MMTC Ltd. vs S. Albert and Co. and Mr. Justice Swamidurai, Sole Arbitrator

S. Rajeswaran, J.—This Original petition has been filed u/s 34 of the Arbitration and Conciliation Act, 1996, hereinafter called ''the Act'', to

set aside the award dated 18.9.2002 passed by 2nd respondent and consequently remand the award for passing additional award in respect of the

counter claim of the petitioner and to assign reasons relating to the issue No. 3 as contemplated u/s 31(3) of the Act.

The brief facts as culled out from the petition are as follows:

The petitioner is a Government of India undertaking Company and they appointed 1st respondent as clearing and forwarding agent on 21.8.1995

and an agreement was entered into on that day. According to the agreement dated 21.8.1995, 1st respondent was to clear the imported sugar

from Chennai Harbour and to despatch the same to various destination all over India. The sugar bags were to be delivered to M/s. Food

Corporation of India. During the period between 22.8.1995 and 5.10.1995 1st respondent transported the imported sugar from Chennai port to

various destinations weighing 41,518 MT. The petitioner came to know that out of 41,518 MT of sugar transported to various destinations, there

was a short delivery of sugar totalling 255.107 MT valuing Rs. 43,13,025/-. When this was brought to the notice of 1st respondent, 1st

respondent ignored to assign any reason for the shortage, but was claiming a sum of Rs. 35.65 lakhs being the service charges. On 2.9.1998, 1st

respondent filed O.P. No. 665/1998 praying for an appointment of arbitrator and in that O.P., the petitioner gave an undertaking to refer the

dispute to an arbitrator within 15 days. Accordingly the petitioner appointed 2nd respondent as arbitrator and before 2nd respondent; 1st

respondent claimed a sum of Rs. 35.60 lakhs and the petitioner claimed a counter claim for a sum of Rs. 43,78,641.74. The arbitrator by an

award dated 18.9.2002 allowed the claim of 1st respondent as prayed for and dismissed the counter claim of the petitioner. Aggrieved by the

award dated 18.9.2002 the above O.P., has been filed by the petitioner u/s 34 of the Act, 1996.

The award was assailed on the following grounds:

1) The findings of the arbitrator in rejecting the counter claim of the petitioner on the ground of limitation is erroneous and is in conflict with Section

21 of the Act, 1996.

2) The arbitrator failed to look into the material document ascertaining the rights of the petitioner.

3) The award is not in compliance with Section 21 and Section 31 of the Act, 1996 and the agreement dated 21.8.95 and also the terms of

reference dated 17.2.2000.

Heard the learned Counsel for the petitioner and Mr. Muthukumarasamy, learned Senior Counsel for 1st respondent. I have also perused the

documents filed and the judgments referred to by them in support of their submissions.

The learned Counsel for the petitioner while reiterating the grounds mentioned in the petition submitted that the award has not been properly

passed and therefore the same has to be remanded to 2nd respondent for fresh consideration. He relied on the following decisions in support of his

contentions:

1) State of Kerala and Another Vs. E.A. Cheriyan Kunju,

2) R.S. Avtar Singh and Co. Vs. National Projects Construction Corporation Ltd.,

3) Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation,

4) Hari Shankar Singhania and Others Vs. Gaur Hari Singhania and Others,

5) Government of Kerala and Another Vs. V.P. Jolly,

6) 2003 (2) CTC 282 (ONGC Ltd. v. SAW Pipes Ltd. (SC)

Per contra, the learned Senior Counsel for 1st respondent submitted that the award under challenge has been passed on the basis of the

evidence let in by the parties and such factual finding cannot be challenged u/s 34 of the Act, 1996. The learned Senior Counsel pointed out that

there is a vast difference between 1940 Act and 1996 Act and the powers conferred on the courts to interfere with an award. He further submitted

that under the Act, 1996 the power of the courts to interfere with an award are restricted and unless sufficient grounds are shown as set out in

Section 34 of the Act, 1996, courts cannot interfere with an award. He relied on the decision of the Supreme Court reported in McDermott

International Inc. Vs. Burn Standard Co. Ltd. and Others, .

