(1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 1/10 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR J U D G M E N T Union of India & Ors. vs. M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97 Union of India & Ors. vs. M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 206/2002 Union of India & Ors. vs. M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 207/2002 Union of India & Ors. vs. M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 DATE OF JUDGMENT : 9th March, 2010 P R E S E N T HON'BLE DR.JUSTICE VINEET KOTHARI Mr.B.R.Mehta, for the appellant Union of India. Mr.R.K.Thanvi, for the respondent contractor. BY THE COURT: 1. This four appeals have been filed by the Union of India being aggrieved by the order dated 2/6/1997 passed by the ADJ No.2, (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 2/10 Jodhpur making the arbitration award in favour of the respondent contractor M/s Laxmi Enterprises, a Rule of Court as required under Section 17 of the Arbitration Act, 1940. 2. CMA No. 645/97 has been filed against the order dated 2/6/97 passed by learned ADJ No.2, Jodhpur in Civil Misc. Case No. 5/97. CMA No.206/2002 has been filed against the order dated 23/10/2001 passed by Learned ADJ No.2, Jodhpur in Civil Misc. Case No. 7/97. CMA No. 207/2002 has been filed against the order dated 23/10/2001 passed by ADJ No.2, Jodhpur in Civil Misc. Case No. 6/1997 and CMA No. 208/2002 has been filed against the order dated 23/10/2001 passed by learned ADJ No.2, Jodhpur in Civil Misc. Case No.4/97. 3. The facts of CMA No. 645/97 are taken illustratively. 4. Learned ADJ No.2, Jodhpur has found that the learned arbitrator had partly allowed the claim of the contractor in respect of supply of furniture by him under the contract awarded by the appellant Chief Engineer (Air Force) Ahmedabad Zone and Garrison (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 3/10 Engineer, Air Force, Jodhpur on 30/4/1994 for a period of six months and supply of furniture was to commence from 21/5/2004. The period of contract was extended by the appellant upto 28/2/1995. However, since the contractor failed to supply the said furniture as per the contract within the stipulated extended time, the appellants cancelled the said contract on 20/6/1995. Thus, there arose a dispute between the parties and the matter was referred to the learned Arbitrator in terms of the contract and Lt. Col. V.N. Lingampa was appointed as sole arbitrator, who vide his award dated 12/7/1996 passed the award of Rs. 1,71,750/- in favour of the respondent contractor. 5. The appellant Union of India filed objections under Section 30 of the Act before the learned ADJ No.2, Jodhpur, which came to be decided by the impugned order dated 2/6/1997. Learned Addl. District Judge by his impugned order found that certain claims raised by the contractor were not sustainable and such claims were accordingly rejected. Likewise, claim of Rs.1,78,000/- in respect of goods supplied by the contractor after the cancellation of contract in question on 20/6/1996, the learned ADJ while rejecting the claim (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 4/10 no.5 of the contractor found that the furniture supplied by the contractor after the cancellation of the contract were neither liable to be returned back to the contractor nor the appellant Union of India was liable to pay said amount to the contractor. Claim no.2 of the contractor was in respect of the damages of Rs.18,879/- against which the learned Arbitrator awarded a sum of Rs. 3561/-. Even this claim was not found to be sustainable by the learned ADJ vide discussion at page 8-9 of the impugned order dated 2/6/1997. The learned Arbitrator while deciding claim no. 7 of the contractor, awarded a sum of Rs.41,404/- in favour of the contractor on account of loss of profit @ 10% of the remaining work under the contract of Rs.4,14,044.70, which could not be made by the contractor on account of non-furnishing of the declaration in Form ST 18 & 18-A under the Sales Tax law applicable within the State of Rajasthan. Under the said contract the contractor supplied the furniture to the extent of Rs. 8,33,022.10 to the appellant Union of India but the remaining supply could not be made on account of cancellation of the contract w.e.f. 20/6/1995. The learned ADJ found that this claim was justified as the cancellation of contract was improper on the part of (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 5/10 Union of India. For the same reasons, the learned ADJ rejected the counter claim of the appellant Union of India vide relevant discussion at page 12-13 of the impugned order in which the learned court below found that the delay was caused by the appellant on account of non- furnishing of the declaration in Form ST 18 & 18A, consequently there was delay in supply of furniture by the contractor as the requirement in law to furnish the said declaration is upon the importer as per the provision of Rule 53 of the Rajasthan Sales Tax Rules, 1995. Thus, the learned court below held that the appellant Union of India was not entitled to claim anything on account of risk and cost clause 28 of the contract from the contractor and similarly no penalty could be realized from the contractor. 6. Learned ADJ vide his impugned order found that the arbitrator cannot be said to have misconducted himself in the present arbitration proceedings and, therefore, said award was liable to be made Rule of the Court. 7. Being aggrieved of the said order dated 2/6/1997, Union of (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 6/10 India has filed separate appeals before this Court. 