Indian Oil Corporation Ltd. v. J.N Marshal & Co. & Ors.

J.B Goel, J.— Respondents 1 to 4 have challenged the validity of award dated 23.12.1983 made by Shri T.S Anand, as Sole Arbitrator.

2. Briefly the facts are that petitioner had invited tenders for supply of generating sets. Tender of respondent No. 1 was accepted and a Purchase Order No. GPS/102/103 dated October 26, 1971 was placed for purchase of 8 numbers 60 KVA Crompton/Jyoti and 4 numbers 100 KVA Crompton/Jyoti, Diesel Engine, genera ting sets for a total prices of Rs. 6,16,000/- for destination. Delivery was to be made in instalments as provided therein. This was subject to acceptance of terms and conditions mentioned therein and also General Terms and Conditions of Standard Contract of the petitioner. The terms were accepted by respondent No. 1 and a formal contract was also executed on 16.12.1971 The goods were not supplied within the stipulated period or even thereafter within the extended period. A final notice dated 10.1.1983 giving 10 days time to make supplies was also sent but still no supply was made. The petitioner made risk purchases after inviting tenders in which respondent had also responded, from M/s. Greaves Cotton Ltd. incurring extra cost of Rs. 6,94,973.84. This amount was demanded but was not paid by the respondents.

3. Clause 25 of the General Terms and Conditions of the Contract provided for resolving disputes by Arbitrator to be appointed by the Chairman of the petitioner. First Shri G.S Pandya and then Shri K.L Goel was appointed as Arbitrator. Shri Goel on his promotion relinquished charge and then Shri T.S Anand was appointed as Arbitrator. He entered reference. Petitioner filed its claim and respondents its reply contesting the claim. Parties led documentary evidence. Time for making the award was extended by them from time to time and finally by this Court in O.M.P 130/82 on August 25, 1983. The award dated 23.12.1983 was made.

4. The operative part of the award reads as under:

“And whereas I have perused the respective statements of the parties, the documents filed by them and considered the same as well as the oral and written submissions made by the parties and have considered the entire matter.

Now I, T.S Anand, the Sole Arbitrator, do hereby make the following award:

(1) I direct that the respondent shall pay to the Indian Oil Corporation Ltd. the sum of Rs. 62,000/- (Rupees sixty two thousand only) within two months from the date hereeof and failing payment aforesaid the respondent shall be liable to pay interest @ 12 per annum on the aforesaid amount.

(2) Parties shall bear their respective costs of this arbitration.

(3) The Indian Oil Corporation Ltd. shall, however, bear the costs of stamp duty.

5. On the application of the petitioner under Section 14 of the Arbitration Act (for short The Act’) made on 21.1.1984 after several notices sent the Arbitrator filed the award and the proceedings in this Court on 11.3.1987 The award is being challenged by the respondents 1 to 4 on the objections mentioned in objection petition (I.A 2920/87).

6. The following issues were framed on 30.4.1990:

(1) Whether the award is liable to be set aside on the objections raised by the respondent?

(2) Relief.

7. Both the parties have adduced evidence by way of affidavits. Respondents filed two affidavits of Shri S.S Mehra whereas petitioner has filed one affidavit of Shri A.P Jain, its Law Officer.

8. Respondent No. 1 at the relevant time was a partnership firm consisting of respondents 1 to 4 and Late Shri K.M Mehta as partners. Shri K.M Mehta had died during the arbitration proceedings. His L.Rs were not brought on record.

9. I have heard the learned Counsel for the parties. First contention of the learned Counsel for the respondents is that the contract was signed only by one partner of respondent No. 1 and he as a partner had no express or implied authority to refer the disputes for arbitration and to bind the other partners. Obviously the objection is based on Section 19(2) of the Indian Partnership Act. The learned Counsel for the petitioner on the other hand has refuted it and has contended that one partner had entered into and signed the contract on behalf of the partnership firm in the ordinary course of its business and it is not disputed that he had authority on behalf of the partnership firm to enter into the said contract. The said contract itself contained the arbitration agreement. This shows that the partner had authority to enter into contract in question, and as arbitration agreement is part of the said contract he had also implied authority on behalf of other partners to refer the disputes relating to that contract for arbitration and hence the reference to arbitration is binding on all the partners. He has relied on Sanganer Dal and Floor Mill v. FCI, (1992) 1 SCC 145 : AIR 1992 SC 481.

10. It is not disputed that the contract entered into by one of the partner on behalf of respondent firm with the petitioner related to the business of and was entered into in the course of the partnership business. It is also not disputed that the contract was entered into on behalf of partnership and that the partner who had entered into contract on behalf of respondent partnership with the petitioner had authority to enter into the said contract on behalf of the firm. It was not disputed by other partners at any time. This contract thus binds the other partners of the firm and for that matter each of its terms including the arbitration agreement contained therein. The facts of the prsent case are similar to the case of Sanganer Lal and Floor Mills (supra). In that case the Supreme Court has held that a contract entered into by one of the partner in the course of business of the partnership firm. The arbitration agreement contained therein is binding on the other partners. This objection thus has no merit.

