1 ARBP 50.08 kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. ARBITRATION PETITION NO.50 OF 2008 ... M/s.S.Dave & Company & Ors. ...Petitioners v/s. Tata Chemicals Limited ...Respondents ... Mr.R.S.Jaisinghani with Mr.Basant Trilokani i/b Jhangiani Narula & Associates for the Petitioners. Mr.D.D.Madon, Sr.Counsel with Mr.Sanjay Kothari and Mr.Vipul Bilve i/b Mulla & Mulla & CBC for Respondents. ... CORAM: D.K.DESHMUKH, J. DATED: 9th December, 2011 P.C.: 1. By this petition filed under Section 34 of the Arbitration & Conciliation Act the Petitioners challenge the award made by the sole arbitrator directing the Petitioners to pay an amount of Rs.1,48,05,201.37 with interest at the rate of 10% from the date of the filing of the 2 ARBP 50.08 claim till realisation. 2. The relevant facts are, that before the Arbitrator the Respondent was the claimant. The Claimant is a Public Limited Company incorporated under the Companies Act. It is in the business of manufacturing and selling of various products. Petitioner No.1 , who was a Respondent No.1 before the Arbitrator, is a partnership firm of which Petitioners Nos. 2 to 8 are partners. There was an agreement entered into between the Petitioners and the Respondent appointing the Petitioner No.1 as Distributor of the products of the Respondent. It is an admitted position that the Petitioner No.1 was acting as Distributor of the Respondent for a period of about 50 years before the dispute between the parties arose. The Distributorship agreement was for a period of two years and after expiry of that period, each time a new agreement was entered into. It appears that the Distributorship agreement between the parties was for the period from 1st April, 2002 to 31st March, 3 ARBP 50.08 2004. It is an admitted position that for the period commencing from 1st April, 2004 there is no Distributorship agreement between the parties. 3. On 9-4-2004, according to the Respondent, a letter was addressed to the Petitioner No.1 stating therein that from the Books of Account maintained by the Respondent it appears that an amount of Rs.1,48,32,663.37 is due from the Petitioner No.1 to the Respondent as on 31-3-2004. It is the case of the Respondent that the Petitioner No.1 accepted that position that as on 31-3-2004 that amount was due. The payment was not made, therefore, according to the Respondent demand was made by the communication dated 14-6-2004, which was notice addressed by the Solicitor of the Respondent to the Petitioner No.1 and its partners demanding the aforesaid amount. The reply dated 12th July, 2004 was sent. According to the Respondent, the liability was admitted. It is the case of the Respondent that on behalf of the Petitioner a letter dated 2nd 4 ARBP 50.08 July, 2004 was addressed, where the lawyer’s notice is referred to and in this communication the liability is admitted. 4. When despite admission of liability, payment was not made, the arbitration clause contained in the Distributorship agreement for the period from 1-4-2002 to 31-3-2004 was invoked and a petition under Section 9 of the Arbitration Act was filed in this court claiming interim measures of protection. In that petition, an order was made dated 11th July, 2005 appointing Hon’ble Justice Smt.K.K.Baam as Arbitrator. Thus, the arbitration proceedings commenced. 5. The Respondent filed a claim statement claiming the aforesaid amount. On behalf of the Petitioner written statement was filed denying all the claims and statements made in the statement of claim. There was a counter claim made in the amount of Rs.2,00,00,000/-. Thereafter the parties filed documents. On behalf of the Respondent two 5 ARBP 50.08 witnesses were examined, who were cross-examined on behalf of the Petitioners. Thereafter, the learned Arbitrator made the award, awarding the claim made by the claimant. Before the learned Arbitrator on behalf of the Petitioner no oral evidence was led. The learned Arbitrator dismissed the counter claim. The present petition has been filed challenging the award made by the learned Arbitrator directing payment of money by the Petitioners to the Respondent. 6. The learned Counsel appearing for the Petitioners challenged only that part of the award made by the learned Arbitrator whereby the claim made by the Claimant has been awarded. No petition has been filed against the award rejecting the counter claim. 