Beat All Sports vs State Trading Corporation Of India (STC)

Hima Kohli, J.—The present petition filed under Sections 30 and 33 of the Arbitration Act, 1940, is directed against an award dated 18.1.1990 given by the Sole Arbitrator while adjudicating the disputes between the petitioner/objector and the respondent/STC, claimant before the Arbitration Tribunal.

Succinctly stated, the facts of the case are that the respondent/STC entered into a contract dated 23.12.1978 with M/s Konsumex Hungarian Foreign Trade Company (hereinafter referred to as the foreign buyer) for export of sports goods mentioned in the foreign contract. The respondent/STC entered into a back-to-back contract dated 24.3.1979 with the petitioner/objector for the manufacture and supply of the goods covered under the foreign contract.

Disputes arose between the parties when the respondent/STC served a notice dated 28.3.1983 upon the petitioner/objector, calling upon it to arrange to defend the claims made by the foreign buyer against the respondent/STC and enter appearance before the Arbitration Tribunal constituted by FICCI for the said purpose. The claim made by the foreign buyer was for a sum of Rs. 2,40,986.97 paise along with the interest @ 18% and costs towards the damages, alleged to have been suffered by the foreign buyer due to defective supplies made by the respondent/STC. In the legal notice dated 28.3.1983, the respondent/STC informed the petitioner/objector that, in case the latter fails to enter appearance before the Arbitration Tribunal, the respondent/STC shall contest the claim at his risk and cost and it shall be liable for the payments of any sums awarded on the claims of the foreign buyer and for the costs of the proceedings. The aforesaid notice was duly replied to by the petitioner/objector vide letter dated 10.4.1983, stating inter alia that the dispute was purely between the foreign buyer and the respondent/STC and that the petitioner/objector did not come into the picture. In view of the above, the respondent/STC invoked the arbitration clause governing the parties and approached the Indian Council of Arbitration for referring the disputes between the parties regarding the liability of the petitioner/objector for payment of any sums awarded on the claims filed by the foreign buyer before the Arbitration Tribunal and the costs to be incurred in relation to the aforesaid proceedings. Pursuant thereto, an Arbitrator was appointed to adjudicate the disputes raised by the respondent/STC against the petitioner/objector, which culminated in passing of the impugned award.

A perusal of the impugned award shows that the learned Arbitrator framed the following five issues, on the basis of the pleadings of the parties:

(i) Whether the arbitrator has jurisdiction to entertain present disputes between the parties for the reasons given by the defendant in its reply to the statement of claim?

(ii) Whether the claim of the claimant is barred by time?

(iii) Whether the relief claimed by the claimant in the statement of claim is pre-matured as alleged by the defendant in its reply to the statement of claim?

(iv) If issue No. 3, is decided against the defendant then to what relief, if any, the claimant is entitled?

(v) Relief

All the aforesaid issues were decided against the petitioner/objector and in favour of the respondent/STC and it was ultimately held that the respondent/STC was entitled to the relief of declaration, that the petitioner/objector was liable for payment of any and all sums payable by the respondent/STC under any award made by the Arbitration Tribunal in the claim filed by the foreign buyer against the respondent/STC, in relation to the contract dated 23.12.1978. The costs and expenses of the arbitral proceedings were directed to be borne equally by the parties. Aggrieved by the aforesaid award, the petitioner/objector has preferred the present petition.

Counsel for the petitioner/objector has raised four arguments to assail the impugned award. Her first argument is that the Arbitrator did not have jurisdiction to adjudicate the disputes between the parties as the arbitration clause governing the parties itself was washed away, in view of the fact that the foreign buyer and the respondent/STC entered into a protocol dated 24.6.1980. She submits that the learned Arbitrator misconducted the proceedings by not looking into the material documents, which were placed on the record including the protocol letter dated 24.6.1980, letter dated 24.10.1980, issued by the respondent/STC and the letter dated 29.10.1980, issued by the petitioner/objector. This aspect of the matter was decided by the learned Arbitrator while dealing with issue No. 1 as reproduced above.

A perusal of the impugned award shows that the learned Arbitrator duly took notice of the fresh protocol entered into between the foreign buyer and the respondent/STC on 24.6.1980 and returned his findings to the effect that the said protocol was not in supersession of the earlier agreement dated 23.12.1978, entered into between the foreign buyer and the respondent/STC, but was in furtherance of that agreement. It was also held in the award that the protocol agreement dated 24.6.1980 was not in supersession of the agreement dated 24.3.1979 between the respondent/STC and the petitioner/objector. Thus, the learned Arbitrator held that the protocol dated 24.6.1980 was only in continuation of the aforesaid earlier agreements and the same did not, in any way, supersede the agreement dated 24.3.1979 and the respondent/STC was entitled to invoke the provisions of the arbitration clause being Clause 12 governing the parties as contained in the said agreement and seek adjudication of the disputes interse the respondent/STC and the petitioner/objector.