11. The second contention is that one of the partner of the respondent firm had died during the arbitration proceedings and his Legal Representatives (L.Rs) were not brought on record and in their absence the arbitration proceedings could not continue and stood abated. The award is thus void and without jurisdiction. This is disputed by the learned Counsel for the petitioner.

12. Learned Counsel for the respondent has not supported this contention by any law. Under Section 25 of the Partnership Act “Every partner is liable jointly with all other partners and also severally, for all the acts of the firm done while he is a partner”. In that case arbitration proceedings would not abate against the surviving partners and the decree, if passed in such a case would be executable against the surviving partners and also against the partnerhip assets.

13. Third objection is that the Arbitrator had misconducted himself in handing over the award and his proceedings to the petitioner.

14. There is no basis for this contention. The petitioner had filed an application under Section 14 of the Act for directing the Arbitrator to file the award in Court. Though several notices were sent to the Arbitrator to file the award which could not “be served due to change of his address and finally the award and proceedings were filed in this Court on 11.3.1987 when following proceedings were recorded by the learned Joint Registrar: “The Arbitrator has filed the award alongwith the original proceedings………”.

15. Correctness of these proceedings recorded by the learned Joint Registrar has not been challenged nor it is alleged or shown who else had produced the same. Learned Counsel for the respondent has referred to para 13 of the affidavit dated 3.12.1990 of Shri S.S Mehta where it is stated as under:

“The learned Arbitrator has misconducted himself as also the proceedings by handing over the entire records to the petitioner without information and knowledge of the respondent and was guilty of taking evidence behind the back of the respondent.”

and has contended that this assertion has not been specifically denied or disputed.

16. This paragraph consists of two parts. The objection is based on first part of it which in itself is self destructive inasmuch as if the deponent had no knowledge, how he could say that the Arbitrator had handed over the arbitration proceedings to the petitioner and if so when. The other inference drawn is also without any basis. No reliance could be placed on such a statement made in the affidavit. Nothing has been brought on record to discredit the proceedings recorded by the learned Joint Registrar on 11.3.1997 This objection has also no merit.

17. Then it is contended that the arbitration record was in possession of the petitioner and for filing the application under Section 14 of the Act the period of limitation is 30 days and this application is to be deemed to have been filed when award and proceedings were filed and so is time barred.

18. The petitioner in para 6 of the application under Section 14 of the Act has stated that it had received notice dated December 23, 1983 from the Arbitrator intimating about making of the award by him. The award is also dated 23.12.1983 This application filed on 21.1.1984 is within 30 days. The arbitration record as noticed above was filed by the Arbitrator and obviously it was not in the possession of the petitioner when this application was filed. Otherwise also there was no point or reason for the petitioner not having filed the same in Court earlier. The award is in favour of the petitioner. They are loser by delay caused in filing the award after over three years. This objection also has no merit.

19. Then it is contended that there is no basis for awarding the damages and the damages have been assessed not as on the date of the breach but three years after the breach.

20. The award in question is a non-speaking award. It is not open to the Court to probe the mental process of the Arbitrator and speculate in the absence of reasons, as to what impelled the Arbitrator to arrive at his conclusion. The petitioner had submitted its claim before the Arbitrator and relevant documents and the respondents had contested the claim. After considering the material and hearing the parties as against the claim of Rs. 6,94,973.84 made by the petitioner, the learned Arbitrator has awarded only a sum of Rs. 62,000/-. The law about the scope of the power of the Court to interfere in a non-speaking award is well-settled. The Court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out whether or not the Arbitrator has committed an error of the law or fact. The parties having agreed for decision by an Arbitrator, their chosen Forum, good or bad, legally right or wrong, are bound by his award.

21. Recently in Arosan Enterprises Ltd. v. Union of India, JT 1999 (7) SC 122, after referring the relevant caes law, the scope of the power of the Court to interfere under Section 30 of the Act has been reiterated. It has been emphasied that the award of an Arbitrator shall not be set aside except for three grounds: (1) Arbitrator has misconducted himself, (2) award has been made after the supersession of the Arbitrator or the proceedings becoming invalid, and (3) award has been improperly procured or is otherwise invalid. In para 35 the legal position has been explained as under:

“Be it noted that by reason of a long catena of cases, it is now a well-settled principle of law that reappraisal of evidence by the Court is not permissible and as a matter of fact exercise of power by the Court to reappraise the evidence is unknown to a proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the Court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the Court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event however two views are possible on a question of law as well, the Court would not be justified in interfering with the award.”

22. There is no error apparent on the face of the award nor is any pointed out. As such there is no grond to interfere with the award. The objections filed by the petitioner have no merit.

23. The objection petition (I.A No. 2920/87) is accordingly hereby dismissed and the award dated 23.12.1983 made by Shri T.S Anand, Sole Arbitrator is made a rule of the Court. In terms of the award, a decree for recovery of Rs. 62,000/- with interest thereon @ 12 p.a from the date of the award till the date of the decree and also future interest from the date of the decree till realisation @ 12 p.a thereon is passed in favour of the petitioner and against respondents 1 to 4. The petitioner shall also get costs of these proceedings. Counsel fee Rs. 2,000/-.

I.A No. 2920/87 is dismissed.

Suit No 782-A/84 is disposed of.