7. Three principal submissions were advanced on behalf of the Petitioners challenging the award. (i)The sum for which the claim was made is not 6 ARBP 50.08 found to be due under the Distributorship agreement for the period from 1-4-2002 to 31-3-2004. But it is found to be due under the previous Distributorship agreement. However, the arbitration clause under the last Distributorship agreement has been invoked whereunder admittedly no amounts were due and therefore no award could have been passed by the learned Arbitrator; (ii)The learned Arbitrator has found that there was accounting practice followed by the Petitioners and the Respondent to carry forward the balance of the last Distributorship agreement during the period of succeeding Distributorship agreement. Such a practice was neither pleaded nor proved by the Claimant before the learned Arbitrator. Therefore, the learned Arbitrator could not have recorded a finding in that regard in favour of the claimant. (iii)It was submitted that the amount was claimed as price of the goods supplied. The 7 ARBP 50.08 cause of action for recovering that amount arose the moment the goods are supplied and sold. No invoices have ever been produced. No evidence has been led on behalf of the Claimant to show that the goods for the price of which the claim was made was supplied within the period of limitation. It is claimed that the cause of action arose when the goods are sold and therefore the burden is on the Claimant to prove that this claim is within the period of limitation from the date on which the cause of action arose. It was also submitted that if on the basis of acknowledgement it is claimed that the claim is within limitation, then the burden to prove that the acknowledgment of debt was made within the period of limitation is also on the Claimant and no evidence has been led to prove that the acknowledgement was within the period of limitation. 8. I have heard the learned Counsel 8 ARBP 50.08 appearing for the Respondent on all the three contentions which have been raised on behalf of the Petitioners. 9. So far as the first contention urged on behalf of the Petitioners is concerned, the learned Arbitrator in the award has held that though the claim is not for recovery of price of the goods supplied under the Distributorship agreement for the period from 1-4-2002 to 31-3-2004, there was a practice followed between the parties to carry forward the balance under the earlier Distributorship agreement to the tenure of the next Distributorship agreement. The learned Arbitrator has also held that the Petitioners have admitted the liability. The award of the learned Arbitrator shows that the learned Arbitrator has appreciated the evidence on record and on appreciation of the evidence on record the learned Arbitrator has recorded these findings. 10. Considering that this petition is filed 9 ARBP 50.08 under Section 34 of the Arbitration & Conciliation Act, I have to see whether the finding recorded by the learned Arbitrator in this regard are possible findings or there are findings which are impossible to be recorded on the basis of the material on record. Perusal of the record shows that on record at Exh.E there is a letter dated 9-4-2004 addressed by the Respondent to the Petitioners, wherein the Respondent states thus: “For the purpose of audit of our accounts, we request you to confirm that balance of Rs.14,832,666.37. Due from you as on 31.03.2004 is correct. In the place provided below, please mail the copy of this letter directly to us/our auditors for which we are enclosing herewith two self-addressed, stamped envelopes. In case the balance is not in accordance with your Books, please let us have the balance and break up as per your books to enable us to reconcile the same. If we do not receive any communication from you within 15 days of receipt of this letter, it will be construed that the balance as per our record is correct.” Below this letter, there is an endorsement made on behalf of the Respondent, which reads thus: 10 ARBP 50.08 “We confirm the above balance. The balance as per our books is Rs. 14,832,666.37 due to you as on 31-3-2004. The detailed break up of the balance is enclosed for your reference and necessary reconciliation.” 11. Perusal of this letter shows that the Petitioners admitted the amount which was due according to Respondent as on 31-3-2004. The Petitioners confirmed this liability and stated that as per their Books of Account this amount is due as on 31-3-2004. The endorsement made by the Petitioners proves not only that the Petitioners admit the liability, but it also shows that the Petitioners admit that the Petitioners were maintaining Book of Account, which carried forward the liability under the earlier Distributorship agreement to the tenure of the next Distributorship agreement. The learned Counsel appearing for the Petitioners submitted that this document has not been proved. The submission of the learned Counsel is that this document is not proved because the signature that is to be seen on 11 ARBP 50.08 this document made on behalf of the Petitioners has not been