1 IN THE COURT OF SH. [ENTITY],LD. SCJ CUM RC(CENTRAL)DELHI S 1502/06/94 In the Matter of : [ENTITY], Through Chief Director of Purchase, Ministry of Defence Army purchase organisation, Krishi Bhawan, New Delhi. Petitioner VERSUS 1. M/s [ENTITY] 2. Sh. [ENTITY] Addl. Legal Advisor to the Govt. of India and Sole Arbitrator, Ministry of Law and Justice and Company Affairs Jeewan Tara Building, Parliament Street, New Delhi. Respondents. Date of Institution : 16.9.94 Date of Assignment to this court: 19.11.08 Date of Argument : 7.4.10 Date of decision: 7.4.10 JUDGMENT
This is the petition U/[SECTION] & [SECTION] of the [ACT] whereby the petitioner UOI has sought filing of the award and making the same as Rule of the Court. It was stated that the parties had entered into an agreement/contract no. J13067/5/112/91Pr.II dated 26.3.91 for supply of 25 MT Mixed Fruit to Defence Services and the said contract was governed by an arbitration clause. As stated certain disputes and differences arose between the parties which were referred to the sole arbitrator i.e. respondent no. 2 who passed an award dated 21.7.94.
Objections were filed by the respondents wherein it was stated that petitioner had invited offers for supply of 120M/T Mixed Fruit Jam which contained several terms and conditions governing the mode and manner in which the offers were required to be prepared. Further certain clauses & conditions were referred which are Clause 11 of tender enquiry, note 4 & 6 of the format of offer , standard special conditions of contract, Clause 16 of Excise Duty payment and it was stated that with the belief and interpretation of various clauses of tender documents as mentioned in the objections the objector prepared its offer no. J12067/6/91 Pur II dated 25.2.91. It was stated that objector quoted the price after allowing the rebate of excise duty paid on inputs which was then available to the objector by way of modvat which fact was clearly highlighted by the objector in Clause 4(d) of the offer. The said offer was accepted by the petitioner and A/[CASE NUMBER] 26.3.91 was released in favour of the objector and objector continued to make supplied to the petitioner from time to time under the above A/T and bills were raised in accordance with the contract and supplies by the objector were duly accepted by the petitioner and payments were released from time to time. It was stated that w.e.f 25.7.91 the items of supply was wholly exempted from excise duty and consequently rebate of modvat benefit in respect of excise duty paid on inputs also became NIL as per [ACT] and accordingly the quoted price needed appropriate revision and therefore objector wrote to the petitioner to allow the objector to submit supplementary bills for the sum due at the rate of Rs.1190.70 per tonne on account of rebate of modvat which was no longer available. The objector as stated thereafter continued to remind the petitioner to settle the claim but the settlement of the said claim was being deliberately delayed thus causing huge loss to the objector and the matter in dispute was referred to respondent no. 2 who passed the award dated 21st July, 1994 which is under challenge herein on various grounds. It was stated that Arbitrator had proceeded on erroneous proposition of law and he has misread, misunderstood and misconceived the law laid down by Hon'ble Supreme Court in case reported in [PRECEDENT]. He has misconducted himself and has neglected to perform his statutory duty to arbitrate. The award as stated is in violation of principles of natural justice and had acted in a biased and malafide manner while passing the award. Ld. Arbitrator as stated had not applied his mind and had given the award not by construction of contract but by merely looking at the A/T and complete documents were not considered. Hence it was prayed that award be set aside.
