IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arbitration Case No. 34 of 2008 Judgment Reserved on : 20.06.2011 Date of Decision : 12.7.2011 H.P.State Civil Supplies Corporation Ltd. …Petitioner. Versus M/s JVG Transport Company ....Respondent. Coram The Hon’ble Mr. Justice Kuldip Singh, Judge. Whether approved for reporting ?1 No For the Petitioner : Ms. Bhavana Dutta, Advocate. For the Respondent : Mr. K.D.Sood, Advocate. Kuldip Singh, Judge The petitioner has filed the objections under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘Act’) against the award dated 5.7.2008 passed by the Arbitrator-cum-Secretary, Food, Civil Supplies and Consumer Affairs, holding that the respondent is entitled to refund of security amount of ` 5,00,000/- alongwith simple interest at the rate of 8.50% per annum from the date of deposit to the date of payment and also refund of ` 50,000/- earnest money forfeited by the petitioner without any interest. 2. The facts, in brief, are that the petitioner had floated open tenders calling offers from transporters for transportation of 1 Whether reporters of Local Papers may be allowed to see the Judgment ?yes 2 levy sugar from Saraswati Sugar Mill, Yamuna Nagar to various destinations in the State of Himachal Pradesh. The respondent was awarded the work. The agreement between the parties was signed. The respondent had deposited an FDR of ` 5,00,000/- as security and also deposited earnest money of ` 50,000/- with the petitioner as per terms and conditions of the tender and agreement. The respondent had projected the case that on account of law and order situation created by the Truck Operators Association in Yamuna Nagar, it could not provide trucks for carriage of levy sugar. The petitioner was informed to this effect. The petitioner thereafter entered into an agreement of transportation of levy sugar with M/s Mohan Transport, Bilaspur without rescinding the contract between the parties. The security amount of ` 5,00,000/- and earnest money of ` 50,000/- of the respondent was forfeited. On 14.8.2001 the respondent served a notice on the petitioner to refund Rs.5,00,000/- with interest at the rate of 8.50% per annum and also refund earnest money of Rs.50,000/- forfeited by the petitioner. The petitioner was also requested to refer the dispute to Arbitrator, which was not done. The respondent moved this Court and vide order dated 4.1.2002 in OMP(M) NO. 105 of 2001 Secretary (Food and Civil Supplies) to the Govt. of H.P. was appointed as Arbitrator to adjudicate the dispute between the parties. 3. The respondent took the stand that the petitioner was aware about the law and order situation in Yamuna Nagar which was created by Yamuna Nagar Truck Operators Association. The respondent could not provide trucks for the carriage of levy sugar. The petitioner wrongfully encashed the security amount of 3 ` 5,00,000/- and wrongly forfeited earnest money of ` 50,000/- of the respondent. The respondent has claimed refund of security amount as well as earnest money. On security amount, the respondent has claimed interest at the rate of 8.50% per annum. 4. The petitioner contested the claim of the respondent. The agreement between the parties was not denied. It was contended that the respondent was unable to arrange transportation of 6000 quintals of levy sugar as per despatch plan delivered to respondent on 3.7.2001. The entire levy sugar as per despatch plan was required to be lifted and transported on or before 5.7.2001. The respondent was unable to transport the sugar due to alleged obstruction created by some truck associations. The Managing Director of the petitioner held a meeting with the representatives of various transport Companies on 9.7.2001 in which the respondent was also present. The respondent assured to carry out the transportation of levy sugar from 11.7.2001. The respondent was categorically informed that in case it would fail to honour the transportation contract on or before 14.7.2001, the action would be taken in accordance with the agreement. 5. The further case of the petitioner is that instead of complying with the terms of the contract, the respondent sent another fax message dated 11.7.2001 to petitioner expressing its inability to transport 6000 quintals of levy sugar. On this, the petitioner was constrained to invoke clauses 8, 12 and 13 of the agreement and clauses 7,10, 15 and 16 of the terms and conditions of the tender and cancelled the transportation contract allotted to the respondent, forfeited the earnest money of ` 50,000/- and security 4 deposit of ` 5,00,000/-. The contract was allotted to next best bidder M/s Mohan Transport Company, who lifted the entire quantity on 12.7.2001 itself thereby falsifying the claim of the respondent that there was a law and order situation at Yamuna Nagar. The petitioner defended its action in canceling the contract as well as forfeiting the security and earnest money. The respondent filed rejoinder and reiterated its stand. The petitioner also filed sur-rejoinder and controverted the stand taken by the respondent in the rejoinder. 6. On the pleadings of the parties, the following issues were framed: 1. Whether the defendant unilaterally entered into a contract with M/s Mohan Transport and unauthorisedly rescinded the contract with claimant, if so, its effect? OPC 2. Whether there was law and order situation which prevented the claimant in lifting the levy sugar, if so, its effect? OPC 3. Whether the contract with petitioner/claimant has been illegally terminated without notice? OPC 4. Whether the security and earnest money has been wrongly forfeited by the defendant Corporation, if so, its effect? OPC 5. Whether the petitioner/claimant is entitled for refund of security amount and earnest money alongwith interest? OPC 6. Whether the petitioner/claimant has no cause of action to file and maintain the petition? OPR 7. Whether the petitioner/claimant has not come to law with clean hands and is guilty of concealment of material facts and misstatement of facts? OPR 8. Whether the petitioner/claimant has failed to comply with the terms and conditions of the tender and agreement and the 5 defendant Corporation was entitled to forfeit the earnest money and security deposit in its favour? OPR 9. Whether the petitioner/claimant is estopped from filing the petition on account of its acts, deeds and conduct? OPR 10. Whether the petition is bad for non-joinder of necessary parties? OPR 11. Relief. The Arbitrator has decided issues No. 1, 3, 4, 5, 6, 10 and 11 in favour of the Contractor, issue No. 2 against the Contractor, issues No. 7 and 9 against the Corporation and issue No. 8 in favour of the Corporation. 