I have considered the rival submissions carefully with regard to facts and citations.

The undisputed facts are that the petitioner appointed 1st respondent as their clearing and forwarding agent for handling their bagged sugar

import consignment at Chennai vide their agreement dated 21.8.1995. 1st respondent cleared the entire quantity and despatched 41,518.008 MT

to various destinations during the period 22.8.1995 to 5.10.95. The petitioner''s contention is that there was a short delivery of sugar totalling

255.107 MT valuing Rs. 43,13,025/- for which 1st respondent did not give any acceptable reasons. Therefore according to the petitioner this loss

was to be made good by 1st respondent as per Clause 10 of the agreement. This was disputed by the petitioner relying on Clause 11 of the

agreement by contending that once the bagged sugars were placed in the railway wagon/trucks, their job was over and they were not responsible

for any shortage thereafter. On the basis of the rival contentions, 2nd respondent arbitrator framed the following seven issues:

1) Whether the claimant is entitled to the claim amount?

2) Whether the claimant lifted the consignment negligently with hooks and if so whether the claimant is liable to make good the loss sustained by the

respondent on account of the negligent handling of the bags and also for having not obtained clean R.Rs, from the Railways?

3) Whether there was a short delivery of sugar totalling to 255.107 Mts valuing Rs. 43,78,641.84/- and whether the respondent is entitled to claim

the said amount?

4) Whether the claimant is bound by the terms of endorsement made in the Railway Receipts issued by the Railway?

5) Whether the claim and the counter claim made by the respective parties are barred by limitation?

6) Whether the respondent is bound by their surveyor''s report on the clearance of goods by the claimant?

7) What reliefs are the parties entitled to?

For the issue No. 1, the learned arbitrator found that 1st respondent is entitled to the claim of Rs. 35.63 lakhs with interest at 18% per annum.

2nd respondent came to this conclusion after finding that this amount was not disputed by the petitioner whose objection was that 1st respondent

should make good of the loss amounting to Rs. 43,78,641.84 which resulted due to short delivery of 255.107 MT of sugar. The arbitrator has

observed that the petitioner did not satisfactorily establish that the liability of 1st respondent continues even after the loading of the cargo in the

wagon. 2nd respondent adverted to the fact that the officials of the petitioner who supervised the body of the cargo in the presence of the

petitioner''s surveyors, did not raise any objection to the railway receipts issued after the loading on the railway wagon. Similarly 2nd respondent

adverted to the fact that the entire unloading of the cargo from the ship was witnessed by the petitioner''s officials in the presence of independent

surveyors appointed by the petitioner to monitor the work of 1st respondent. In such circumstances, 2nd respondent held that 1st respondent is

entitled to claim as prayed for.

For issue No. 6, 2nd respondent after finding that the independent surveyors appointed by the petitioner supervised import of the sugar and

issued certificate certifying that 1st respondent cleared a total of 41,518.500 Mts of sugar as per the requirement of the petitioner and there was no

adverse remark against the surveyor''s report by the petitioner held that petitioner is bound by the surveyor''s report on the clearance of goods by

1st respondent.

For issue Nos. 3 and 5, 2nd respondent after elaborately evaluating the evidence adduced, found that 1st respondent''s claim is not barred by

limitation and the petitioner''s claim is barred by limitation. Even on merits 2nd respondent found that the counter claim of Rs. 43,78,641.84 as

claimed by the petitioner by their letter dated 27.5.1998 (Ex.C33) was reduced to Rs. 20,89,516/-unilaterally by the petitioner in their letter dated

25.8.98 (Ex.C35).

For issue No. 2, on the basis of surveyor''s report and their inconsistency in their counter claim, 2nd respondent held that there was no

negligence on the part of 1st respondent and therefore they are not liable to make good the loss sustained by the petitioner.

