MMTC Limitd vs Sanco Trans Limited & Anr

This application has been filed under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside the award of the sole

Arbitrator (Hon''ble Mr.Justice K.Swamidurai (Retd.)) dated 07.07.2004. The gist of the application under Section 34 is as follows:

The petitioner is a Government of India Company having its corporate office at Core 1, Scope Complex, 7-Institutional Area, Lodhi Road,

New Delhi 110 003 and its Regional Office at ""Chennai House"", No.7 Esplanade, Cehnnai 600 108. According to the petitioner in the regular

course of activities, they import various fertilisers. The applicant was appointed as a consignment agent at Chennai Port in the year 1995 and 1996

by M/s. Paradeep Phosphate Limited, who was the handling agent at Chennai Port for the Ministry of Agriculture, Department of Chemicals and

Fertilisers, Government of India. The petitioner had in turn appointed the first respondent as its clearing and forwarding agent under agreement

dated 18.07.1995. Pursuant to the said agreement, the first respondent handled clearing and forwarding of the bulk fertilisers imported through the

vessels viz., Asian Pioneer, Petrowave, Allalihorn, Hafez, Jayalakshmi and Golden Kiris. It is claimed that in the course of handling all these vessels

by the first respondent there were various instances of deficiency in service, negligence in the performance of the job and several acts of

commission and omission on the part of the first respondent, which resulted in heavy loss to the petitioner.

According to the petitioner, due to the said negligent handling, large quantity of imported urea was dis-coloured and the said dis-coloured Urea

could not be sold in open market. The petitioner was forced to sell the dis-coloured urea at a discounted rate which resulted in loss due to the

price difference. The petitioner also suffered godown charges for having stored the dis-coloured cargo in the godown for a longer time which

resulted in heavy rents being paid by the petitioner for the godown for over the period of three years. Therefore, the petitioner made a total claim

of Rs.80,95,170.33 against the first respondent under several heads. The petitioner also claimed interest on the said sum of Rs.80,95,170.33 at

24% p.a. for the period from 01.10.1995 to 08.09.1999 and after adjusting the handling charges due and payable by the petitioner to the first

respondent to the tune of Rs.72,62,712.25, the petitioner claimed the balance amount.

In view of the Arbitration Clause contained in the agreement dated 18.07.1995. The petitioner had appointed the second respondent as a sole

Arbitrator. A counter claim was made by the respondents before the arbitrator. The learned Arbitrator has passed an award on 07.07.2004. The

learned Arbitrator found that the petitioner is entitled to a sum of Rs.20.24 lakhs with interest at 18% per annum from 17.12.1996 to 30.06.2004

and the respondent is entitled to a sum of Rs.72.62 lakhs with interest at 18% per annum from 17.12.1996 to 30.06.2004. After adjusting the

claim the learned Arbitrator concluded that the claimant would be entitled to an award for a sum of Rs.47.56 lakhs with future interest at 9% per

annum from 01.07.2004 till date of realization and the respondent on its counter claim would be entitled to an award of Rs.170.65 lakhs with

future interest at 9% per annum from 01.07.2004 till date of realisation. This award is challenged in this application.

I have heard Mr.N.R.Chandran, learned Senior Counsel appearing for Mr.K.C.Ramamurthy, for the petitioner and Mr.K.Bijai Sundar, learned

counsel appearing for the first respondent.

Mr.N.R.Chandran, learned senior counsel appearing for the petitioner would contend that there was a considerable delay in passing of the

award by the Arbitrator. He would point out that the recording of evidence was closed on 07.05.2002 and the arguments on the side of both the

parties is completed on 04.10.2002. But the award came to be passed on 07.07.2004. Pointing out that a delay of more than nearly two years

had occurred in passing of the award, Mr.N.R.Chandran, learned Senior Counsel would contend that the award is vitiated because of the delay.

