Delhi High Court Hindustan Paper Corporation Ltd. vs Delhi Paper Products And Ors. on 13 April, 2010 #F22 * + O.M.P. 379/2001 HINDUSTAN PAPER CORPORATION LTD. ..... Petitioner Through: Mr. R.K. Singh, Advocate with Mr. Nikhilesh Krishnan, Mr. Mayank Wadhwa, Mr. Prabhat Chaurasia, Mr. Yashish Chandra, Mr. Rajesh Kumar, Mr. Jaipratap, Mr. Vimal Dubey, Advocates for Ratan K. Singh & Co. versus DELHI PAPER PRODUCTS AND ORS. ..... Respondents Through: Mr. Jayant K. Mehta, Advocate. % Date of Decision : April 13, 2010 HON'BLE MR. JUSTICE MANMOHAN 1. Whether the Reporters of local papers may be allowed to see the judgment?No. 2. To be referred to the Reporter or not? No. 3. Whether the judgment should be reported in the Digest? No. JUDGMENT MANMOHAN, J (ORAL) 1. This petition has been filed under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "Act, 1996") seeking partial setting aside of the arbitral Award dated 09.09.2001, passed by Mr. Justice B.D. Aggarwal (Retd.), the Sole Arbitrator. O.M.P.379/2001 Page 1 of 47 FACTS : 2. The relevant facts of the present matter is that the petitioner, Hindustan Paper Corporation Limited (hereinafter referred to as „HPC‟) is in the business of manufacturing and selling varieties of papers. For the purpose of selling its paper, HPC appoints stockists throughout the country. HPC entered into one such stockistship agreement and another agreement called supplementary/third party agreement with respondent no.1, Delhi Paper Products Pvt. Ltd. (hereinafter referred to as „DPP‟) whereby DPP was authorized to purchase papers from the HPC on the terms and conditions mentioned therein. Said agreement was to work as an umbrella agreement with respect to rights and obligations of the parties to the said agreements. 3. Under the aegis of the said umbrella Stockistship agreement, DPP was regularly buying paper from HPC. For such transactions, DPP used to be entitled to various benefits/incentives in the form of quality discount, quantity discount etc. DPP also used to purchase paper on credit basis on various occasions. 4. During the course of transactions, in the month of FebMarch 1996, DPP purchased paper worth Rs. 79,81,340/ (Rupees Seventy Nine Lakhs Eighty One Thousand Three Hundred Forty only) under 11 O.M.P.379/2001 Page 2 of 47 invoices. For the paper so purchased during this period, DPP made payments thereof. 5. Thereafter, in the month of JuneJuly 1996, DPP purchased from HPC another batch of paper and against the said supplies in the month of JuneJuly 1996, DPP issued number of cheques for a total amount of Rs. 44,92,782.20 (Rupees Forty Four Lakhs Ninety Two Thousand Seven Hundred Eighty Two only). 6. After issuing aforesaid cheques, DPP asked HPC to abstain from depositing the said cheques on the ground that paper purchased by DPP in the month of FebMarch 1996 was found to be defective and, therefore, in the understanding of DPP, consideration for the papers purchased by them in the month of FebMarch 1996 failed. A request was made by DPP to HPC that it be given credit of the said amount of Rs. 44,92,782.20/ (Rupees Forty Four Lakhs Ninety Two Thousand Seven Hundred Eighty Two only) against the claim arising in their favour because of defective supply made in the month of FebMarch 1996. DPP also asked HPC to refund/adjust the balance of Rs. 34,88,557.80/ (Rupees Thirty Four Lakhs Eighty Eight Thousand Five Hundred Fifty only) being the difference between price of paper supplied in the months of FebMarch 1996 and JuneJuly, 1996. Parties exchanged various correspondences in this regard. There are certain documents on record which indicate that DPP was initially asking for O.M.P.379/2001 Page 3 of 47 reduction against the supplies made in the months of FebMarch, 1996. By way of its subsequent letters, DPP informed HPC that papers supplied in the months of FebMarch 1996 were totally defective and unusable and not of marketable quality. DPP also asked HPC to take back papers which were lying in the godown of the DPP. DPP