to the transaction in question as the transaction itself were never contemplated at that point of time, and the pleadings made in the claim statement will be material and the claim is towards the customs duty, cess, demurrage, sampling charges etc and this charges is not forthcoming in document No.9 and even otherwise, the transaction under which the arbitration clause is invoked itself had never come into existence and in such circumstances there is nothing more which requires to be adjudicated as the claims made with reference to document No.9 is not in relation to the agreement in question and similarly document No.10 is referred to in para 12 where it is claimed that advance payments had been made and the supply of materials is to the tune of ₹.146,40,38,850.73 and that the respondent has not paid the remaining amount of ₹.23,54,04,546 and that the debit notes raised towards demurrage charges etc is reflected in terms of the document shown at document No.10, but document No.10 as stated supra is for the period 1-4-2006 to 31-7-2007 (referred to as MSPL Ltd EOU Unit-1), and there is another ledger extract which has been produced for /13/ Com.A.P.No.12/2023 the period 1-4-2005 to 31-3-2007 for which there is no reference for having marked as a document separately and even this ledger account is relating to payments which have been made pertaining to some other transactions and not relating to the transactions in question and there is no specific averment in the entire claim statement that there were payments made in lieu of or under the contract and that there is any shortcomings with reference to the payments as made or the materials as supplied and in such circumstances the claim as made is bereft of any cause of action which could be said to be arbitrable in nature. The contention which has been raised is that a total sum of ₹. 165,28,83,718 has been paid but however the total contract value of the 7 contracts referred to could in itself not exceed ₹.70 crores and there is no specific references to the advances paid under the contracts and however the factum of raising the invoices is not in dispute though not in a manner as sought to be projected by the claimant. The payments which are alleged to have been made is with reference to Annexure-1, 2 and 3 as also referable to document Nos. 9 and 10 and these payments refers to the payments said to have been made with respect to certain other transactions in the nature of transportation etc and most of the transactions commences from the year 2003 unrelated to the arbitration agreement invoked in the present proceedings and that the claimant is seeking to club various transactions which have taken place from 2003 onwards and up to 2013 between the claimant and the /14/ Com.A.P.No.12/2023 respondent and that the claimant has tried to merge various transactions in the nature of transportation or Jetty Infrastructure contracts etc and has been making unfounded claim, and there is no bifurcation provided as to what was actually paid under the contract and what was the extent of the supplies made and to what extent there is either a short supply or there is a requirement of payment is not spelled out and this joint and individual cause of action made as per the claim statement is relatable to the entire payments alleged to have been made under various transactions and document No.28 produced which is in the nature of a statement the contents of which is not admitted by the respondent and this forms the basis where the transactions are running with reference to 2003-04 to 2013- 14, and this is the calculation which appears to be the basis of making the claim of ₹.38,82,11,099.26, and there is clearly a reference to document Nos. 9 and 10 as also document No.28 and Annexures-1 to 3 that there are numerous payments which are made not relatable to the transaction but the nature of the claim is with reference to and by taking into account the transaction of 2003 to 2013- 14 not relatable to contract in which the arbitration agreement exists and in that view of the matter, there is an attempt of clubbing of arbitrable and non-arbitrable issues and the arbitration clause which has been invoked in terms of what has been stated at para No.20 of the claim statement is the purchase order/contract dated 20-7-2010 and the contract 20-7-2010 which is at Sl.No.5 of the table /15/ Com.A.P.No.12/2023 in the claim statement is the document produced as document No.6, and the document No.6 is the contract dated 20-7-2010 in which Clause 18 is arbitration clause. Further, while extracting the said arbitration 18 of document No.6 dated 20-7-2010, it is contended that, therefore, the scope of arbitration is only the disputes which are in connection with the contract or in execution of the contract and the contract specifically refers to the supply of 30,000 metric tons as per clause 2 and the agreed price is also mentioned at Clause 5, and the total worth of the agreement in which the arbitration clause is invoked would approximately be ₹.10 Crore and there are other payments which are alleged to have been made under various other transactions and headings with which the present arbitration clause is not concerned with. Further, while on a decision of the Supreme Court in the case of Sukanya Holdings Pvt. Ltd. V. Jayesh Handya and others (2003) 5 SCC 351, holding that there cannot be a possibility of non- arbitrable and arbitrable disputes being clubbed and decided by the arbitrator when joint and indivisible issues are involved, it is necessary that arbitrable disputes also should be decided along with the non-arbitrable disputes to be decided upon by a proper forum, and in that view of the matter, the present dispute is not arbitrable in nature and therefore there should be a cessation/termination of arbitration proceedings in terms of section 16 and section 32 of the Arbitration and Conciliation Act, 1996. In view of the specific pleading at paragraph No. 20 that the claimant /16/ Com.A.P.No.12/2023 has invoked the arbitration clause 18 in purchase order dated 20-7-2010 (document No.6), and there is admittedly no invocation of the arbitration Clause in respect of the other purchase orders namely, the purchase orders which are referred to at Sl.Nos.1, 2,3,4, 6 and 7 in the table provided at paragraph No.9 of the claim statement, those proceedings have already been rendered as time barred and there is nothing which can be done with reference to the other contracts at this stage.