A perusal of the impugned award shows that the learned Arbitrator did not misconduct himself while deciding the aforesaid issue as the said issue has been decided after taking into consideration all the relevant documents, and particularly two agreements dated 23.12.1978 and 24.3.1979 and the protocol of 24.6.1980. A perusal of the said documents also shows that the protocol dated 24.6.1980 was between the respondent/STC and the foreign buyer alone. The petitioner/objector not being a signatory to the aforesaid protocol, it cannot be claimed that the agreement between the petitioner/objector and the respondent/STC dated 24.3.1979 stood superseded by the said protocol. Therefore, this Court does not agree with the submissions made by the counsel for the petitioner/objector, insofar as the decision of the learned Arbitrator, in respect of the first issue is concerned. The learned Sole Arbitrator was justified in holding that he had the jurisdiction to entertain the disputes between the parties.

The second argument taken to assail the impugned award is that that learned Arbitrator erred in arriving at the conclusion that the claim of the respondent/STC is not barred by limitation. It is stated by the counsel for the petitioner/objector that the aforesaid issue has been dealt with by the learned Arbitrator in very general terms and not specifically. She relies on the judgement rendered by the Supreme Court in the case of J.C. Budhraja Vs. Chairman, Orissa Mining Corporation Ltd. and Another, to state that, in the case of arbitration, limitation for the claim is to be calculated on the date on which the arbitration is deemed to have commenced and that Section 37(3) of the Act provides that for the purpose of the Limitation Act, an arbitration is deemed to have commenced when one party to the Arbitration Agreement serves on the other party thereto, a notice requiring appointment of an Arbitrator.

A perusal of the observations made by the learned Arbitrator while deciding issue No. 2 as regards the claim of the respondent/STC that it is barred by limitation shows that the learned Arbitrator took note of various dates after perusing the pleadings and examining the material placed on the record. It has been stated in the award that the claim of the foreign buyer was initiated on 31.3.1982 and not on 31.3.1981, as claimed on behalf of the petitioner/objector, and in view of the aforesaid, it was held that since the claim petition of the respondent/STC was filed on 24.11.1984 before the arbitration, the same was well within limitation. It is settled law that even if it is assumed that two views can possibly be taken on the basis of the same facts and law, this Court should restrain from interfering in the award merely because the other view which may in its view be a possible view was not taken by the learned Arbitrator. M/s. Hind Builders Vs. Union of India,

Further arguments sought to be raised by the counsel for the petitioner/objector, in respect of limitation by going into the question of when the cause of action arose, in respect of the disputes between the foreign buyer and the respondent/STC, and the date of invocation of the arbitration clause governing the aforesaid parties can hardly be urged before this Court when submissions to the said effect have apparently not been made before the learned Arbitrator, as is borne out from the perusal of the impugned award or, for that matter, even in the present petition. This Court refuses to be drawn into the said issue, which is purely a question of facts, at this belated stage. Hence, the plea raised on behalf of the petitioner/objector to challenge the award on the ground of limitation, is turned down.

The third argument urged on behalf of the petitioner/objector is that the learned Arbitrator failed to give a finding in respect of issue No. 3, in favour of the petitioner/objector. Issue No. 3 was framed to decide as to whether the relief claimed by the respondent/STC was pre-mature. The objection raised by the counsel for the petitioner/objector is that as the respondent/STC was itself prosecuting the litigation with the foreign buyer, which fact was not brought to the knowledge of the petitioner/objector and the latter was kept out of the said litigation, the respondent/STC could not have sought any relief for declaration against the petitioner/objector. The aforesaid contention is demolished by a mere perusal of the impugned award wherein the learned Arbitrator culled out the relevant facts of the case before dealing with the claim of the respondent/STC. It has been observed in the award that the respondent/STC served a notice dated 28.3.1983 upon the petitioner/objector invoking the provisions of the back-to-back contract and calling upon the petitioner/objector to take steps to defend the claim made by the foreign buyer and enter appearance before the Arbitration Tribunal constituted by the FICCI. The petitioner/objector was also informed that in case it fails to contest the said claim, then the same will be contested by the respondent/STC at the risk and costs of the petitioner/objector. In reply to the aforementioned facts, the petitioner/objector issued a letter dated 10.4.1983 informing the respondent/STC that it does not come into the picture, in respect of the disputes between the parties. In view of the aforesaid stand taken by the petitioner/objector, it cannot be inferred that the litigation between the foreign buyer and the respondent/STC was not brought to the notice of the petitioner/objector or that it was intentionally kept out of the picture by the respondent/STC. On the contrary, it is clearly established that the petitioner/objector was well aware of the litigation initiated by the foreign buyer against the respondent/STC and chose to stay away from it.

The last argument raised on behalf of the petitioner/objector is that the counter-claim of the petitioner/objector for US$3037.50 was not considered by the learned Arbitrator. When asked as to whether the said counter-claim was made a subject matter of reference, counsel for the petitioner/objector replies in the negative. The said fact is also borne out from a perusal of the reply filed by the petitioner/objector to the claim of the respondent/STC. In these circumstances, the learned Arbitrator cannot be blamed for not considering a claim, which was never raised by the petitioner/objector before him. In fact, had he taken note of the said claim without the same being referred to him in accordance with the terms of reference, he would have exceeded his jurisdiction. Refer : Orissa Mining Corporation Ltd. Vs. Prannath Vishwanath Rawlley,

In the light of the aforesaid discussions, this Court is of the opinion that the objections taken by the petitioner/objector to the award are devoid of merits and are liable to be rejected. Accordingly, the present application is rejected. The award dated 18.1.1990 is made rule of the Court. Decree shall be drawn up accordingly. There shall be no orders as to costs.