8. Mr.B.R.Mehta, learned counsel for the Union of India submitted that the formalities for obtaining Form ST 18 & 18A from the Sales Tax Department were to be taken by the contractor himself as soon as he made request for the same and the concerned authority of the appellant Department gave him the necessary letter and authority and if there was any delay or said declaration Form was not given to him by the Sales Tax Department, the appellant Union of India could not be held liable and thus the cancellation of the contract was justified on account of non-supply of goods by the contractor within the stipulated time frame and consequently the counter claim filed by the Union of India also deserves to be allowed while the award of the claim no.7 on account of loss of profit was illegal and deserves to be set aside. He, therefore, submitted that the court below has erred in making the award Rule of Court and thus an enforceable decree. 9. On the other hand, Mr. R.K.Thanvi, learned counsel for the (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 7/10 contractor urged that the cancellation of the contract was illegal and unjustified and in view of the legal obligation of the concerned authority to obtain such declaration Form from the Sales Tax Department, the said burden cannot be shifted on the contractor and on account of illegal cancellation of contract the appellants are not entitled to claim anything under risk and cost clause of the contract. 10. On the contrary he submitted that the claim of Rs. 1,78,000/- vide claim no.5 for the material supplied to Union of India deserves to be paid but the learned Arbitrator and the learned court below have erred in rejecting the said claim of the contractor. 11. Having heard the learned counsels and after perusing the impugned order, this Court is of the opinion that the impugned order of learned Addl. District & Sessions Judge dated 2/6/1997 is unassailable. The learned Arbitrator appears to have applied his mind to the relevant facts and evidence and has dealt with each claim separately giving his own reasons for either allowing or rejecting the same or partly allowing the same. Therefore, the main contention of the learned counsel for the appellant that the learned Arbitrator has (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 8/10 erred in rejecting the risk and cost claim of the Union of India and, therefore, he should be deemed to have misconducted himself in the arbitration proceedings cannot be sustained. If the award is a reasoned award, its validity cannot be assailed in Section 17 proceedings unless the arbitrator has misconducted himself in the proceedings. The scope of Section 17 of the Arbitration Act, 1940 is limited to the extent of finding the misconduct of the arbitrator in the arbitration proceedings. It is not the case of appellant Union of India that they were not given reasonable and sufficient opportunity by the arbitrator or that he exceeded the term of reference while giving the impugned award. Merely because the award has gone against the appellant Union of India, the arbitrator cannot be said to have misconducted himself in the arbitration proceedings. Once the contract in question was found to be illegally cancelled on 20/6/1995, there was no question of allowing risk and cost claim of the appellant Union of India against the contractor. On the other hand, since the cancellation of the contract was found to be wrong by the learned arbitrator and he awarded 10% of the value of remaining work on account of loss of profit for the material which could not be supplied (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 9/10 on account of such illegal cancellation of the contract, the award cannot be said to be erroneous. 12. Thus, taking over all view of the matter, this Court is satisfied that the learned Arbitrator cannot be said to have misconducted himself in the arbitration proceedings and consequently the learned court below also cannot be said to have erred in making the same a Rule of Court with some modification. Thus, the appeals filed by the appellant Union of India are liable to be dismissed and are accordingly dismissed. 13. Similarly the cross objections filed by the contractor on 11/8/1998 in the said appeal are also liable to be rejected. Admittedly, supply of furniture in question was made after the stipulated date and after the contract was cancelled. There was no reason to supply such material after the expiry of the contract or cancellation of the same. The provision of law relied upon by the learned counsel for the contractor under Section 65 of the Contract Act do not apply in the present case because that talks of supply made and goods retained (1)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 645/97(2) Union of India & Ors.vs.M/s Laxmi Enterprises & anr.-S.B.CIVIL MISC. APPEAL NO. 206/2002(3)Union of India & Ors.vs.M/s Laxmi Enterprises & Anr.S.B.CIVIL MISC. APPEAL NO. 207/2002 (4) Union of India & Ors.vs.M/s Laxmi Enterprises & Anr. S.B.CIVIL MISC. APPEAL NO. 208/2002 Judgment dt:9th March, 2010 10/10 by the purchaser under the void contract. Similarly, Section 37 of the Sale of Goods Act, 1930 talks of delivery of wrong quantity of goods, which is not the case here. Learned arbitrator has taken into account all the relevant facts and circumstances of the case and has awarded the claim of the contractor wherever found to be reasonable by him. Consequently, cross objections filed by the contractor are also dismissed. (DR.VINEET KOTHARI), J. item no. 9-12 baweja/-