15. Regarding several of the transactions between the claimant and the respondent and the counterclaims, it is contended vide para 25 of the statement of defense and counterclaim that the claimant and the respondent as is apparent have had various business transactions from the year 2003 and onwards, and the payments are made and the discharges are given of the services towards transportation etc., and there were multiple contracts as stated supra and they include the transportation contract specifically covered under the transportation agreements, Jetty Infrastructure contract, road contracts and there were materials of the claimant for which the permits had to be arranged by the respondent and to be transported from Hospet to Tinaighat and there were several other incidental transactions that had taken place and these are the transactions under which the payments have been made and services have been rendered if for any reason the claimant intends to and a claim that there is shortfall in the /17/ Com.A.P.No.12/2023 nature of services rendered etc, it is beyond the scope of the arbitration agreement. Regarding the transactions between the claimant and the respondent the claimant has not issued H-Forms in relation to various supplies which case the claimant is liable to make payments to the respondent running into several Crores and that apart, the claimant is also liable to make payments to the respondent in relation to various supplies that have remained uninvoked and hence, the respondent has various counterclaims against the claimant which would be made before the relevant forum as and when appropriate. It is also submitted that there is no way that there can be a deciphering of the nature of the facts that has been putforth for the purpose of deciding or determining the arbitrability of the present dispute and at any rate whatever payments are stated to have been made under the transportation agreement, jetty infrastructure contract, road contract and including the transportation of the materials purchased by the claimant for which the permit had to be arranged and transported from Hospet to Tinaighat besides other contract cannot become the subject matter of the instant dispute but the claimant apparently has included all the payments which is said to have been made and has produced improper ledger entries claiming a shortfall which is highly imaginary claim and at any rate is not an issue which can be dealt with by this tribunal. As against the invoices there are debit notes which are sent and these are unilateral debit notes for which there is no concurrence given, and there are some debit /18/ Com.A.P.No.12/2023 notes or which an acknowledgment have been given for having received the bit notes but this is not a concurrence to the debit which the claimant intends to make and there are certain other debit notes for there are no acknowledgments and have been unilaterally produced and this will also form part of the counterclaim but in the nature of the stand taken regarding other causes of action which forms part of the disputes not relatable to arbitration clause and even the respondent will have to be relegated to work out their counterclaims before an appropriate forum.
16. The respondent prayed the arbitral tribunal to terminate and consequently dismiss the arbitral proceedings. The Respondent has prayed the Tribunal to relegate him to work out counter claims before appropriate forum.
17. The claimant has filed rejoinder to the statement of defense of the respondent and also written statement to the counterclaim of the respondent.
In the rejoinder filed by claimant to statement of defense of respondent, it is contended inter alia, as under:
18. The Claimant has stated that the respondent in the statement of defense and counterclaim has sought to confuse the whole issue and is not coming up with his case, /19/ Com.A.P.No.12/2023 and the statements made in the defense requires to be clarified in order to clear the confusion created by the respondent. The claimant has stated in the claim petition that it has paid in all a sum of ₹.165,28,83,718 to the respondent towards transportation of iron from various places right from 2003, purchase and export of iron and ore fines and calibrated iron ore lumps from 2007 onwards, and, admittedly, the claimant and respondent have been doing business and the figure of ₹.165,28,83,718 is total payment made to the respondent covering period from 2003 onwards. Initially, the respondent was transporting the goods on behalf of the claimant and thereafter he was entrusted with the work of purchase and export of iron ore and allied products, and therefore, the claimant has shown and placed the fact of total payment of ₹.165,28,83,718 to the respondent since 2003, and the respondent is not disputing that it has discharged the obligations under the transport contracts as well as the purchase orders placed by the claimant but however he has not placed any material as to what extent he has discharged its liability when the claimant has shown that it has made payments to the tune of ₹.165,28,83,718/- in terms of annexure I, II and III. The disputes covered under the purchase orders relates to the advance payments made by the claimant on the request of the respondent and therefore, the disputes now raised by the claimant relates to the advance payments made to the respondent and the purchase orders placed against the respondent. The advance payments to the tune of /20/ Com.A.P.No.12/2023 ₹.88,69,41,427/- out of ₹.165,28,83,718/- relates to purchase orders, and the remaining amounts relates to the other contracts other than the purchase orders, which the claimant is not claiming and thus, the claim of the claimant is only in respect of advance payment to the tune of ₹.88,69,41,427/- and the Claimant has furnished the details of the same in Table-1.
19. The payments are reflected in the ledger account maintained by the claimant company as well as Annexure-I, II and III to the claim petition, and as against these payments, the respondent partially fulfilled his obligations and exported the goods in terms of invoices that he has raised. The claimant has furnished details of 7 purchase orders in Table II. During the course of business, the respondent has supplied goods as per invoices at Goa port pursuant to the aforesaid purchase orders, and the respondent raised various invoices to the tune of ₹. 63,26,04,213 against the claimant, and thus, the respondent has retained an amount of ₹.25,43,37,214/- without any justification and requires to be returned back to the claimant with interest at the rate of 24% p.a., and the respondent has neither repaid the remaining amount of ₹.25,43,37,214/- nor made any attempt to repay the same and the respondent has also not explained about the value of the invoices raised and advance amounts received from the claimant in his statement of defense. In addition to the above, the respondent has not paid the demurrage charges, /21/ Com.A.P.No.12/2023 loss of cargo, export and other levies, sampling charges, custom duty, and the claimant has raised various debit notes to the tune of ₹.14,81,64,519 against the respondent, and that, the respondent has received all the debit notes as and when it was raised and thus, the issue relating to the debit notes is nothing but an afterthought. The claimant has given credit to respondent to the tune of ₹.1,04,44,286/- and further the respondent has returned the advance amount to the tune of ₹.80,91,831/-to the claimant, and thus, the amount due and outstanding from the respondent as on 4-8-2011 is ₹.38,40,15,616/- as detailed in Table-III.
