Case: M/S VIJAY TRADING Vs. CENTRAL WAREHOUSING CORPORATION

2. Brief facts which led to filing of this appeal are as under:An agreement dated 30.08.2001 was entered into between the respondent-Central Warehousing Corporation and the appellant for a period of two years from 28.08.2001 to 27.08.2003 for carrying out the work of Handling and Transportation at Inland Clearance Depot (ICD), Varanasi. The respondent-Corporation terminated the contract on 21.02.2002 under Clause X(A) and X(B) of the agreement due to appellants poor performance as Handling and Transportation Contractor and deterioration of the situation at the Inland Clearance Depot. The security deposit furnished by the appellant upto the date of termination was also forfeited3. Dispute arose between the parties which led to the appointment of an arbitrator vide reference order dated 23.09.2002. The respondent-Corporation claimed a sum of Rs.98,06,000/- with interest @ 18% thereon. It was contended by the respondent- Corporation that the performance of the appellant was not found satisfactory particularly, in regard to Export loaded Container No.TRIU-4991702x40, which was illegally detained by the appellant and the appellant failed to transport the container to the Port at Navi Mumbai. The said container was handed over to the appellant on 06.11.2001 from the Inland Clearance Depot, Varanasi and did not reach its destination, JNP, Navi Mumbai within the stipulated time period i.e. upto 16.11.2001. When the exporter, M/s Bhola Nath Industries pressed for early recovery of the container and also raised claims towards compensation for loss of the container, the respondent-Corporation started inquiries and issued several notices to the appellant for recovery of the container and non-performance of contractual obligations. Only after intervention of the Courts, the container was located and recovered at Ghaziabad and received back at ICD, Varanasi on 23.05.2003. But by then, the said container missed the export schedule. The exporter initially declared that the cargo stuffed in the container was of no use to him; but subsequently, reprocessed the same to make it usable4. The appellant filed counter claims under various heads claiming Rs.52,00,000/- with interest @ 18% thereon. It was submitted by the appellant that the container in question was illegally detained by M/s ODC Roadways to whom the container was entrusted for transportation to Port, Navi Mumbai. According to the appellant, it had taken all possible steps including approaching the High Court for speedy recovery of the container and in spite of all the efforts taken by the appellant, respondent-Corporation terminated the contract illegally5. Taking into consideration the claim and grounds for termination and also the reply filed by the appellant, the Arbitrator vide award dated 18.03.2005 upheld the termination of the contract as valid and decided certain claims of the respondent in its favour. Certain counter claims of the appellant were also allowed by the learned Arbitrator. Other claims including counter claim No.3 (claim of Rs.4,30,284/- towards refund of security deposit) and counter claim No.4 (claim of Rs.15,75,484/- including interest of Rs.4,64,815/- towards illegal detention of the fork lift) were decided against the appellant. It was held by the Arbitrator that the termination of the contract is legal and justified and in view thereof, the respondent had the right to forfeit the security deposit. As to the claim of the appellant towards alleged detention of the fork lift and hand trolleys, the Arbitrator held that the detention of the equipments is right and justified. The Arbitrator held that it is seen from Clause 5(g) of the tender conditions of the contract that the respondent has the right to demand the balance due when sufficient sum is not available to cover the full amount recoverable from security deposit and other dues. In view of the heavy claim amount of M/s Bhola Nath Industries and Customs/Excise Department and others, the learned Arbitrator concluded that there is no illegality in the action on the part of the claimant in detaining the equipments like fork lift and hand trolleys as security6. The appellant filed objections under Section 34 of the Arbitration and Conciliation Act contending that the order of termination whereby the security deposit was also forfeited does not record any reason for forfeiture of the security deposit. Similarly, no reason has been given by the Arbitrator for rejecting the counter claim No.3. In support of its counter claim No.4, the appellant averred that for successful executing of the contract, it had employed one fork lift and four hand trolleys at Inland Clearance Depot, Varanasi, which were owned by them and the same have been illegally detained by the respondent. On behalf of the respondent-Corporation, it was contended that the forfeiture of the security deposit was justified on the following reasons – firstly in view of the heavy claim raised by M/s Bhola Nath Industries before the Consumer Forum, Lucknow and secondly, on account of bank guarantee to sum of rupees ten lakhs furnished by the respondent for release of the container. The respondent submitted that a claim of rupees forty lakhs was lodged by M/s Bhola Nath Industries Ltd. Accordingly, it was decided not only to withhold the payment due to the appellant, but also to forfeit all the equipments in use7. Considering the objections of the appellant and the claim of the respondent-Corporation, the learned Single Judge of the High Court found no infirmity in the reason recorded by the learned Arbitrator while rejecting counter claim No.4. Counter claim No.3 was allowed to the extent that in case the bank guarantee furnished by the respondent-Corporation is discharged, the appellant would be entitled to refund the security deposit in the sum of Rs.4,30,284/-. The appeal filed by the appellant under Section 37 of the Arbitration and Conciliation Act was dismissed vide the impugned judgment affirming the order of the learned Single Judge.

Court's reasoning:
13. Insofar as the allegation of detention of fork lift and hand trolleys, the respondent-Corporation has stated that after finalisation of the arbitration case between the respondent-Corporation and the appellant, all the dues as per the order of the Arbitrator has been paid to the contractor; but the appellant did not approach the respondent-Corporation for lifting their equipments and as such the same were lying at ICD, Bhadohi occupying valuable space. According to the respondent-Corporation, for the space occupied by the equipments, the total rent for the period up to 31.05.2007 works out to Rs.41,746/- and Rs.89,049/- for fork lift and hand trolleys respectively. Be that as it may, according to the respondent- Corporation, the detention of the equipments were made as per the terms of the agreement at Clause 5(g) and the same was accepted by the arbitrator. As held by the learned Arbitrator, the appellant was given a contract to assist in smooth running of international business of import and export and to have the time management on top priority. Failure to transport the container to the Port at Navi Mumbai resulted in missing of the export schedule. Taking into consideration the failure of the appellant to deliver the container at the Port at Navi Mumbai and the time taken in recovery of the container and the expenditure incurred by the respondent- Corporation in particular, furnishing of bank guarantee of rupees ten lakhs, the detention of the equipments cannot be said to be arbitrary or beyond the terms of the agreement14. It is pertinent to note that the appellant has received an amount of Rs.11,06,598/- as the amount allowed by the Arbitrator vide award dated 18.03.2005 by DD No.079915 dated 03.09.2005. Thus, even before filing of the objection petition under Section 34 of the Act, the appellant has received the full payment due and payable to him as per the arbitral award dated 18.03.2005. According to the respondent-Corporation, the appellant has not disclosed the receipt of the money at the time of filing the petition under Section 34 of the Act15. The learned Arbitrator and the Courts below have recorded the concurrent findings that the appellant Contractor has failed in carrying out the work as per the terms and conditions of the contract and the learned Arbitrator has rightly allowed the detention and forfeiture of the equipments of the contractor and disallowed the counter claim No.4 of the appellant. Similarly, the counter claim No.5 which was for the damages for the alleged detention and use of hand trolleys has been rejected and thus, the counter claim Nos.4 and 5 have been rightly disallowed by the learned Arbitrator. We do not find any reason warranting interference with the award passed by the Arbitrator and the impugned judgment and this appeal is liable to be dismissed.