FAO No.5311 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO No. 5311 of 2006 Date of decision: 19.12.2008 Punjab State Civil Supplies Corporation Limited and another …..APPELLANTS Versus M/s Kansal Rice and General Mills, New town, Moga and others …..RESPONDENTS CORAM: HON’BLE MR JUSTICE T.P.S.MANN PRESENT: Ms Deepali Puri, Advocate for the appellants. T.P.S.MANN, J. In terms of an agreement dated 12.11.1994 executed between the appellant-Punjab State Civil Supplies Corporation, hereinafter referred to as “the PUNSUP” and M/s Kansal Rice & General Mills, hereinafter referred to as “the respondent- Miller” the disputes arising thereunder were referred for adjudication. Shri R.K.Gupta was appointed as the sole Arbitrator vide order of the Managing Director of the PUNSUP. Vide his award dated 21.2.2003, the sole Arbitrator awarded a sum of Rs.48,64,429/- plus interest at the bank rate, as admissible from time to time on Rs. 45,02,429/- with effect from 1.7.1995 till payment, in favour of the PUNSUP and against the respondent-Miller for the crop year 1994-95. The PUNSUP, however, alleged that the respondent-Miller was required to deliver 28,047.36 FAO No.5311 of 2006 -2- quintals of rice in the account of PUNSUP with the Food Corporation of India, which it did not do so and, therefore, 24,102.00 quintals of superior quality of paddy had to be sold in the open auction, which fetched Rs.83,29,207/-. The Arbitrator wrongly gave benefit of the amount of Rs.39,62,500/- to the Miller towards sale of paddy and also wrongly arrived at the figure of 8614.05 quintals of balance paddy. The clause of charging the Miller 1.5 times of the economic cost of paddy which was not delivered, alongwith interest at the rate of 21% became redundant in view of the sale of paddy in the open auction. Claiming that it was entitled to 1.5 times of the economic cost of paddy, which was not delivered, along with interest at the rate of 21% notwithstanding the fact of sale of paddy in open auction and that the Arbitrator wrongly ordered the PUNSUP to release the security amount of Rs.30,000/-, besides awarding only Rs. 48,64,429/- as against the total sum of Rs.3,78,53,707/-, the PUNSUP filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as “the Act”, which petition was, however, dismissed by learned Additional District Judge, Chandigarh vide judgment dated 4.9.2006. The said judgment has been assailed by the PUNSUP by filing the present appeal under Section 37 of the Act. The main plea of the appellant Corporation is that it was entitled to 1.5 times of the economic cost of paddy which was not delivered, along with interest at the rate of 21% notwithstanding the fact of sale of paddy in open auction. However, from a perusal of the award given by the sole Arbitrator, it is apparent that against the paddy stored with the respondent-Miller which could not be milled, a part of the stock FAO No.5311 of 2006 -3- was sold through open auction, which fetched an amount of Rs.83,29,207/-. Besides this, the Miller also deposited an amount of Rs.39,62,500/- with the PUNSUP. These amounts had to be taken into consideration so as to calculate the loss suffered by the PUNSUP on account of failure of the Miller to deliver rice against the paddy. Moreover, the question of charging 1.5 times of the economic cost of paddy could not have been referred to the Arbitrator as it was the Managing Director of the PUNSUP, who was to decide the question relating to imposition of the economic cost. Therefore, the dispute with regard to charging of 1.5 times of the economic cost of the paddy was an excepted matter. Accordingly, the sole Arbitrator was justified in not awarding the economic cost to the PUNSUP. Learned Court below in para-8 of its judgment was justified in holding that the objections raised by the PUNSUP did not, in strict sense of the term, fall within the ambit and purview of Section 34 of the Act, as the objections were to be decided only on the basis of evidence on the file of the Arbitrator and not on the basis of evidence to be recorded by the Court seized of a petition under Section 34 of the Act. In view of the above, there is no merit in the appeal, which is hereby dismissed. December 19, 2008 (T.P.S.MANN) Pds. JUDGE