20. The due amount is in connection with the purchase orders placed on the respondent and the respondent is liable to pay an amount of ₹.38,40,15,616 along with interest at the rate of 24% p.a. from 4-8-2011 till date of payment, and, therefore, the disputes out of the purchase orders and consequent invoices, debit notes, etc are arbitrable. The respondent has not disclosed the advance amount received, invoices but an afterthought. The claimant has given credit to respondent to the tune of ₹.1,04,44,286/- and further the respondent has returned the advance amount to the tune of to the claimant, and thus, the amount due and outstanding from the respondent as on 4-8-2011 is as under:
/22/ Com.A.P.No.12/2023 Table- III Sl.No. Description Amount Balance 1 Advance payments ₹.88,69,41,427 2 Less: Invoices (₹.63,26,04,213) ₹.25,43,37,214 raised by respondent the pursuant to the purchase orders 3 Add: Debit notes ₹. 14,81,64,519 ₹.40,25,01,733 raised by the claimant in terms of the purchase orders 4 Less: Credit Notes (₹. 1,04,44,286) ₹.39,20,57,447 issued by the claimant 5 Less: Advance (₹.80,41,831) ₹.38,40,15,616 amount returned by Respondent Amount due and receivable from the ₹.38,40,15,616 respondent
21. Thus, it is seen that the aforesaid amount is in connection with the purchase orders placed on the respondent and the respondent is liable to pay an amount of ₹.38,40,15,616 along with interest at the rate of 24% p.a. from 4-8-2011 till date of payment, and, therefore, the disputes out of the purchase orders and consequent invoices, debit notes, etc are arbitrable. The respondent has not disclosed the advance amount received, invoices raised against each purchase only trying to create confusion and to further prolong the proceedings and nothing prevented the /23/ Com.A.P.No.12/2023 respondent from issuing any reply to the notice issued by the claimant prior to the initiation of the proceedings, and further, the respondent has not taken any exception for reference of the disputes to this before for reference of the disputes to this arbitral tribunal, and now after 9 years, the respondent is coming up with untenable defense and trying to prolong the proceedings. The respondent has time and again in his defense stated that the dispute or allegedly referred to this arbitral tribunal pertains to only one purchase order, which is incorrect, as could be seen from the order passed by the Hon'ble High Court of Karnataka, while allowing the Civil.Mis.Petition No. 501/2013 on 18-3- 2016 and thus, it is clear from the order passed by the Hon'ble High Court of Karnataka, the disputes referred to this arbitral tribunal pertains to Annexure-B series, which is nothing but all the purchased orders mentioned in Table-II, and that apart, the arbitration clause mentioned in all the purchase orders are worded exactly the same, but are numbered differently, and the details of the arbitration clauses contained in the purchase orders.
22. Mr.Mohit J.Ratolikar is duly authorized by the Claimant Company to represent it before the Hon'ble High court in CMP 501/2013 and arbitration proceeding.
23. The respondent has not denied the averments made in para of claim petition, nothing prevented the respondent to say that has retained sum of ₹. 25,43,37,214 /24/ Com.A.P.No.12/2023 nor has produced any material show that he supplied the goods against the advance amount received and purchase orders placed. The claim in this petition is only with regard to the purchase orders, which is the subject matter of reference, the disputes, raised in the claim petition is for recovery of sum ₹.38 Crores and odd and significantly the defendant is not coming out with the true facts as to the receipt of the total amount paid by the claimant company and also the value of the goods and services provided by him, for the reasons best known to him as referred to in para 12 of the claim petition. The Claimant has reiterated the averments made in the claim statement.
24. The Claimant has stated that the counter claim made by the respondent is liable to be dismissed. The counter claim is made as a counter blast and as an after thought. The counter claim is bald and barred by limitation. The counter claim is not the subject matter of reference. The relief sought to relegate the alleged claims in the form of counter claim for being dealt in an appropriate forum is mischievous. The counter claim is uncertain and no arbitration fee is paid on the same. The respondent has not issued any notice before making counter claim. The Claimant has prayed the Arbitral Tribunal to reject the counter claim with exemplary costs.
/25/ Com.A.P.No.12/2023
25. Based on the rival pleading the learned Arbitral Tribunal has formulated the terms of reference and framed Issues for its determination as under:
TERMS OF REFERENCE AND ISSUES.
1. Whether the claimant proves that it is entitled to an award in a sum of ₹.38,82,11,099.26 together with interest thereon at the rate of 24% per annum against the respondent or directing the respondent to pay the claimant a sum of ₹.38,82,11,099.26 together with interest at 24% per annum at the hands of this arbitral tribunal?
2. Whether the respondent proves that the present dispute is not arbitrable in nature and therefore, there should be a cessation/termination of arbitration proceedings in terms of Section 16 and Section 32 of the A&C Act, 1996?
3. Whether the respondent proves that the scope and ambit of arbitration invoked in terms of Clause 18 of the contract dated 20-7-2010 is only the disputes which are in connection with the contract or in execution of contract, and the contract specifically refers to the supply of 30,000 MTs as per clause 2 and the agreed price is also maintained at clause 5, and the total worth of the agreement in which the arbitration clause is invoked would approximately ₹.10 Crore and there of are other payments which are alleged to have been made under various other transactions and headings with which the present arbitration clause is not concerned with?
4. Whether the respondent proves that in the nature of the stand taken regarding other causes of action which forms part of the dispute not relatable to the arbitration clause, even the respondent will have to be relegated to work out his counterclaims before an appropriate forum?
/26/ Com.A.P.No.12/2023
5. Whether the whole of the claim made by the claimant, in its entirety, against the respondent or any part thereof is barred by limitation?
6. To what award or order?
26. The claimant has examined Sri.K.Rajasekhar as PW1. The PW1 has exhibited Ex.P1 to Ex.P102. The respondent adduced his evidence as RW1. He has not exhibited any documents.
27. After hearing the oral arguments and written arguments submitted by the Claimant and Respondent, the Learned Arbitral Tribunal has passed the Award on 01.10.2022 as under:
AWARD
(i) The claim petition filed by the claimant is allowed in part.
(ii) The respondent is liable to pay to the claimant a sum of ₹.25,43,37,214/- and accordingly, the respondent is directed to pay the said amount to the claimant with interest at 9% p.a. from the date of the 7 purchase orders till the date of the actual payment of the amount exclusive of the period during which the stay order was operative.
(iii) The claimant is not entitled to any other amount, other than the above stated amount.
(iv) The counterclaim of the respondent is rejected with liberty to the respondent to pursue /27/ Com.A.P.No.12/2023 its remedy, if any, in accordance with law before any other appropriate court, as may be open to him, subject of course to the Law of Limitation.