proved. In my opinion, only because the signature below this document cannot be said to have been proved does not mean that the document has not been proved. The first witness examined on behalf of the Claimant is Mr.S.C.Kalani. Paragraph 8 of the affidavit in examination-in-chief of the first witness examined on behalf of the Claimant/Respondent read thus: “I say that the Claimants by their letter dated 9th April, 2004 addressed to Respondents requested them to confirm the outstanding balance of Rs. 1,48,32,666.37 as on 31st March, 2004. The Respondents have confirmed the said amount by putting their endorsement on the foot of the said letter. I further say that the 1st Respondent also forwarded its own ledger account of the Claimants for the period 1st April 2003 to 1st March, 2004 and it showed that the amount payable to the Claimants was Rs.1,48,85,601.37. A copy of the said letter is at Exhibit E to the Compilation of Documents. A copy of the Respondents’ said ledger account is at Exhibit E1 to the Compilation of Documents.” 12. Thus, this witness has produced a copy of the letter dated 9-4-2004 at Exh.E. On behalf of the Claimant/Respondent second witness examined 12 ARBP 50.08 is Mr.Sushil G.Khandelwal. This witness has stated thus, “Each distributor has been assigned a code number. The Marketing Department enters the details of the PO with the corresponding distributor code number in the system known as SAP (Systems Applications Products) and the Respondent’s SAP Code No.is S0008A00).” In paragraph 4 this witness states, “I say that I have seen Exhibits “B”, “D” and “E” filed along with the affidavit of evidence of Mr.S.C.Kalani. The same has been retrieved from the SAP.” 13. Thus, this witness has clearly deposed that the document at Exh.E is produced from the record maintained in regular course of business by the Respondent. Therefore, this document has presumptive value and it cannot be said that this document has not been proved specially when there is no cross-examination of this witness on the manner in which the system is made and authenticity of that system. In my opinion, therefore, the learned Arbitrator was perfectly justified in relying on the letter dated 9-4-2004, which as observed above not only proves admission 13 ARBP 50.08 of liability but also proves that the system of maintaining current account and carrying forward balance of last Distributorship agreement to the tenure of the next Distributorship agreement is also proved. On the record, I also found that at Exh.E-1 is a ledger account maintained in the book of account of the Petitioners. Perusal of that ledger account shows that similar amount is shown as due to the Respondent from the Petitioners. It was submitted by the learned Counsel appearing for the Petitioners that this document has not been proved. In my opinion, as the Rules of evidence contained in the Evidence Act are not applicable to the arbitration proceedings, strict proof of every document cannot be insisted upon. The Arbitrator would be justified on relying on the document and deciding authenticity of the document relying on other admitted and proved documents on record. If one tallies the ledger account at Exh.E-1 with the acceptance of the balance in the document at Exh.E as also the other material available on record, then it cannot be said that 14 ARBP 50.08 placing reliance on the document at Exh.E-1 is not proper. What is further to be seen here is that the letter dated 14-6-2004 was addressed on behalf of the Respondent by their Solicitor to the Petitioner, where demand for the amount was made. Paragraph 5 of that letter is relevant. It reads as under: “As you were irregular in making payments to our clients from the year 2000 and thereafter, your various cheques drawn in favour of our clients for the outstanding dues were dishonoured from time to time. Your cheques were returned by your Bankers and you issued further cheques for the same. You have acknowledged in writing your liability to pay to our clients a sum of Rs.1,48,32,666.37 ps. As per your Books of Accounts.” In paragraph 7, one finds reference to the Ledger Account at Exh.E-1. Paragrapy 7 reads as under “7. As per your Ledger Account and as per the Reconciliation Statement furnished to our clients, the balance as per your Books of Account as sum of Rs.1,48,32,666.37 is due and payable by you as on 31-3-2004 to our clients. As per your Ledger as on 1-3-2004, a sum of Rs.1,48,85,601.37 Ps. Was due and payable by you to our clients. However, a sum of Rs.28,950.00 was credited to your account on 1st May, 2004 being the distributor account for April 2004 (less TDS of Rs.1485/-) thus leaving 15 ARBP 50.08 a balance of Rs.1,48,05,201.37 due and payable by you to our clients.” 