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Judgment
S. Rajeswaran, J.—0. P. No. 448/2002 has been filed u/s 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''the
Act'') to set aside the award dated 1.11.2002 and to allow the counter claim of the petitioner amounting to Rs. 2,09,56,376/- together with
interest with effect from 1.10.1998 till the date of realisation.
0.P. No. 449/2002 has been filed u/s 34 of the Act, 1996 to set aside the award dated 1.11.2001 and to allow the counter claim of the
petitioner amounting to Rs. 3,76,55,400/- together with interest with effect from 1.10.1998 till the date of realisation.
In the above two petitions, the petitioners are challenging the common award passed by the 2nd respondent arbitrator dated 1.11.2001. In the
common award dated 1.11.2001, the 2nd respondent allowed the claim of the first respondent, in full against which 0.P. No. 448/2002 has been
filed by the petitioner partnership firm. In respect of the other claim of the 1st respondent MMTC against another partnership firm and its partners,
the 2nd respondent has allowed the claim in full except an amount of Rs. 25 lakhs. Hence, against this portion of the award, 0.P. No. 449/2002
was filed by the petitioners.
The facts in both the cases are similar and for the sake of convenience I am referring to the facts contained in 0.P. No. 449/2002 alone.
The petitioner has been engaged in quarrying, sourcing and producing granites since 1990 for the purpose of sale in India as well as other parts
of the world. The petitioner was approached by 1st respondent for a tie-up for export of granite and accordingly a Memorandum of
Understanding was entered into in 1993. All of a sudden the 1st respondent stopped transacting with the petitioner because the 1st respondent
was unable to. realise the outstanding amounts from the foreign buyer. The 1st respondent corporation, further claimed that the said outstanding
amounts from the petitioner quoting the MoU, wherein the petitioner had guaranteed the realisation of the said amounts. Thus the dispute arose
between the parties and the 1st respondent sent a notice claiming the amount, in reply to which the petitioner asked the 1st respondent to initiate
arbitral proceedings. Thus the matter was referred to the 2nd respondent who passed an award in favour of 1st respondent and challenging the
same the petitioner has filed these vpetitions u/s 34 of the Act, 1996.
In both the petitions the following grounds have been raised:
(1) The initiation of. arbitration proceedings itself is wrong as the same was not initiated by the Competent person of the 1st respondent
Corporation. (2) The relationship between the petitioners and the first respondent is that of buyer and seller and therefore the contrary finding by
the second respondent in this regard is not correct. (3) The MoU itself is not valid as it violates the Foreign Exchange Regulation Act, 1973,
(hereinafter called ''FERA'') and Indian Contract Act 1872. (4) The 1st respondent corporation has violated the rules, regulations and the
principles of natural justice which was not appreciated by the arbitrator. (5) The counter claim was rejected summarily without considering the loss
of the petitioner.
The 1st respondent filed a counter statement in both the petitions and supported the award of 2nd respondent.
Heard the learned Counsel appearing on either side and I have perused the documents filed in both the cases and the judgments referred to in
support of their submissions.
The 2nd respondent framed six issues in both the claims and counter claims of parties in his award. The 1st respondent corporation marked 204
documents on their side which are Exs. C1 to C204 insofar as O.P. Nos. 449/2002 is concerned and 4 witnesses deposed on behalf of 1st
respondent corporation who are CW1 to CW4. Thereafter the case was reopened again and Exs.C205 to C207 were marked in addition to
earlier documents on behalf of the claimants. Exs.Rl to R44 were marked by the petitioners and RW1 and RW2 were examined on their side.
Similarly, in 0.P. Nos. 448/2002, the 1st respondent corporation ""marked Exs.C1 to C41 and CW1 to CW3 were examined. The petitioners
marked Exs. Rl to R13 and examined RW1. After elaborately considering the entire evidence both oral and documentary adduced before him, the
2nd respondent has passed the award.
This court has its own limitations as imposed u/s 34 of the Act. The award cannot be set aside if none of the grounds set out in Section 34 of
the Act is attracted. I am also aware that this Court is not an appellate court to re-appreciate and re-evaluate the evidence on record to come to a
different conclusion. The attempt on the part of the petitioners in both the petitions is that the award is vitiated as it violated the Company''s Act,
Sale of Goods of. The FERA and the Indian Contract Act. It is well settled law that an award passed by the arbitrator in violation of the
mandatory provisions of any Indian law is liable to be set aside u/s 34 of the Act. Therefore, now let me consider whether the award violated the
above enactments as contended by the learned Counsel for the petitioners.
Insofar as the contention that the initiation of the claims in both cases of the claimants are bad as the same was by an unauthorised person is
concerned, the 2nd respondent has framed this question as an issue and after going through the evidence adduced before him has held that the
arbitration proceedings has been duly authorised by the claimant company (1st respondent). This finding of the 2nd respondent on the basis of
evidence cannot be found fault with by this Court u/s 34 of the Act by re-appreciating the entire evidence which is outside the purview of Section
34 of the Act, 1996.
The 2nd respondent has also framed the issue of whether there was an outright sale from the petitioners to the 1st respondent, before the 1st
respondent''s export to foreign importers. After framing this issue, the 2nd respondent has clearly held that 80% advance given by the 1st
respondent under the MoU was only a loan given to the petitioners and not part of sale. The 2nd respondent has also referred to the very plea of
the petitioners themselves that 1st respondent only lent -money to the petitioners and did not pay any sale price. He has also referred to
petitioner''s submissions and pleadings and also their depositions and rendered a finding against the petitioners. This finding also cannot be found
fault with by this Court u/s 34 of the Act.
Insofar as the violation of Sections 26 and 47 of FERA 1973, and Section 23 of Indian Contract Act 1872 to nullify the MoU is concerned,
the 2nd respondent after referring to the oral evidence and exhibits and the provisions in the respective Act also held that the provisions of the Act
could not be invoked to nullify the MoU. This finding based on evidence cannot be interfered with by this Court u/s 34 of the Act, 1996.
Similarly, the counter claim of the petitioners was considered by the 2nd respondent in detail and after elaborately evaluating the entire
evidence adduced before him, the 2nd respondent has held that 1st respondent cannot be blamed for stoppage of funds and the entire counter
claim fall to the ground. This finding is also based on entire evidence adduced which will not fall under any of the clauses enumerated u/s 34 of the
Act.
In my view, the common award under challenge has been passed by 2nd respondent after thoroughly considering the entire evidence adduced
before him and no ground has been made by the petitioners to set aside the award u/s 34 of the Act. But the learned Counsel for the petitioners
relied on the judgments of this Court reported in 1998-1-L.W. 203 Swadharma Swarajya Sangha, etc. v. Indian Commerce & Industrial
Company Pvt. Ltd. and 1994-1-L.W.602 Sankaranarayanan K.N. and Anr. v. Shree Consultations and Services Pvt. Ltd. & 3 others to contend
that institution of arbitral proceedings itself is bad as the same was done by an unauthorised and incompetent person.
I am unable to accept this contention because in both the judgments, this Court considered the question of initiation of suits by the person in the
light of Order 29 Rule 1 of C.P.C. Order 29, Rule 1, C.P.C. deals with suits by or against corporations which is not the question before the
second respondent. Moreover, Section 19(1) of the Act, 1996 has clearly barred the application of the provisions of the CPC and the Indian
Evidence Act.
Hence, I find no merits in the above O.Ps., and consequently'', both the above O.Ps., are dismissed. No costs.