So also the claimant is also at liberty to pursue its remedy before an appropriate forum with regard to the claim which are found to be non- arbitrable by this arbitral tribunal subject of course to the Law of Limitation.
(4) Both the parties are directed to bear their own costs.
(vi) The Award shall be enforced under the Code of Civil Procedure in the same manner as if it were a decree of the court in terms of Sec.35 of the Arbitration and Conciliation Act, 1996.
(vii) The stamp duty payable on this Award may be paid by the claimant or the respondent. However, if the claimant pays the stamp duties, it shall recover it from the respondent as part of this Award.
(viii) The proceedings before this Arbitral Tribunal stands terminated herewith.
(ix) The award is signed and issued in three originals, one for the record of the Centre and rest of the two to each of the parties.
28. Being aggrieved by the Award dated:01.10.2022 passed by the Learned Arbitral Tribunal in A.C.No.86/2016, the Respondent has filed this petition under Section 34 of /28/ Com.A.P.No.12/2023 Arbitration & Conciliation Act, 1996 for the following among other grounds:
The plaintiff/Respondent has furnished brief facts of the case.
29. The award passed by the Arbitrator is in violation of the express law of the land and is against the settled authorities of the Courts of India and also against the fundamental policy of Indian Law hence the same deserves to be set aside.
30. The Arbitrator has failed to understand the express terms of the law and has decided the issues in utter disregard to the law which is a blatant aberration and a violation of public policy of India.
31. The Claimant/Respondent No.1 had sought to initiate proceedings for appointment of Arbitrator for adjudication of the alleged disputes in relation to the seven of the several Purchase Orders; in CMP No.501/2013, before the Hon'ble High Court of Karnataka. The said petition was allowed and the Arbitral Tribunal was constituted for adjudication of the disputes. When the claims were actually made before the Hon'ble Tribunal, only the Arbitration agreement pertaining to the agreement/Contract dated 20/07/2010 was invoked while making claims in relation to all the contracts that have ever been entered into between /29/ Com.A.P.No.12/2023 the Petitioner and the Respondent No.1 between the years 2002-2013, rendering the claims non-arbitrable. It had also been stated by the Respondent No.1 that the claims were made based on a running account. The allowing of such claims by the Arbitrator is beyond the scope of arbitration and beyond the scope of the terms of reference made in CMP No.501/2013 and contains decisions on matters beyond the scope of the submission to arbitration and hence the award deserves to be set aside.
32. The Hon'ble Supreme Court has in the case of Sukanya Holdings Put. Ltd. v. Jayesh H.Pandya and Ors., (2003) 5 SCC 351, has held that there cannot be a possibility of non-arbitrable and arbitrable disputes being clubbed and decided by the Arbitrator when joint and indivisible issues are involved.
33. The Hon'ble Supreme Court has in the case of Oriental Insurance Company Ltd. vs. Narbheram Power and Steel Pvt. Ltd. 2018 6 SCC 534 held that an arbitration clause is required to be strictly construed and that any expression in the clause must unequivocally express the intent of arbitration. Admittedly, in the underlying proceedings there are hundreds of contracts between the parties and one arbitration agreement contained in an agreement is invoked for the purposes of all the transactions which are untenable and hence the award impugned before this Hon'ble Court requires to be set aside.
/30/ Com.A.P.No.12/2023
34. Two prime contentions were raised by the Respondent No.1/Claimant while alleging breach of the terms of the Purchase Order on the Petitioner while making the claims; that (a) the Petitioner short supplied the items in relation to certain Purchase Orders and that (b) the items that were supplied in relation to some Purchase Orders were of an inferior quality. Admittedly, no material was produced to substantiate both the contentions and there were no specific details provided by Respondent No.1 as to the short supply of the items with the corresponding Purchase Order numbers or the details of supply of materials of an inferior grade and material particulars pertaining to such short supply or supply of material of an inferior quality or grade. The allegations were made in air and the claims were made without any basis whatsoever and the same has been allowed by the Arbitrator when there was no nexus between the claims and the evidence qua the arbitral award. The Hon'ble Supreme Court in the case of PSASICAL Terminals (P) Ltd. vs. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and others 2021 SCC Online SC 508 has held that an Arbitral Award based on no evidence and/or passed in ignorance of vital evidence would come under the realm of patent illegality.
35. The Respondent No.1 had sought to contend, though without any basis, that it had made advance payments to the Petitioner. The contention of advance payment was sought to be set up by the Respondent No.1 /31/ Com.A.P.No.12/2023 without any proof or without any factual or contractual basis and without any material particulars. The Respondent No.1/ Claimant Witness during his cross-examination, has stated that some payments were made in advance, even the said contention is not backed by any evidence but the witness was not in a position to specifically state when these payments were made. The award is patently illegal on the face of the award when no material particulars has been provided by the Respondent No.1 in relation to the short supply or when no particulars of any advance payment qua the purchase orders are provided which were the sole basis for making the claims and hence the same requires to be set aside.
36. The Contracts do not contemplate any advance payments to be made and the same were not made. The payments were made only after the material was supplied and the same is the stipulation under the contract. The Arbitrator instead of interpreting the terms of the contract as it is has sought to rewrite the terms of the contract for the parties and to foist them up on the Petitioner which requires interference of the Court under Section 34 of the Arbitration and Conciliation Act, 1996 in setting aside the arbitral award as held by the Hon'ble Supreme Court in the case of Ssyangyong Engineering and Construction Co. Ltd. v. National Highway Authority of India (2019) 15 SCC 131.
/32/ Com.A.P.No.12/2023
37. The Respondent No.2/Arbitrator seem to have accepted all contentions of Respondent No.1 without there being any underlying evidence. The award passed is one sided and in ignorance of the vital evidence of the Claimant and hence the same is required to be interfered with under Section 34 of the Arbitration & Conciliation Act, 1996.