Reply to the objections was filed and it was stated that the Ld. Arbitrator had considered all documents of both parties and gave a judicious award and there is no error either in the proceedings or declaration of award. It was admitted that rate quoted by the respondent were accepted a firm and final inclusive of cost of raw material or manufacturers containers and all duties and taxes except duty and sales tax. The firm as stated had quoted for mixed fruit jam for 25 MT @ 20.50 paise per kg and for 20MT @ 20.48 paise per kg as prices. It was submitted that it was clearly indicated in para 4(d) of the Tender Enquiry that rebate allowed by application of MODVAT had already been adjusted in cost and the objector had no where asked to pass on benefits of rebate by adjusting same in their quoted rates. Moreover, after placing of A/T such contention as stated amount to fresh offer and does not warrant any consideration. It was stated that the rates quoted by the objector in their offer dated 13.3.94 were accepted by the petitioner and conveyed to the objector through acceptance of tender as firm and final inclusive of the cost of raw materials or manufacturers, containers and packaging etc and all duties and taxes except the excise duty and sales tax. The objector as stated had not stated the rate per tonne of the rebate allowed by the application of MODVAT. It was stated that petitioner nowhere compelled the objector to pass on the benefits of rebate allowed by applicationof Modvat to the petitioner by adjusting the same in their quoted rates and therefore the objector may not be allowed to take advantage of their own act of doing such an adjustment on account of rebate available in their quoted price. The demand of the objector to pay the excise duty after adjusting rebate/exemption is unjustified and illegal. It was also submitted that Ld. Arbitrator neither misconducted himself nor the proceedings and the grounds of objections filed by the objector are baseless, unsubstantiated and deserves rejection. Award as stated is legal, speaking and based on facts and deserves to be made rule of court.
Rejoinder on behalf of objector was also filed in which contents of the objections were reiterated and those of the reply to objections were denied.
Affidavit was filed on behalf of objector.
I have Ld. Cl. for both the parties as well as perused the record. Vide order dated 21.2.97following issues were framed:
1. Whether the award is liable to be set aside in view of [SECTION] of [ACT].
2. Relief.
Affidavit was filed on behalf of objector.
Number of objections have been taken by the objector in his objections application. I have gone through the award. It is argued that award is without reason. It is the cardinal rule of principle of natural justice that the reasons of decision should be given by the authority concerned so that court may come to know as to what was the reasons for arriving at this conclusion. The award even does not mention as to what is the dispute and difference between the parties. While passing the award the arbitrator has only stated that he has considered the arguments and documentary evidence but what were the arguments, what was the evidence and the reasons for arriving at the conclusion are missing from the award. Bare perusal of the award leads to nowhere and the whole exercise is a mere eye wash. The Ld. Counsel for objector has relied upon number of judgments to content that award passed is on no evidence and without any reasons and thus there is no award in the eyes of law, hence it is to be quashed. Ld. Cl. for objector has replied upon [PRECEDENT] [PRECEDENT] wherein inter alia it was observed that "Arbitrator enjoined to decide about arbitrability of certain claims and decision thereon cannot be given by implication, hence non speaking award granting lump sum amount is liable to be set aside". Reliance was also placed upon [PRECEDENT] and argued that when the claim of the respondent was rejected without giving the reason then it means question is not decided by the arbitrator and matter should be remanded back and further the jurisdiction issue should be decided first. The counsel has also relied upon [PRECEDENT] works wherein it is mentioned that if arbitrator has not assigned any reason, the award should be remanded back. In [PRECEDENT] full Bench Judgment by Hon'ble Supreme Court it has been laid down that umpire should give his findings of claims and reason and without this award is illegal. The Ld. Counsel for the UOI has relied upon [PRECEDENT] and argued that even if reasons have not been given then court cannot interfere with the award. This judgment is not applicable on two counts to the fact of the case. Firstly on the ground that this is division bench judgment and the judgment relied upon by the objector is full bench judgment and further more this ruling was under consideration before the Hon'ble Supreme Court in [CASE NUMBER]. Thus no help can be taken by the counsel for UOI from this ruling. The counsel for the UOI has also relied upon [PRECEDENT] ,777 and argued that in appeal in arbitration matter, court cannot sit as a appeal. This legal aspect is not disputed but herein the arbitrator has not given any reason hence there is no question of court as sitting in appeal but rather this court has been deprived of the reasons prevailing in mind of arbitrator to pass the award. In these circumstances, there is no question of any reappraisal of the evidence. The counsel for UOI failed to justify the award on the test of principles of natural justice and thus in these circumstances as held by Hon'ble Supreme Court Supra the award is not sustainable and the same cannot be made rule of the court. Hence the application u/[SECTION] & [SECTION] of [ACT] is dismissed. The award is hereby set aside and matter is again remanded back to arbitrator concerned to pass a reasoned award in accordance with the law and rules applicable in that regard. The original file of arbitration be sent back to the concerned arbitrator for the decision after fulfilling of all the formalities. The copy be supplied to both parties. The arbitrator will commence proceedings after one month of the receipt of this order. File be consigned to record room.
Announced in the open court on ([ENTITY]) 7.4.10 SCJ Cum RC(Central)Delhi