Food Corporation of India vs Shanti Cereals Pvt. Ltd. and Others

S.N. Aggarwal, J.—This is a petition filed against the arbitral award dated 12.08.1999 by Food Corporation of India (hereinafter to be referred as the ''petitioner'') seeking to challenge the said award u/s 34 of the Arbitration and Conciliation Act, 1996.

The brief facts of the case are as follows:

A large quantity of Paddy was received by the petitioner in its Haryana region from Punjab during January and February, 1995 and this fact came to the knowledge of the respondent who made an offer to mill 10,000 M.T. of Paddy into rice as per the petitioner''s specifications vide its offer received by the petitioner on 16.02.1995. The offer was accepted by the petitioner and the written agreement dated 24.02.1995 was executed between the parties whereby the respondent agreed to mill 10,000 M.T. of Paddy into rice in three phases as under:

(1) 1/3rd by the end of March, 1995

(2) 1/3rd by the end of April, 1995 and

(3) 1/3rd by the end of May, 1995

The respondent allegedly did not mill the Paddy of the petitioner lying at the Hemda Open Complex, Karnal and the Paddy brought at Taraori which was a part of the contract between the parties. The petitioner is alleged to had suffered a loss of Rs. 2,52,86,402/- due to non-performance of the contract by the respondent.

The agreement dated 24.02.1995 executed between the parties contained an arbitration clause being Clause 22 by which the parties agreed to refer their disputes and differences that might arise between them under the contract for arbitration in accordance with the Rules of the Indian Council of Arbitration. It was agreed upon between the parties that the award in pursuance of the said agreement between them shall be binding on the parties.

The disputes under the agreement dated 24.02.1995 that arose between the parties were referred for arbitration by the Indian Council of Arbitration to a panel of three arbitrators presided by Hon''ble Mr. Justice N.N. Goswami, a former Judge of this Court with Mr. N.K. Verma and Mr. Sarwamitter as members of the Arbitral Tribunal. The petitioner made a claim of Rs. 2,52,86,402/- against the respondent on account of alleged loss suffered by it due to breach on the part of the respondent in not milling the Paddy in terms of agreement dated 24.02.1995. The respondent also filed a counter claim of Rs. 53,13,365.51 paise before the Arbitral Tribunal. The Arbitral Tribunal vide its award dated 12.08.1999 dismissed the claim as well as the counter claim of the parties. Aggrieved therefrom the petitioner has filed the objections u/s 34 of the Arbitration and Conciliation Act, 1996 whereas the respondent has not filed any objections against the said award.

The arbitral award dated 12.08.1999 is sought to be challenged by the petitioner inter-alia on the following grounds:

(i) The award is a non-speaking award and therefore it is contrary to the terms of the Arbitration Agreement contained in Clause 22 of the Agreement which specifically provides that the panel of arbitrators shall give a speaking award.

(ii) The award is bad in law because the Arbitral Tribunal has not returned any findings on issues No. 5 to 7.

(iii) The award is opposed to public policy because of judicial misconduct on the part of the arbitrators in ignoring the letter dated 15.03.1995 (Annexure P-5 to the petition) written by the respondent No. 1 to the petitioner informing that it was ready to mill 4100 M.Ts. Paddy lying at Hemda Open Complex Karnal provided it was supplied at their mill at Taraori.

(iv) The Arbitral Tribunal has failed to take into account that the time was the essence of the contract and since the respondent No. 1 had failed to mill the paddy in terms of agreement dated 24.02.1995, there was clear breach on the part of the respondent No. 1.

I have gone through the contents of the award and have also given my thoughtful consideration to the arguments advanced by the counsel for the parties in the light of the material available on record.

There is absolutely no merit in the contention of the counsel for the petitioner that the award under reference is a non-speaking award. The Arbitral Tribunal has given cogent reasons in its award for rejecting the claim of the petitioner. The relevant portion of the award is reproduced hereinbelow:

There is no material on record to show that this stand of the respondents was ever questioned by the claimants. Therefore, we have to accept that the quality of Paddy was not in accordance with the specifications and as such was rightly rejected. Further there is also no dispute that the Paddy brought to the mill premises has already been accounted for though a portion of which was milled little later for which no grievance was made.

Now coming to the legal question, the respondents had admittedly informed the claimants in March, 1995 that the Paddy was of inferior quality and as such no further stock should be sent for milling. No reply to that letter was sent by the claimant and no effort was made to send any further Paddy. this leads us to the conclusion that the claimants accepted the stand of the respondents. In any case Clause XIV of the contract clearly states that the Corporation/Claimant could get the work executed at Miller''s risk. The contract does not contemplate that the Paddy could be sold at such a late stage and Miller could be held liable for the same. Assuming that the respondents had wrongly refused to Mill the Paddy, it was open to the claimants to have it milled from another miller and loss if any could be claimed from the respondents. Admittedly there were number of other Mills in the same area, but no effort was made to get the Paddy milled. At the request of counsel for the claimants a further opportunity was given to show if any effort was made to get the Paddy milled. The claimants along with further affidavit filed a tender notice which was issued for the next year and not for the Paddy in question. The Paddy was kept in the open for more than 21 months and sold thereafter. It is the concerned official/officials of the claimants who are answerable and not the respondents.

For the reasons recorded above, the claimants have failed to prove their claims and the same is dismissed in toto.

9 A bare reading of the above would show that the Arbitral Tribunal has rightly rejected the claim of the petitioner on account of loss allegedly suffered by it because of alleged breach on the part of the respondent No. 1. No fault can be found with the reasoning of the Arbitral Tribunal referred hereinabove. The reliance placed by the petitioner on letter of respondent No. 1 dated 15.03.1995 is of no consequence. The counsel for the petitioner has failed to show as to how the award given by the Arbitral Tribunal in the present case can be said to be opposed to public policy. The learned Counsel for the petitioner did not point out any defect or irregularity in the procedure followed by the Arbitral Tribunal in adjudicating the disputes between the parties. The award is in accordance with the terms of the Arbitration Agreement between the parties. This Court can neither reappreciate the evidence nor sit in appeal over the judgment of the Arbitral Tribunal and substitute its own opinion in place of that of Arbitral Tribunal. The objections against the award preferred by the petitioner do not fall within the parameters of Section 34 of the Arbitration and Conciliation Act, 1996.

In view of the above, this petition fails and is hereby dismissed with no orders as to costs.