38. The Respondent No.1's witness has also admitted that there is no basis for the claims made before the Hon'ble Arbitral Tribunal which is factually true. Even when there was an admission made by the Respondent No.1's witness, the claims are allowed. The Hon'ble High Court of Karnataka in the case of Pandurang Jivajirao Manglekar and Ors. vs. State of Karnataka ILR 2007 KAR 3602 has held that an admission made by a witness is the best evidence against the party making it. Though the said judgment was relied upon on behalf of the Petitioner and in spite of there being valid and categorical admissions by the Respondent No.1 that the claims are baseless, the Respondent No.2 has not given any credence to the said fact and has passed the impugned award.
39. The Arbitrator has also drawn an adverse inference on the Petitioner in passing the award without any regard to the law on adverse inference. The adverse inference has been drawn against the Petitioner for not producing any documents in his evidence and has failed to understand that the same is of no consequence as the Claimant/Respondent /33/ Com.A.P.No.12/2023 No.1 had to either succeed or fail on its own strength and weaknesses and not on the weaknesses in the case of the Respondent. The Hon'ble High Court of Karnataka has in the case of N.T. Vijayakumar and Others The Allahabad Bank, Nehru Road Branch, Shimoga 1999 2 Kar. LJ 4 held that it is a well settled principle of law of evidence that a person who comes to claim relief before the Court with a specific case, has rest and stand on his own legs and not on the weakness of defendants case and even in case no evidence is led by the defendant, the same would still be of no consequence and the burden would only lie on the person that has made the claims. This being the settled position of law and the judgment having been relied upon by the Petitioner, the Arbitrator has held contrary to the said precedent which is a blatant aberration also a violation of the public policy of India. The Hon'ble Supreme Court in the case of Ssyangyong (supra) has held that an arbitral award passed in disregard to the judgments of the superior courts would be liable to be set aside under section 34 of the Arbitration and Conciliation Act, 1996 as being in violation of the fundamental policy of India.
40. The Respondent No.2 has (in pages 96 and 97 of the award) recorded a finding that the calculations/ claims made by the Respondent No.1 is not justified. It has been held that the Claimant has not taken the value of the seven purchase orders and that there has not been any particulars about the specific advance amounts paid in relation to each /34/ Com.A.P.No.12/2023 of the purchase orders and the claims cannot be related to the seven orders and that the stands taken by the Claimant/ Respondent No.1 are inconsistent and contradictory. In spite of recording a finding to this effect, the impugned award has been passed by Respondent No.2 directing payment of to the Respondent No.1. The Respondent No.2 has also held that the Claimant cannot merge or club all the transactions done by the parties and that the Claimant, by shrewd drafting of the claim petition cannot claim relief which are outside the purview of arbitration and that the Arbitral Tribunal cannot decide on the issues that are not covered by the arbitration agreement. The Respondent No.2 has held (at page 106 of the award) that the claims made by the Claimant are beyond the subject purchase orders and that the contents of the documents that are marked do not show that the Respondent No.1 has on paid any advance to the Petitioner. The Respondent No.2 has held (at page 107 of the award) that the claims included the arbitrable and non- arbitrable claims and that the same are vague, devoid of particulars and unsupported by any materials. The Respondent No.2 has held (at page 108 of the award) that many claims are also time barred and that the claim of payment of advance amount is more than the actual value of the purchase orders. Hence the award and the reasons assigned under the award are contradictory and unsustainable. The Arbitrator has failed to correctly understand and interpret the issues. Hence the award is perverse, capricious and patently illegal. The impugned /35/ Com.A.P.No.12/2023 award passed by Respondent No.2 is even otherwise vague and not supported by any evidence or valid reasons.
41. The Claims even on merits was unfounded and the reliefs sought as Claims were not capable of being granted or were otherwise baseless. Yet, the Arbitrator has substantially allowed the claims without any basis or evidence and therefore award is required to be set aside.
42. The award passed by the Arbitrator is hence arbitrary, capricious, and perverse and shocks the conscience of the Court. The Patent illegality in the award is not trivial but goes to the root of the matter hence deserves to be set aside.
43. The Plaintiff has prayed for setting aside the Award dated:01.10.2022 passed in A.C.No:86/2016 and to award the costs.
44. After the service of notice the Claimant i.e., defendant No:1 herein appeared before the Court and has filed statement of objections to the petition as under:
45. The plaintiff has not made out any grounds whatsoever to challenge the arbitral award passed in AC.No.86/2016:
b) The Plaintiff has not paid the stamp duty on the Arbitral Award and therefore question of /36/ Com.A.P.No.12/2023 challenging the award without payment of stamp duty does not arise.
c) The Petition is also liable to be rejected as the same is barred by law of limitation.
d) Petition is also liable to be rejected for want of jurisdiction.
e) The claim of the plaintiff is beyond the powers conferred under Section 34 of the Arbitration and Conciliation Act 1996.
f) The objections raised by the plaintiff is the repetition of what the plaintiff has said in his pleadings before the learned arbitrator.
g) It is strange that the plaintiff has failed to substantiate his defense before the learned Arbitrator by leading cogent evidence.
46. The Claimant has reiterated the facts of the case presented before the Learned Arbitral Tribunal in his statement of objections.
47. The Plaintiff was transporting the goods on behalf of Defendant No.1 and thereafter he was entrusted with the work of purchase and export of Iron Ore and allied products.
48. In this behalf, the defendant No.1 had paid a sum of ₹. 165,28,83,718/- to the Plaintiff since 2003. The Plaintiff has vaguely denied the receipt of ₹.165,28,83,718/- from the Claimant, by not coming out with a figure to counter the /37/ Com.A.P.No.12/2023 said amount of ₹.165,28,83,718/- that he has received from the Claimant.
49. The Plaintiff contends that he has discharged the obligations under the transport contracts as well as the Purchase orders placed by the Respondent No. 1. While taking such contention, the plaintiff ought to have placed materials to show that he has discharged his liability towards the orders placed by the Claimant. However, he has not placed any material to show as to what extent he has discharged his liability, when the Claimant has shown that it has made payments to the tune of ₹.165,28,83,718/-.