Countering the said submission on the ground of delay Mr.K.Bijay Sundar, learned counsel appearing for the first respondent would contend

that the petitioner had not raised the ground regarding the delay in passing of award in the original petition filed by it in October 2004. Though, this

petition has been pending for nearly 12 years no additional grounds had been raised on the question of delay by the petitioner. Therefore,

according to him, the petitioner should not be allowed to raise the ground that delay in passing of the award is a vitiating factor. He would also

contend that delay by itself cannot be a reason to set aside the award especially when the Arbitration Proceedings pertained to the Contract and

Maritime Law a specialized subject. He would further point out that voluminous documents were placed before the Arbitration Tribunal, witnesses

were examined and Cross-examined, elaborate written submissions were made and therefore, the alleged delay cannot be a ground for setting

aside the award. He would also submit that the award is a speaking award with elaborate reasons. He would also invite my attention to the

judgment of Hon''ble Mr.Justice T.S.Sivagnanam, in OP No.20 of 2006 between the same parties with reference to another contract reported in

Manu/TN/0558/2017, wherein a similar plea regarding delay was rejected by this Court.

Mr.N.R.Chandran, learned Senior Counsel appearing for the petitioner would also contend that the learned Arbitrator has only reproduced the

portions of the written submissions filed by the parties and throughout the award he has not discussed the effect of the evidence and arrived at a

conclusion one way or the other. He would further contend that due to the negligence on the part of the respondent the imported urea got dis-

coloured. According to him, the first respondent had not taken sufficient precaution to cover the urea imported as a result of which the same got

discoloured due to the coal dust that emanated ships that were unloading the coal in the same area settling on the urea that was discharged from the

vessels handled by the respondent. The Survey Reports relating to the ships handled by the first respondent have been filed as Exs.C9 to C16.

Mr.K.Bijay Sundar, learned counsel appearing for the 1st respondent would contend that all the Survey Reports in fact suggest that the

respondent had taken every effort to collect spillages in the wharf area. Considerable amount of spillages got damaged due to incessant rain

contributing to over all loss of cargo. Multiple handling of cargo at various points caused spillages, contributing to the overall shortage. It is not in

dispute that the dis-colouration of the imported cargo was due to the handling of coal in the same wharf or nearby berths. It is contended by the

petitioner that the respondent exhibited carelessness and negligence in handling the cargo and had stored the cargo uncovered in the berths before

the cargo was loaded on to the lorries for transportation to the godowns, which had resulted in the coal dust that emanated from nearby ship

settling on the cargo which resulted in dis-colouration. Mr.Bijay Sunder, learned counsel appearing for the respondent would point out the survey

report which contains the details of the discharge operation and contend that the cargo was loaded by means of grabs to the waiting lorries at each

discharge point.

The survey reports which has been filed as Ex.C8 to C16 contained the details of the discharge operations. In all the Survey Reports the

details of discharge operation is almost identical and it reads as follows:

The vessel commenced discharge operations at 0700 hours on 28h August 1995 (the date and time of discharge varies from vessel

to vessel). Cargo was discharged by means of grabs to waiting lorries at each discharge point. After each lorry was loaded to its

capacity it was observed and proceeded to various Weigh bridges for weighment.

The discharge reports also suggest that the surveyors were in continuous attendance on the wharf to ensure that spillages that had occurred

during discharge operations are immediately swept. Spilled cargo on the wharf which were sound were immediately loaded to the waiting lorries.

From the above, it could be seen that there is no possibility of the cargo having been stored on the wharf of the berth. Only the spilled cargo was

immediately swept and loaded on the waiting lorries. Therefore, the claim of the petitioner that the respondent had exhibited negligence in not

covering the cargo that was stored in the wharf or the berth is incorrect on facts.

