Case: The Kamrup Industrial Gases Limited Vs. Union Of India

1. An agreement dated 21.04.1965 was executed between the appellant-Kamrup Industrial Gases Ltd., and the respondent-Diesel Locomotive Works, Varanasi, for setting up a plant for manufacture of Oxygen gas and Acetylene gas, at the site of the Diesel Locomotive Works, at Varanasi. It is not a matter of dispute, that the aforesaid contract required the Diesel Locomotive Works, to lift a minimum of 18,000 cubic meters of Oxygen gas, and 2,500 cubic meters of Acetylene gas, per month. The obligation being, that even if the minimum quantity of the gases was not lifted, payment for the minimum postulated quantity, would have to be made, by Diesel Locomotive Works. The contractual agreement also envisaged, that in case Diesel Locomotive Works could not lift the aforesaid minimum postulated quantity, Kamrup Industrial Gases Ltd., would assist it for the disposal of the balance, which could not be lifted. However, if the appellant remained unsuccessful in the sale of the deficit amount of gas, Kamrup Industrial Gases Ltd., would have the liberty to empty their cylinders on buyers account, namely, the appellant- Kamrup Industrial Gases Ltd., would blow off the unutilized balance, and recover the proceeds thereof, from Diesel Locomotive Works.2. The appellant before this Court, raised an arbitral dispute, claiming payment/consideration, on account of non-lifting of the minimum quantum of gases, by Diesel Locomotive Works. By an order dated 13.08.1976, the Calcutta High Court appointed an arbitrator, in the matter. Various orders were passed by the Calcutta High Court thereafter, appointing different arbitrators. Eventually Shri D.P. Mukherji, was appointed (by the High Court, vide its order dated 22.09.1988) as the sole arbitrator, to adjudicate upon the dispute raised by the appellant-Kamrup Industrial Gases Ltd. The arbitral proceedings continued from 1982 to 2004. The arbitral award was finally rendered on 18.04.2004. The operative part of the arbitral award is extracted hereunderregard to my findings on the issues settled in these proceedings as recorded in the preceding paragraphs hereof; I now give my award on the claims raised by the claimant.(1) As regards Claim No.1, I award Rs. 8,72,235.16P (Rupees Eight Lakhs Seventy Two Thousand Two Hundred Thirty Five and paise sixteen) to the claimant;(2) With regard to claim No.2, the claim of Rs. 1,50,000/- is rejected;(3) With regard to Claim No.3, the claim of Rs. 1,50,000/- is rejected;(4) As regards Claim No.4, the claimant is entitled to a sum of Rs. 3,23,581.59P (Rupees Three Lakhs Twenty Three Thousand Five Hundred Eighty One and paise fifty nine) on account of interest on the unpaid bills of the claimant upto 15th November, 1976;(5) As regards Claim No.5, the claimant is entitled to interest at the rate of 3% (Three Percent) per annum on the unpaid bills, being sum of Rs. 8,72,235.16P as pendente lite interest from March 6, 1989 till the deed of this Award.The claimant shall also be entitled to further interest at the rate of 6% (Six Percent) per annum on the said sum of Rs. 8,72,235.16P from the date of the Award till the date of decree or realization whichever is earlier;(6) As regards Claim No.6, the claimant will be entitled to Rs. 4,00,000/- (Rupees Four Lakhs) as costs of and incidental to these proceedings.The Diesel Locomotive Works being dissatisfied with the award, approached the Calcutta High Court (hereinafter referred to as the High Court), under Sections 30 and 33 of the Arbitration Act, 1940. By an order, dated 19.04.2005, a learned Single Judge of the High Court, upheld the award, dated 18.04.2004.4. Dissatisfied with the impugned award, dated 18.04.2004, as well as, the order passed by the learned Single Judge, dated 19.04.2005, the Diesel Locomotive Works preferred a further appeal under Section 39 of the Arbitration Act, 1940. A Division Bench of the High Court, by an order dated 27.04.2007, accepted the appeal (preferred by Diesel Locomotive Works). Aggrieved by the same, the appellant has approached this Court, through the instant civil appeal.

Court's reasoning:
5. During the course of hearing it emerged, that the main reason for the Division Bench of the High Court in accepting the appeal was, that the appellant did not produce vital documents called for by the Diesel Locomotive Works, before the Arbitrator.We find substance in the contention advanced at the hands of the learned counsel for the appellant, more particularly because learned counsel for the respondent, could not dispute the factual position recorded in the proceedings conducted before the Arbitrator, on 16.08.1989. We therefore, hereby set aside the finding recorded by the High Court, to the effect, that the documents sought for by the buyer - Diesel Locomotive Works, were neither produced before the Arbitrator, nor provided to the respondent.9. The next question, that arises for consideration is, whetherthe appellant was entitled to payment on account of short lifting of gases by the Diesel LocomotiveWorks. In this behalf, it has already been noticed hereinabove, that the Diesel Locomotive Works, would lift a minimum of 12,900 cubic meters of Oxygen gas, and a minimum of 2,500 cubic meters of Acetylene gas, per month. And whether or not they lifted the minimum quantity, the appellant herein - Kamrup Industrial Gases Ltd., would be entitled to payment for the same. Be that as it may, it is imperative to determine, before the appellant can be held to be entitled to claim the right of such payment, that the appellant - Kamrup Industrial Gases Ltd., had actually produced the gases in terms of the stated minimum quantum, and further, the appellant was not able to sell the shortfall, in the open market. The question of payment to the appellant would arise only if, there was a subsisting shortfall, after the steps referred to above were followed. This could be done by adding the amount of gases lifted by the Diesel Locomotive Works, and the amount of gases sold by the appellant in the open market. Payment for the shortfall would emerge, "only" if the shortfall of gases thus established, were shown to have been blown off, as has been claimed by the appellant before the Arbitrator, and before the High Court.The above factual finding of the High Court, has also been assailed by the appellant.13. Having perused the documents furnished by the appellant, at the asking of the Diesel Locomotive Works, and having perused the findings recorded with reference to the statement made by Shri A.N. Jha, before the Arbitrator (extracted above), we are satisfied, that on each occasion, before the shortfall of the gases were blown off, the appellant duly informed the Diesel Locomotive Works, and in that view of the matter, it is not possible for us to concur with the findings recorded by the High Court, that due intimation was not furnished by the appellant - Kamrup Industrial Gases Ltd., to the respondent - Diesel Locomotive Works, before carrying on the exercise of emptying their cylinders, by blowing off the unlifted gases. It is also relevant in this behalf to make a reference to the determination recorded by the Arbitrator, again based on the statement of the aforesaid Shri A.N. Jha, that on different occasion, relevant bills were raised by the appellant - Kamrup Industrial Gases Ltd., indicating payments claimable by the appellant. The bills raised also denoted the amounts deducted on account of the sale proceeds of the gases which the appellant could sell in the open market. According to Shri A.N. Jha, all the bills were duly furnished to the Diesel Locomotive Works.15. The list of dates reveals, that on 1.9.2006 the Calcutta High Court decreed the award dated 18.4.2004 (in Award Case No. 12/2004). The said factual position is not disputed in the counter affidavit filed on behalf of the respondent.