50. The Plaintiff has taken exception for showing the entire amount paid by the Claimant to the Plaintiff since 2003 and contended that the disputes relating to the period from 2003 till 2007, i.e. until the Purchase Orders were placed, are not arbitrable. Significantly, the disputes covered under the Purchase Orders relates to the advance payments made by the Claimant on the request of the plaintiff. Therefore, the disputes raised by the Claimant relates to the advance payments made to the plaintiff and the Purchase Orders placed against the Plaintiff. The advance payments to the tune of ₹.88,69,41,427/- out of ₹.165,28,83,718/-, relate to Purchase Orders. The remaining amount relates to the other contracts other than the Purchase Orders, which the Claimant has not claimed. Thus, the claim of the Claimant was only in respect of advance /38/ Com.A.P.No.12/2023 payment to the tune of ₹.88,69,41,427/-, which was pertaining to the purchase orders.
51. As against these payments, the Plaintiff partially fulfilled his obligations and exported the goods in terms of invoices that he has raised. It is pertinent to note that the Plaintiff admits about the issuance of invoices from time to time and claims that some of the invoices have not been raised. However, the Plaintiff has not placed any material in support of his case. Significantly, the Plaintiff has not produced a single document to prove his contentions when the Claimant has placed several documents which the learned Arbitrator, has relied upon. The law is well settled that whenever certain allegations are made in the pleadings, it is for the party to produce documentary evidence in support of its case. Interestingly, the pleadings of the Plaintiff before the learned Arbitrator has not been proved. In the absence of any document, the Plaintiff cannot claim again that he has proved his case. The Cross Examination of the Plaintiff in Ac No.86/2016, discloses that the allegation made by the Plaintiff has not been proved.
52. During the course of business, the Plaintiff has supplied goods as per various invoices at Goa port pursuant to the seven purchase orders. The Plaintiff raised various invoices to the tune of ₹.63,26,04,213/- against the Claimant. Thus, the Plaintiff has retained an amount of ₹.25,43,37,214/- without any justification and the learned /39/ Com.A.P.No.12/2023 arbitrator has passed award and thereby directed the Plaintiff to pay the said sum with interest. The Plaintiff has neither paid the remaining amount of ₹.25,43,37,214/- nor made any attempt to repay the same even after the award has been passed. The Plaintiff has also not explained about the value of the invoices raised and advance amounts received from the Claimant in his Statement of Defense filed before the Arbitrator.
53. That apart, the Plaintiff has time and again alleged that the disputes referred to the Arbitral Tribunal pertain to only one Purchase Order, which is incorrect. The Hon'ble High Court of Karnataka vide Order dated 18.03.2016 has allowed the Civil miscellaneous Petition No. 501/2013. It is clear from the said order the Hon'ble High Court of Karnataka has referred the disputes pertaining to 7 purchase orders for Arbitration to the Tribunal.
54. The details of the Arbitration Clauses contained in the Purchase Orders are as under
Sl. No. Purchase Order Arbitration Clause 1 MSPL-PTR/PVG/EXP-104/2008-09 17 dated 21.01.2009 2 MSPL GNICE / PVG / EXP-102/2008- 17 09 dated 13.01.2009 3 MSPL CITIC / PVG / EXP-101/2008-09 18 dated 12.05.2009 4 MSPL SINOSTEEL / PVG/EXP- 17 /40/ Com.A.P.No.12/2023 102/2009- 10 dated 11.06.2009 5 MSPL/PVG/EXP-101/2010-11 dated 17 20-7-2010 6 MSPL/PVG / EXP-102/2010-11 dated 18 18-8-2010 7 MSPL/PVG/EXP-103/2010-11 dt.17- 19 9-2010
55. The arbitration clause clearly states that all disputes in connection with the contract (Purchase Orders) or execution thereof shall be settled amicably by negotiations and in case no settlement is reached then the disputes shall be referred to arbitration. The claim of the claimant is about the excess amount retained by the respondent to the tune of ₹.25,43,37,214/- and the debit notes to the tune of ₹.14,81,64,519/-. It is pertinent to note that these debit notes were raised during the course of the execution of the Purchase Orders and thus these debit notes as well as the excess amount paid by the Claimant are within the ambit of the Arbitration Clause and thus the entire claim of the Claimant is arbitrable.
56. The sum and substance of the Plaintiff's averments is that there are two types of disputes, one is arbitrable and the other is non-arbitrable. But the Plaintiff has even to this day, not come out with a clear statement as to what are the arbitrable disputes and what are the non-arbitrable disputes and its extent according to him. Thus, the bald statement of the Plaintiff that the claim of the Claimant was not arbitrable /41/ Com.A.P.No.12/2023 falls flat without any basis since the claim of the Claimant arise out of and in connection with the Purchase Orders wherein the advance payments have already been paid. That apart, the Plaintiff had not raised the dispute regarding the arbitrability before the High Court at the time of reference or before the Arbitral Tribunal until 08.04.2022. Thus, the averment of the Plaintiff that the claim of the Claimant is non-arbitrable is nothing but an afterthought to delay and deny the Claimant of its rightful claim.
57. The Plaintiff has the habit of denying everything in his pleadings. learned Arbitrator has gone into the entire evidence, and eventually award has been passed. The Plaintiff has miserably failed in all counts and is raising several untenable grounds even in this Petition. All the grounds urged by the plaintiff have been dealt by the learned Arbitrator and also by the Hon'ble High Court of Karnataka. The Plaintiff has repeated the same even in this Petition. Therefore, there are no grounds to set aside the award. Accordingly, this Petition requires to be rejected.
58. The claimant has reiterated the averments made above while denying each of the grounds urged by the plaintiff and prayed the Court to dismiss the petition with exemplary costs.
59. I have heard the arguments addressed by the learned Counsel for the Plaintiff and defendant No:1. The /42/ Com.A.P.No.12/2023 Learned Counsel for the defendant No:1 has relied on the following decisions and also submitted his written arguments.
