FAO No. 1848 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH -- FAO No. 1848 of 2008 Date of decision: September 14, 2009 M/s Sukhbir Singh and Company ........ Appellant Versus The Punjab State Cooperative Supply and Marketing Federation Limited through its District Manager, Ferozepur (Markefed) and another .......Respondents Coram: Hon'ble Ms Justice Nirmaljit Kaur -.- Present: Mr. Mrigank Sharma, Advocate for the appellant Ms Deepali Puri, Advocate for the respondents -.- 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether the judgment should be reported in the Digest? Nirmaljit Kaur, J. This is an appeal against the judgment dated 12.02.2008 passed by the District Judge, Ferozepur, dismissing the objection petition under Section 34 of the Arbitration and Conciliation Act, 1996 (in short 'the 1996 Act') filed by the appellant-miller against the Award dated 27.02.2004. The dispute in the present case was that during the year 1995-96, the respondent-Markfed supplied 14806 bags weighing 9617.40 quintals of fine variety and 5441 bags weighing 3530.15 of IR-8 quality for custom FAO No. 1848 of 2008 2 milling, out of which, the appellant-miller delivered 2234 bags weighing 2114.08 quintals of IR-8 and 6665 bags weighing 6309.25 quintals and 421.55 quintals of IR-8 and 339.95 quintals of fine variety were left with the appellant-miller. The respondent-Markfed lodged a claim of Rs.8,29,526/-, along with future interest at the rate of 21% per annum on account of interest, economic cost, the costs of Bardana etc. Thus, according to the respondent- Markfed, there was a shortage of rice so delivered by the appellant-miller. The solitary argument raised by the learned counsel for the appellant-miller, is that the Arbitrator had no jurisdiction to entertain the claim because the dispute was covered under the 'excepted matters', as it has been duly provided in the contract that in case of shortage or delay, the recovery can be made at the rate of 1½ time of the economic cost of the shortage of the rice and if the Rice miller failed to supply the rice within time, Markfed shall be entitled to interest at the rate of 21% per annum on the economic cost of the left over quantity of the paddy rice for which, the decision of the Managing Director of the Markfed will be final. It is also not disputed that the dispute was only with regard to the shortage of rice delivered by the appellant-miller and the same was not delivered within the stipulated period. Thus, the decision of the dispute, in question, is already available under Clauses 6 (iii) and 7 (iii) of the agreement, itself and, therefore, the same was not required to be referred to the Arbitrator. The relevant portion of Clauses 6 (iii) and 7(iii) of the agreement are reproduced below:- “ Clause 6 (iii) In case there is a shortfall in the recovery of rice provided in sub clause (i) above, the miller shall pay to the FAO No. 1848 of 2008 3 MARKFED the cost of paddy, equivalent to the shortfall at the rate of 1½ times the economic cost of paddy.” Clause 7 (iii) The miller shall complete delivery of rice within 10 (ten) days of the issuance of paddy, to him and rice due to MARKFED on the total quantity of paddy issued to him or in joint custody released at regular intervals shall be delivered not later than the 28th Feb., 1966. the miler shall further ensure milling of Markfed paddy and delivery of rice in the following manner” As per Clause 22 of the Agreement, all the disputes and differences arising out of or in any manner touching or concerning the agreement, whatsoever (except as any matter decision of which is expressly provided for in the contract) shall be referred to the sole Arbitration of the MD, Markfed, which reads as under: “22. ARBITRATION: All the disputes and differences arising out of or in any manner touching or concerning this agreement whatsoever (except as to any manner decision of which is expressly provided for in the contract) shall be referred to the sole Arbitration of the M.D., MARKFED or any person appointed by him in this behalf...” Thus, a combined reading of Clauses 6(iii), 7(iii) and 22 of the agreement, referred to above, clearly shows that all the disputes between the MARKFED and the miller were liable to be referred for arbitration concerning the agreement, except disputes regarding the matter for which the decision has been expressly provided for in the contract under Clause 22 of the agreement. It is duly provided in Clause 6 (iii) in case there is a shortfall in the recovery of rice, the miller shall be liable to pay to the MARKFED the cost of paddy FAO No. 1848 of 2008 4 equivalent to the shortfall at the rate of 1½ times the economic costs of paddy and Clause 22 of the agreement duly provides that in such a situation, the matter shall be referred to the sole arbitration of the M.D.,Markfed being an 'excepted matter'. Thus, the Managing Director, Markfed had no authority to refer the aforesaid dispute to the Arbitrator, nor the Arbitrator had any jurisdiction to continue with the proceedings under any circumstances. In a case 'Shree Krishna Rice Mills v. The Punjab State Co-op Supply and Marketing Federation Ltd.', The Punjab Law Reporter-Vol CXXXV (2003-3) 341, this Court, on a similar proposition of law, has observed in para 12 of the said judgment that:- “12. Therefore, the combined reading of Clauses 18, 5 and 6 of the aforesaid agreement, clearly show that all disputes between the Markfed and the miller were liable to be referred to the arbitration concerning the agreement except disputes regarding the matters, the decision of which is expressly provided for in the contract. Under Clauses 5 and 6 of the aforesaid agreement, the decision with regard to 1.5 times economic costs and interest at the rate of 21% is clearly provided in the agreement, itself and as such, the aforesaid matters were not liable to be referred to the Arbitrator and reference in this regard was beyond the scope of arbitration clauses and the proceedings before the Arbitrator were clearly liable to be terminated on the short ground alone. In such circumstances, neither the Managing Director had any authority to refer aforesaid dispute to the Arbitrator, nor the Arbitrator had any jurisdiction to continue with the proceedings FAO No. 1848 of 2008 5 under any circumstances. The observation of the learned additional District Judge at page 13 of the judgment that the claim with regard to the economic cost and interest was liable to be decided by the Arbitrator and the dispute is not frivolous, is not based on the appreciation of Clause 18 read with Clauses 5 and 6 of the agreement but he has misinterpreted these clauses and had failed to appreciate the same properly and as such, has misdirected himself. Consequently, the findings of the Additional District Judge on this score cannot be sustained.” The Special Leave Petition filed against the aforesaid judgment was dismissed. The same controversy, in some what similar facts, as in the present case has already been adjudicated upon by this Court in FAO No. 3521 of 2007 and other connected appeals, decided on 28.07.2009 whereby reliance has been placed on the judgments rendered by Hon'ble the Supreme Court in the cases of 'Food Corporation of India v. Surendra, Devendra and Mahendra Transport Co', The Punjab Law Reporter Vol CXXXIII (2003- 1) 843 and 'Shree Krishna Rice Mills v. The Punjab State Co-op Supply and marketing Federation Ltd.', The Punjab Law Reporter Volume CXXXV (2003-3) 341. The question involved in the present case is fully covered by the judgment rendered in FAO No. 3521 of 2007, referred to above. The question in the present case is also an excepted matter and was, therefore, required to be decided by the Managing Director, Markfed and not by the Arbitrator. In view of the discussion made above, the judgment dated FAO No. 1848 of 2008 6 12.02.2008 passed by the District Judge, Ferozepur, dismissing the objection petition under Section 34 of the 1996 Act' filed by the appellant-miller against the Award dated 27.02.2004, is hereby set aside. The appeal is accordingly allowed with liberty to the Managing Director, MARKFED to receive back the record of the arbitration proceedings and proceed with the matter, in accordance with law. (Nirmaljit Kaur) Judge September 14, 2009 mohan FAO No. 1848 of 2008 7