The grounds of challenge of an award under Section 34 of the Arbitration and Conciliation Act, 1996 are very limited. Unless the petitioner

makes out a case for interference within the ambit of Section 34, I do not think the award can be set aside on the grounds other than those that are

enumerated under Section 34 of the Arbitration and Conciliation Act, 1996. Insofar as the question of delay is concerned, it should be pointed out

that the unlike 1940 Act, in 1996 Act does not provide for any time limit for passing the award. Time limit had been introduced only by the 2015

amendment by insertion of Section 29(A). In view of the fact that the impugned award had been passed prior to the introduction of Section 29(A)

and it has been passed under the 1996 Act, it is clear that there is no time limit fixed for passing of the award at the time of the award was passed.

However, if the petitioner is aggrieved by the delay in passing of the award, it was open to the petitioner to have invoked Section 14 of the Act

which provides for the remedy in case of delay in passing of award. It is obvious that the petitioner did not invoke the provisions of Section 14.

This very point regarding delay has been considered by Hon''ble Mr.Justice T.S.Sivagnanam in his judgment in OP No.20 of 2006 dated

16.02.2017 wherein he had, after referring to the judgment of the Delhi High Court in Union of India v. Niko Resources Ltd., & Anr., dated

02.07.2012, held that the award cannot be set aside on the ground of delay unless it is shown that the award suffered from the patent illegality on

account of such delay. In view of the above pronouncement, I do not think there is any scope for the petitioner to contend that the delay in passing

the award vitiates the awards. Therefore, I am obliged to reject the contention of the petitioner on the ground of delay.

The next ground stressed by Mr.N.R.Chandran, learned Senior Counsel appearing for the petitioner is on factual matrix of the matter. He

would submit that the Arbitration Tribunal has not discussed the evidence independently. But had only extracted the portions of the written

arguments verbatim and had incorporated its conclusions. In essence, the learned Senior Counsel would contend that the award is devoid of

reasons, lack in objective consideration and fails to discuss the claims of the parties to the proceedings. The award being a replica or a repetition of

the written arguments cannot be set to be a valid award which would satisfy the requirements of an award and to the Arbitration and Conciliation

Act, 1996. This aspect has also been raised by the petitioner in OP No.20 of 2006 which is the subject matter of the decision of the Hon''ble

Mr.Justice T.S.Sivagnanam dated 16.02.2017. A reading of the award would show that the learned Arbitrator had extracted the rival contentions

and had thereafter concluded on the effect of the documents as well as the evidentiary value of the same. A reading of the award further shows that

after referring to the written submissions and after extracting the same, the learned Arbitrator had reached his independent conclusions and

rendered his findings, observations on each of the contentions raised before him.

In P.Dhandapani & Anr. v. The Motor and General Finance Ltd., reported in 2006 (2) ARBLR 274 Delhi, the Delhi High Court had

observed that an Arbitrator is not like a Court, which write a judgment what is required to be done is that the thought processes of the Arbitrator

should be available from the reasons set out. In National Highway Authority of India v.Gammon India Ltd., dated 21.08.2014 made in FMA 2536

of 2013, the Calcutta High Court, after considering various decisions on the point, pointed out that modern tendency more especially in

commercial arbitration, is to endeavor to uphold and award the skilled persons that the parties themselves have selected to decide the question at

issues between them. If an Arbitrator had acted within the terms of the submission and has not violated any rules such as rules of natural justice,

Court should be slow in setting aside the award.

In the case on hand admittedly, the Arbitrator was appointed by the petitioner and the said appointment was accepted by the respondent

without any objection. A reading of the award particularly from Paragraph 64 to 72 shows that the Arbitrator has applied his mind to the issues

that are raised before him and after giving reasons stated his conclusions. From Paragraph 73 to 85, the learned Arbitrator had examined the issues

independently and stated his conclusions thereon. Therefore, I do not think the petitioner is right in its submission that the award is the replica of the

written arguments or written submissions made by the parties. No other contention was raised by the learned counsel for the parties. Therefore

both the grounds of challenge raised by the petitioner fail.

In fine the OP No.930 of 2005 is dismissed. However, there will be no order as to costs.