60. The Learned Counsel for the Claimant has relied on the following decisions in support of his case.
Sl.No. Particulars Citation
01. Delta Distilleries Limited Vs. (2014) 1 SCC 113 United Spirits Limited and Ors.,
02. Silor Associate Vs.Bharat (2014) 213 DLT Heavy Electrical Ltd., 312
61. The Learned Counsel for the respondent has relied on the following decisions in support of his case.
Sl.No. Particulars Citation
01. Biraj @ Briraji and Anr., Vs. 2020 10 SCC 729 Surya Pratap and Ors.,
02. Booz Allen Hamilton Inc., Vs. 2011 5 SCC 532 SBI Home Finance Ltd.,
03. Pandurang Jivajirao ILR 2007 KAR 3602 Manglekar and Ors., Vs. State of Karnataka
04. N.T.Vijayakumar and Others 1999 2 Kar.LJ 490 Vs.The Allahabad Bank, Nehru Road Branch, Shimoga
05. Oriental Insurance Company 2018 6 SCC 534 Ltd Vs.Narbheram Power and Steel Pvt., Ltd., /43/ Com.A.P.No.12/2023
62. I have gone through the materials available on record.
63. The following points arise for my determination:
(1) Whether the Plaintiff has made out any of the grounds as set out under Section 34 of Arbitration & Conciliation Act, 1996 so as to set-aside the Award dated 01.10.2022 passed by the Learned Arbitral Tribunal in A.C.No.86/2016? (2) What Order?
64. My findings on the above points are as follows:-
Point No. 1 : - In the NEGATIVE
Point No.2 : - As per final orders
for the following
REASONS
65. Point No.1 : The Plaintiff has filed a petition under Section 34 of Arbitration & Conciliation Act, 1996 praying the Court to set aside the Award passed by the Learned Arbitral Tribunal/Defendant No:2 in A.C.No:86/2016.
66. For the sake of convenience the parties are hereafter referred to as Claimant and Respondent as before the learned Arbitrator in A.C.No:86/2016.
67. In order to determine the suit it is useful to refer to Section 34 of Arbitration and Conciliation Act, 1996 which reads as under:
/44/ Com.A.P.No.12/2023 ARBITRATION AND CONCILIATION ACT, 1996 [Section : 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 establishes on the basis of record of the Arbitral tribunal 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 /45/ Com.A.P.No.12/2023 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 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, /46/ Com.A.P.No.12/2023 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.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral Tribunal will eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.
68. It is settled law that the Court while dealing with an application under Section 34 of Arbitration & Conciliation Act, 1996 is required to exercise its jurisdiction within the frame work of Section 34 and Section 34 (2A) of the Act. Where two views are possible in respect of a dispute, the view taken by the Arbitrator cannot be found fault with by the Court. The Court is not empowered to set aside an /47/ Com.A.P.No.12/2023 award under the Public Policy ground unless the award shocks the conscience of the Court. The Court shall not interfere with the award on the assumption that the award is unjust on the facts of the case and substitute its view for that of the arbitrator to do what it considers to be just. The Court acting under Section 34 of the Act does not sit in appeal and correct the consequential errors of facts as the arbitrator is the ultimate master of the quantity and quality of evidence. The mere erroneous application of the law is not a ground to interfere with the award under the head 'patent illegality', unless the patent illegality is apparent on the face of record/award and must go to the root of the case. The Court has to consider the grounds raised by the plaintiff seeking interference with the award in the narrow corridors of the principles enunciated under Section 34 of the Act and the ratio of the precedents. The Court shall not interfere with the Award only on the ground that the reasoning and findings of the learned Arbitral Tribunal are not in consonance with the line of case/contentions raised by the aggrieved plaintiff. The impugned Award cannot be modified or partially set aside, where the claims are interconnected and cannot be segregated from the other. The Court acting under Section 34 of the Act cannot remand the matter to the Arbitral Tribunal to allow the Arbitral Tribunal to either review or reconsider the findings or conclusions that have been already rendered.
/48/ Com.A.P.No.12/2023
69. Having regard to the scope of Section 34 of the Arbitration & Conciliation Act, 1996 this Court refrains from re-appreciating the evidence. It is not necessary to quote the rival pleadings, evidence available on record as the learned Arbitral Tribunal while passing the Award has meticulously examined the rival pleadings, the evidence adduced by the parties and the written arguments submitted by them apart from referring to the ratio of the precedents.
70. From the materials available on record it is evident that there existed a business relationship between the claimant and the respondent since 2002-03 and onwards. The Claimant has issued various purchase orders to the respondent for supply of iron ores. The Respondent has supplied the materials in pursuance of the purchase orders placed by the Claimant. The Respondent has raised invoices and the claimant has made payments towards the supply of materials. There is no dispute between the Claimant and the respondent in respect of transportation of materials. The present case involves the dispute in respect of export business of the claimant. The Claimant has preferred the claim petition on the basis of seven purchase orders. The Claim is not in respect of any other transaction. The materials available on record show that the other purchase orders, other than the 7 purchase orders, are unconnected to the dispute.
/49/ Com.A.P.No.12/2023
71. The dispute raised by the Claimant involves Short supply of materials and supply of substandard materials. The Claimant is contending that it has made advance payment to the tune of ₹.88,69,41,427/-. The respondent has raised various invoices to the tune of ₹.63,26,04,213/- against the claimant. The Claimant is contending that the respondent has retained an amount of ₹.25,43,37,214/- without any justification. The respondent has failed to supply the materials or refund ₹.25,43,37,214/- The Claimant has also made a claim towards other dues to a tune of ₹.14,81,64,519/-.
