Azhagu Stores vs R. Subramaniam, I.A.S., (Retd) and Tamilnadu Civil Supplies Corporation Limited

S. Jagadeesan, J.—This appeal is directed against the order of the learned Judge dated 28-08-1996 made in O.P. No. 95 of 1993, which

was filed by the appellant for setting aside the award passed by the Arbitrator.

The appellant agreed to supply 5000 metric tonnes of rice to be supplied at any loading stations in Andhra Pradesh through Tamil Nadu Civil

Supplies Corporation. The rice to be supplied was to be of fine/super fine/boiled rice at the rate of Rs. 4,999/- per metric tonne and another 5000

metric tonne at the rate of Rs. 5,100/- respectively. The agreement provides for forfeiture of the security deposit in the event of any violation of

conditions of agreement or the Corporation suffering any loss. The rice ought to have been supplied by the appellant between 11.11.1991 to

31.12.1991 in three equal instalments i.e., 1/3rd of the quantity to be supplied on or before 11.11.1991 and another 1/3rd by 01.12.1991 and the

balance 1/3rd to be supplied before 31.12.1991. The appellant did not comply with the schedule of supply with the result the Corporation

forfeited his security deposit. The appellant made a claim before the arbitrator, who passed an award confiscating a sum of Rs. 5,04,499/- by

working out the forfeiture of security deposit at 1 1/2 percent on the total value of 6666 metric tonnes of rice to be supplied by the appellant. The

appellant has filed Original Petition before this court for setting aside the said award. The learned Judge dismissed the Petition, hence the present

appeal.

The short question arise for consideration in this appeal is whether there can be forfeiture at all as made by the Corporation in the absence of

any loss sustained by them.

The learned senior counsel appearing for the appellant vehemently contended that the respondents did not establish any loss because of the non-

supply of rice by the appellant. In the absence of any loss sustained by the respondents, the forfeiture clause cannot be enforced. Hence, the award

passed by the arbitrator is illegal and consequently the judgment of the learned Judge confirming the said award without considering the necessity

on the part of the 1st respondent to establish the loss is also bad.

The learned counsel appearing for the second respondent contended that it is unnecessary to establish the loss sustained by the first respondent.

The clauses stipulated in the terms of agreement unequivocally made it clear that for violation of condition, forfeiture of the security deposit can be

made. The non-supply of rice by the appellant being violation of the agreement, it is open to the first respondent to invoke the forfeiture clause and

consequently, there is no need for any interference, either in the award or in the judgment of the learned Judge.

To appreciate the contentions, it is necessary to have a look at clause 10 of the agreement dated 30-10-1991, which was relied on by both the

parties:-

It is agreed that the Corporation is at liberty to forfeit the deposit of Rs. 10,09,000 (Rupees Ten Lakhs Nine Thousand and Nine Hundred Only)

either in full or in part for any violation of this agreement or for the loss, and also to claim further damages for loss, if any, sustained by the

Corporation after forfeiture of the deposit.

Admittedly, the appellant did not supply any one of the consignments which he had agreed to be supplied on 11.11.1991, 01.12.1991 and

31.12.1991. Hence, the fact remains that he totally failed to comply with the conditions of supply of rice to the Corporation. Clause 10 of the

terms of the agreement dated 30-10-1991 referred to above envisages that the corporation is at liberty to forfeit the deposit of Rs. 10,09,900/-

either in full or in part for any violation of the terms of the agreement or in the event of any loss sustained by the Corporation and also to claim

further damages for loss, if any. Hence, it is clear that the respondents can enforce the forfeiture clause, if there is any violation of the terms of the

agreement. The non-supply of rice by the appellant undoubtedly is a violation of the terms of the agreement as such the arbitrator has passed an

award forfeiting a sum of Rs. 5,04,499 as adopted in respect of other contractors as well. The learned Judge also considered the same and

confirmed the award passed by the arbitrator holding that there is no illegality in the award.

We have also considered the contentions of the counsel for either side. We also perused the judgment of the learned Judge. When admittedly

there is violation of the conditions of supply by the appellant, no interference is warranted either in the award or in the judgment of the learned

Judge. Hence, the same is confirmed.

The appeal is therefore dismissed. No costs.