Similarly for issue No. 4, the arbitrator after going through evidence and Clauses 8, 10 and 11 of the agreement found that the terms of the

endorsement made in the railway receipt issued by the railways will not bind 1st respondent and 1st respondent is entitled to a sum of Rs. 35.63

lakhs with interest at 18% per annum.

From the above it is very clear that a very reasoned award has been passed by 2nd respondent and as rightly submitted by the learned Senior

Counsel for 1st respondent such factual findings cannot be re-agitated before this Court u/s 34 of the Act, 1996 as if this Court was an appellate

court. Further the petitioner filed a review petition and the same was also disposed of by 2nd respondent keeping in mind that the O.P., was

posted for arguments before this court.

In the light of the above, I do not find any grounds as made out u/s 34 of the Act, 1996 to interfere with the award under challenge.

Now let me consider the citations relied on by the learned Counsel for the petitioner to find out whether they are useful to the petitioner in their

attempt to assail the award.

In State of Kerala and Another Vs. E.A. Cheriyan Kunju, , a Division Bench of the Kerala High Court held that when the arbitrator has

committed a misconduct by committing various illegalities and irregularities with a pre-disposition of mind in favour of the contractor and passed an

award without application of mind to the terms of the agreement, the same is liable to be set aside u/s 30 of the Act, 1940.

I do not find any irregularity or illegality committed by 2nd respondent in the instant case and he is also not pre-disposed in favour of 1st

respondent. In fact 2nd respondent has applied his mind to the various clauses contained in the agreement namely, Clauses 8, 10 and 11.

Therefore the above decision cannot be applied to the facts of the present case.

In R.S. Avtar Singh and Co. Vs. National Projects Construction Corporation Ltd., , the Delhi High Court held that if arbitrator arrives at a

finding inconsistent with his own findings or arrives at a decision ignoring the material document, the award can be set aside u/s 30 of the Act,

1940.

This decision is also not useful to the petitioner as I do not find any inconsistencies in the award passed by 2nd respondent.

In Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation, and in 2003 (2) CTC 282 (cited supra), the Hon''ble Supreme Court held that when

the arbitrator made an award, which is in conflict with a particular clause in the agreement, the same is liable to be set aside u/s 34 of the Act,

1996.

In the instant case, it cannot be said that 2nd respondent has passed an award in contravention with the clauses contained in the agreement. In

fact, he did consider Clause 10 relied on by the petitioner and Clause 11 relied on by 1st respondent and only thereafter came to his conclusion.

Therefore these decisions are also not useful to the petitioner.

In Hari Shankar Singhania and Others Vs. Gaur Hari Singhania and Others, , the Supreme Court held that Article 137 of the Limitation Act

applies to an application u/s 20 of the Act, 1940 and the right to apply accrues when difference or dispute arises between the parties to the

arbitration agreement.

This decision relied on by the learned Counsel for the petitioner to submit that their counter claim is not hit by the law of limitation. I am unable

to accept this submission as the arbitrator has correctly come to the conclusion in this regard and further the counter claim was rejected not only on

the ground of limitation, but also on merits. In particular 2nd respondent adverted to the inconsistencies of the petitioner in arriving at the counter

claim amount on the basis of Exs.C33 and C35.

In Government of Kerala and Another Vs. V.P. Jolly, , a Full Bench of the Kerala High Court held that awards contrary to basic or obvious

features of contract or traverse beyond obvious terms of the contract could be set aside u/s 30 of the Act 1940.

The above decision is also not helpful as the facts in the present case are easily distinguishable.

27 In McDermott International Inc. Vs. Burn Standard Co. Ltd. and Others, , relied on by the learned Senior counsel for 1st respondent, the

Supreme Court has clearly pointed out the difference between the Act 1940 and the Act 1996 and the difference between Section 34 of the Act,

1996 and Sections 30, 33 of the Act, 1940.

In the light of the above decisions and discussions, I am of the considered view that the award under challenge cannot be interfered with u/s 34

of the Act, 1996.

In the result, there are no merits in the above O.P., and the same is dismissed. No costs.