F.A.O No.1392 of 2007 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. F.A.O No.1392 of 2007 Date of Decision: 20.10.2009 M/s Kultar Singh and Brothers and others ....Appellants Versus Punjab State Civil Supplies Corporation Ltd. and others. ...Respondents CORAM : Hon'ble Ms. Justice Nirmaljit Kaur Present:- Mr. S.K. Singla, Advocate for the appellants. Ms. Ekta Thakur, Advocate for respondents No.1 and 2. ***** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest ? ** NIRMALJIT KAUR, J. This order shall dispose of F.A.O No.1392 of 2007 and FAO No.1277 of 2007 as the similar question is involved in these cases. The facts are being taken from FAO No.1392 of 2007. This is an appeal against the order dated 14-11-2006 passed by District Judge, Ferozepur, vide which, the petition under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside the award dated 16-05-2001, was dismissed. The solitary argument raised by learned counsel for the appellants is that a bare perusal of the alleged agreement, which F.A.O No.1392 of 2007 2 constitutes the basis of the present litigation and the claim of the respondents, shows that there could be no arbitration in the matter as the decisions thereof stand already provided for in the agreement itself. Clause 17 of the agreement specifically bars adjudication on excepted matters. Keeping in view the various claims made by the PUNSUP and the different clauses of the agreement, it becomes crystal clear that the alleged claims could not be subject matter of arbitration. It is not disputed that the dispute as referred to the Arbitrator was with respect to the delay in the delivery of rice. The outer date for delivery of rice was fixed as 28-02-1996 and as per clause 5(iii) of the agreement, in case of shortfall in the delivery of rice, the respondent shall pay the cost of paddy equivalent to shortfall 1.5 times economic cost of paddy. Further, the respondents were required to pack rice in standard size bags and double line machine stitching was compulsory. It was also stipulated in the agreement that bags found surplus after lifting rice shall be retained by the miller and cost there of shall be paid by them to the claimants at the rate fixed by the State Government from time to time. The respondents were supplied 2870 bags weighing 1865.50 Qtls. of common variety paddy and 36275 bags weighing 2357.75 Qtls of fine variety paddy and respondents were required to supply 1268.54 Qtls of common variety rice and 16033.55 Qtls of fine variety rice. However, respondents supplied 9250 bags of fine variety rice weighing 8757.00 Qtls upto 30.06.1999 and after 30.06.1999, the respondents delivered 7500 bags, weighing 7095.75 Qtls of fine variety rice. The respondents have not delivered common variety rice i.e. 1268.54 Qtls and fine variety rice weighing 180.80 Qtls which stands due/balance. As per the terms of agreement, the respondents were entitled to milling charges @18% of paddy for rice delivered upto 25.05.1996 and Rs.23/- of paddy per Qtl. delivered after 25-05-1996 and double line machine stitching @ 1.25 per bag. The respondents are liable to pay cost of gunny bags F.A.O No.1392 of 2007 3 retained by them @Rs.16.34 per bag and sales tax thereon. Besides above, the respondents are also liable to pay T.D.S and quality cut and interest on late delivery of rice. Learned counsel for the parties also do not dispute that the decision of the dispute, in question, is already available in the agreement itself. Clauses 6(i) and 6(iii) of the agreement read as under :- “6(i) The entire quantity of rice delivered to by the miller to the PUNSUP shall confirm to the specifications laid down in the Punjab Rice Procurement (Levy) Order, 1983 as amended from time to time and in any other or Notifications issued by the State Government from time to time. The stock of rice not confer to the specifications so laid down, shall be liable to rejected to qty. of rice which is not found to be within the specification and miller shall be liable to for fresh stocks of rice conforming to specifications to the PUNSUP in the event of his failure to supply rice within the prescribed specifications, shall be liable to pay to the PUNSUP for the qty. of rice short supplied at the penal rate of one and half time the economic cost of the converted variety paddy equivalent to the shortages. The decision of the Managing Director PUNSUP in this behalf shall be final. 6(ii) xx xx xx 6(iii) The Miller shall complete delivery of rice within 10 days of issuance of paddy to time and rice due to the PUNSUP on the total qty. of paddy issued to him or in joint custody released at regular interval shall be delivered not later than the 28th February 1996. The Miller shall further ensure milling of PUNSUP paddy and delivery of rice in the following manner :- October/November 20% December 26% January 26% February 20% In the event of his failure to supply rice F.A.O No.1392 of 2007 4 within the stipulated period, he shall be liable to for an interest @21% on the basis of economic be shall be liable to for an inter cost of left over qty. stocks of paddy/rice. The decision of Managing Director in this behalf shall be final.” Clause 12 of the agreement reads thus : “12. PACKING Rice shall be packed in the gunny bags in which paddy is supplied by the _______. In case the Punsup choose to supply other gunny bags for the purpose, the miller shall pack the rice in such gunny bags so supplied and return the Punsup the gunny bags originally supplied. The rice mill will give proper account of all the/gunny bags/Double line machine stitching is mad compulsory to all the millers/dealers irrespective of rice milling capacity. The bags found surplus after the fillings of rice shall be retained by the millers had cod therefore shall be paid by the miller to the Punsup at the rate to be fixed by the State Government from time to time.” Clause 17 of the said agreement makes it clear that in a dispute, where the decision is provided in the agreement itself, no arbitrator need be appointed. The same reads as under :- “17. ARBITRATION : All the disputes and difference arising out of or any manner touching or concerning this agreement whatsoever (except as to any matter the decision of which is expressly provided in the control shall be offered to the sole arbitration of the Managing Director or any person appointed by her on this behalf,it will be non objection to any such appointment that the person is or was an employee of PUNSUP that he had expressed view on all or any of the matters in disputes or difference.” It is obvious from the reading of Clauses 6(i), 6(iii) as well as F.A.O No.1392 of 2007 5 17 of the agreement that the decision of the disputes referred to in this case, is already provided in the agreement itself and the decision of which was exclusively provided for is to be given by the Managing Director PUNSUP, whose decision shall be final as per Clause 6(iii) of the Agreement. Thus, the matter was to be determined by the Managing Director himself and the same could not be referred to the Arbitrator being an excepted matter. In a case `Shree Krishna Rice Mills v. The Punjab State Co-op Supply and Marketing Federation Ltd.', The Punjab Law Reproter-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 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 F.A.O No.1392 of 2007 6 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 judgment 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 and not by the Arbitrator. In view of the discussion above, the order dated 14-11-2006 passed by District Judge, Ferozepur, and the award dated 16-05-2001 passed by the Arbitrator are, hereby, set aside. The appeal is, accordingly allowed with liberty to the Managing Director, PUNSUP to receive back the record of the arbitration proceedings and proceed with the matter, in accordance with law. (NIRMALJIT KAUR) 20.10.2009 JUDGE gurpreet