14. A reply was received by the Respondent to this letter from the Petitioner No.1, which is dated 12th July, 2004 wherein it is stated, “There is no dispute between us and Tata Chemicals Ltd. as far as the amount payable to TATAs is concerned. It is just that we are having liquidity problems.” The submission of the learned Counsel is that neither the letter dated 14th June, 2004, copy of which at Exh.E on record, or the reply of the Petitioner dated 12th July, 2004, copy of which at Exh.G, is proved. However, it is an admitted position between the parties that the document dated 2nd July, 2004 which is a letter addressed to the Managing Director of the Respondent on behalf of the Petitioners is an admitted document. A statement that appears in paragraph 2 of that letter, in my opinion, clearly proves the Solicitor’s letter dated 14-6-2004. In paragraph 2 it is stated “On the same day we received a notice from TCL’s 16 ARBP 50.08 solicitors to pay-up the dues of Rs.1.48 Crore within 30 days from the date of notice.” and it is further stated “Our intentions are not bad or malafide. We have earned from TATA’s and we intend to pay TCL to the last paise but we require time.” 15. Thus, receiving the letter from the Solicitor is clearly admitted. The letter of the Solicitor not only demands the money but also refers to the Leger Account. In my opinion, therefore, the learned Arbitrator was perfectly justified in relying on the Ledger Account. In my opinion, therefore, leaving all other material on record aside, the endorsement on the document at Exh.E and the Ledger Account at Exh.E-1 clearly establish that there was a regular practice to maintain the current account. The balance under the earlier Distributorship agreement was carried forward to the tenure of succeeding Distributorship agreement and therefore, it cannot be said that the amount which is demanded cannot be recovered by invoking the arbitration clause 17 ARBP 50.08 under the Distributorship agreement commencing from the period 1-4-2002 to 31-3-2004. 16. Perusal of the award shows that the learned Arbitrator apart from referring to the document to which I have made the reference, has considered the entire evidence on record and has recorded her finding. In my jurisdiction under Section 34 of the Arbitration Act, I cannot re- appreciate the evidence on record. I have considered that evidence and I find that the findings that have been recorded by the learned Arbitrator on the basis of the evidence before me are possible findings and therefore I will not be justified in disturbing the same. 17. So far as the contention that the Respondent has not proved that the acknowledgement was within limitation is concerned, really speaking once a finding is recorded that there was a practice followed by both parties of maintaining current account and carrying forward liability of 18 ARBP 50.08 last Distributorship agreement during the tenure of the next Distributorship agreement, there is really no question of the Claimant-Respondent being required to base its claim on any admission of liability. Because perusal of the letter of the Solicitor shows that the claim was made by the Solicitor on the basis of the Ledger Account maintained by the Petitioners themselves. Thus, when the claim is based on the Ledger Account maintained by the Petitioners themselves, there is no question of the Claimant proving any acknowledgement of liability, because the Claimant is basing his claim apart from other thing on the Account Books maintained by the Petitioners themselves. In my opinion, therefore, really speaking the question whether the acknowledgment was within the period of limitation or not does not really arise in this case. The record has so many documents, which show that it was an admitted liability. In my opinion, therefore, the finding recorded by the learned Arbitrator that it is an admitted claim is incapable of being disturbed. 19 ARBP 50.08 The learned Counsel relied on several judgments of the Supreme Court and also one judgment of the Full Bench of the Rajasthan High Court and the Division Bench of this court on the question as to on whom is the burden of proving the acknowledgement. In my opinion, considering that the claim of the Respondent is really based on account books maintained by the Petitioners themselves, I need not consider that aspect of the matter. In any case, in my opinion, considering the evidence on record, it cannot be said that the award made by the learned Arbitrator has resulted in any injustice because claim was really admitted by the Petitioners and the only plea raised by them was their financial stringency. 18. In the result, therefore, the present petition fails and is dismissed. No order as to costs. (D.K.Deshmukh, J.)