72. The Respondent has denied the case of the Claimant. The Respondent is contending that Sri.Mohit J Ratolikar has no authority to represent the claimant and prosecute the arbitration proceeding. The Respondent is contending that the claimant is seeking to consolidate various transactions which have been taken place from 2003 onwards up to 2013 between the claimant and the respondent. The claimant is trying to merge various transactions in the nature of transportation or jetty infrastructure contracts etc., The Claimant has not furnished break-up regarding the payments made and the materials supplied and short fall in supply of materials. The Claimant has clubbed non-arbitrable and arbitrable disputes and contended that the very arbitration proceeding should be terminated. The Respondent has various counterclaims against the claimant which would be made before the /50/ Com.A.P.No.12/2023 relevant forum as such the parties may be relegated to work out their counterclaims before an appropriate forum.
73. The Claimant in his rejoinder reiterated the averments made in the Claim statement apart from denying the objections raised by the respondent in the defense statement and prayer of the respondent with respect to non-existing counterclaim.
74. The Learned Arbitral Tribunal after analyzing the materials available before it has come to the conclusion that the present dispute is confined to seven purchase orders. The Claimant has established payment of advance amount and the respondent has supplied materials worth ₹.63,26,04,213/-. The Respondent has retained a sum of ₹.25,43,37,214/-. The Learned Tribunal has rightly observed that the Respondent has not furnished any materials to show that he has raised invoices in respect of 7 purchase orders for having supplied the materials to the Claimant. The Learned Tribunal has rightly observed that the advance payment made by the Claimant confines only in respect of 7 purchase orders. The 7 purchase orders relied on by the Claimant contain arbitration clauses and the claim made by the Claimant beyond these 7 purchase orders falls outside the scope of reference and are non-arbitrable. Hence, the learned Arbitral Tribunal has rightly declined to adjudicate the claim of the claimant beyond the 7 purchase orders.
/51/ Com.A.P.No.12/2023
75. The Learned Tribunal has allowed the claim of the Claimant for ₹.. 25,43,37,214/- The Learned Tribunal after considering the materials available on record has rightly opined that the claimant is entitled for award of interest and determined the rate of interest at 9% p.a. The Tribunal has assigned proper and convincing reasons backed by the ratio of decision of the Hon'ble Supreme Court of India and refused to award interest at 24% p.a., as claimed by the Claimant. The rate of interest determined by the Tribunal at 9% p.a. is proper and reasonable. The Tribunal has awarded interest at 9% p.a. from the date of the respective 7 purchase orders till the date of actual payment of the amount, exclusive of the period during which the stay order was operative, which calls for no interference by this Court.
76. The Respondent has sought the leave of the learned Arbitral Tribunal to pursue his counter claim before the appropriate forum on the count that the same is non- arbitrable. The Learned Tribunal after considering the rival contentions of the Claimant and the Respondent has come to a right conclusion that the alleged counterclaim of the respondent does not satisfy the requirements of Section 23 of the Arbitration & Conciliation Act, 1996. The Learned Tribunal has rightly relegated the respondent to seek his remedy before an appropriate forum subject to law of Limitation. The learned Arbitral Tribunal has also reserved the liberty to the Claimant to seek redress of its claim which are held to be non-arbitrable as per Section 16 of the /52/ Com.A.P.No.12/2023 Arbitration & Conciliation Act, 1996 subject to law of Limitation. The Claimant and the Respondent have not assailed the said finding of the learned Arbitral Tribunal.
77. The Respondent is contending that Sri.Mohit J Ratolikar has no authority to prosecute the Arbitration proceeding on behalf of the Claimant Company as he is not duly authorized by the Claimant Company. The Learned Arbitral Tribunal has extensively considered the said contention with reference to the materials available on record which shows that Mr. Mohit J Ratolikar has represented the claimant company before the Hon'ble High court of Karnataka in CMP No. 502/2013. The Claimant Company has passed a resolution authorizing Mr. Mohit J Katolikar to file/defend any civil or criminal proceedings on behalf of the company in any court, tribunal, commission or any other authority. In such circumstances no fault could be found with the conclusion of the learned Arbitral Tribunal that Mohit J. Katolikar is duly authorized to represent the claimant company before the Arbitral Tribunal.
78. The Learned Tribunal has held that the claim of ₹.25,43,37,214/- made by the claimant in respect of 7 purchase orders is not barred by time. The Learned Arbitral Tribunal has relegated the Claimant and Respondent to exhaust their remedies in respect of non-arbitrable claim of the claimant and counter claim of the respondent before an appropriate forum subject to law of limitation. Thus, the /53/ Com.A.P.No.12/2023 findings of the learned Tribunal calls for no interference by this Court.
79. After examining all the materials available before it the learned Arbitral Tribunal has rightly answered Issue Nos. 1,2,3 and 5 partly affirmative and Issue No:4 in the affirmative and allowed the claim of the claimant in part, which calls for no interference by this Court.
80. The Learned Tribunal has assigned proper and convincing reasons while accepting the Claims put forth by the Claimant partially. The materials available on record justify the reasoning adopted and findings given on Claims of the Claimant and on the counter claim of the respondent by the learned Arbitral Tribunal while passing the impugned Award. The Plaintiff herein i.e. the respondent has failed to make out good grounds to interfere with the impugned award to set aside the award in its entirety. In these circumstances POINT No.1 is answered in the NEGATIVE.
81. POINT No.2 : In view of the discussion made above and findings on Point No:1 I pass the following ORDER The petition filed by the plaintiff (Respondent in A.C.No.86/2016) under section 34 of the Arbitration and Conciliation Act, 1996 is hereby dismissed with costs.
/54/ Com.A.P.No.12/2023 The Award dated:01.10.2022 passed by the learned Arbitral Tribunal in A.C.No.86/2016 is hereby confirmed.
Return the Records in A.C.No:86/2016 to the Arbitration & Conciliation Centre, Bengaluru. (Dictated to the Stenographer, transcribed and typed by her, the corrected and pronounced by me in the Open Court on this 25th day of APRIL 2024) (S.J.KRISHNA) LXXXIX ADDL.CITY CIVIL & SESSIONS JUDGE, BENGALURU.
(CCH-90)
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Digitally
signed by S J
SJ KRISHNA
KRISHNA Date:
2024.04.29
05:59:09 -0400