7. On the pleadings of the parties, the following issues were framed:- 1. Whether the impugned award is against the public policy of India? OPO 2. Whether the award is in conflict with the agreement? OPO 3. Relief. 8. I have heard the learned counsel for the parties and have also gone through the record. The issue-wise findings are as follows:- Issues No.1 & 2 : 9. The issues No.1 and 2 are inter-connected, therefore, both of them are taken up together for determination. The respondent participated in the tender and gave its rate for transportation of the levy sugar from Yamuna Nagar to various destinations in Himachal Pradesh on 4.5.2001. The work was awarded to the respondent and an agreement dated 29.6.2001 was 6 executed between the parties. Sandeep Tyagi, sole proprietor of respondent adduced his evidence by way of affidavit dated 28.3.2007 and S.G.Negi, General Manager of petitioner tendered his affidavit dated 16.5.2007 in evidence. In his cross-examination, he has stated that as per Ex.P7, the claimant was to transport the levy sugar upto 14.7.2001. The meeting of the officers of H.P.State Civil Supplies Corporation Ltd. was held on 11.7.2001 and after the meeting tender was allotted to M/s Mohan Transport Company in view of refusal to transport the levy sugar by the claimant vide letter dated 11.7.2001. There was no need to issue any notice to rescind the contract as the claimant itself had sent the letter through fax expressing inability to transport the levy sugar. 10. Ex.RW-1/A is the tender notice. Ex.P-1 is the financial bid and terms and conditions of the contract for handling and transportation of levy sugar from Yamuna Nagar to various destinations of Himachal Pradesh. Clause 23.3 of the financial bid and terms and conditions of the contract provides that the successful tenderer shall be required to execute an agreement as per terms and conditions specified in the NIT, tender documents and Annexures attached thereto. In other words, the financial bid and terms and conditions of the contract Ex.P-1 is part of agreement dated 29.6.2001 Ex.P-2. Clause 10 of Ex.P-1 provides that Corporation reserves the right to terminate the contract at any time by giving 15 days notice if the services of the contractor are found unsatisfactory. 11. It has been contended on behalf of the petitioner that since the respondent had shown its inability to transport the levy 7 sugar vide letter dated 11.7.2001 Ex.P-6, therefore, it was not necessary to comply Clause 10 of the financial bid and terms and conditions of the contract read with agreement which authorises the petitioner to terminate the contract at any time by giving 15 days notice if the services of the contractor are found unsatisfactory. On the basis of the evidence on record, the Arbitrator has recorded a finding that the notice should have been issued as per tender condition which admittedly was not given to the respondent. It has also been held that Corporation by its own admission had actually given the contractor time till 14.7.2001 to complete the transportation of 6000 quintals of levy sugar but awarded the work to another firm on 11.7.2001. On one hand the Corporation had granted the time to respondent till 14.7.2001 for transportation of the levy sugar, but on the other hand awarded the work to other firm on 11.7.2001. It has also been held by the Arbitrator that no formal communication of termination of agreement or rescission of the agreement has been placed on record by the Corporation. Once the contract has not been terminated then the respondent has every right to demand refund of security amount of ` 5, 00,000/- and also refund of earnest money of ` 50,000/-. The Corporation has wrongly forfeited these amounts. 12. This Court under Section 34 of the Act is not sitting in appeal, the reasonableness of the reasons cannot be gone into. It is not a case of no evidence. The Arbitrator on the basis of material on record has recorded a finding of fact that respondent is entitled to refund of security and earnest money. It is not the case of the petitioner that Arbitrator has ignored the material documents which 8 go to the root of the case. The petitioner has miserably failed that the impugned award is against the public policy of India. 13. The learned counsel for the petitioner has relied M/s Rashtriya Chemicals & Fertilizers Ltd. vs. M/s Chowgule Brothers and Ors. AIR 2010 SC 3543 on the point that Arbitrator has no jurisdiction to make award against specific terms of contract between the parties. On facts of the present case the petitioner has failed to point out which part of the impugned award is against the terms of the contract. The clause 10 of the financial bid and terms and conditions of the contract which is part of the agreement provides issuance of 15 days notice before termination of the contract, which admittedly was not issued nor the contract was rescinded. The Arbitrator has rightly appreciated the material on record. The petitioner has miserably failed to prove objections under Section 34 of the Act. There is no merit in the objections. Both the issues are decided against the objector. 14. In view of above discussion, the petition fails and is accordingly dismissed with no order as to costs. ( Kuldip Singh ), July 12, 2011. Judge. (GR)