M/s Swastik Ginners Pvt Ltd vs /s Tek Chand Daulatram And Ors

In wake of onslaught of COVID-19, abundant caution is being taken while hearing the matters in Court.

The appellant has preferred the present appeal under Section 39 of the Indian Arbitration Act, 1940 claiming the following relief:-

"It is, therefore, humbly prayed on behalf of the appellant that the stay petition may kindly be allowed and the operation and exectuion of the impugned order dated 22.02.2022 passed by the learned District Judge, Hanumangarh as well as the award dated 17.04.1996 passed by the Arbitrator may kindly be stayed, pending the final decision of the appeal."

Brief facts as noticed by this Court are that an application was filed by the respondent no.1-M/s. Takchand Daulta Ram before the respondent no.5-The Northern India Cotton Association Limited., Bhatinda regarding the dispute pertaining to the supply of cotton between the respondent no.1 and appellant. The transactions caused disputes and the respondent no.5 vide its communication dated 04.08.1995 asked the present appellant to give a name of Arbitrator for resolving the dispute between both the parties. After some litigation, the arbitrators were appointed but due to unacceptability of the arbitrators amongst the parties, the respondent no.4 was appointed as an Umpire.

The appellant did not receive the copy of the claim petition and thus, was seeking an opportunity before the Umpire to get a copy of the claim petition so as to entitle him to defend his case before the Umpire. The meeting was held at the instance of the Umpire on 17.04.1996 and award was passed on the same date itself even when the appellant was not represented. Subsequently, it was acknowledged that a telegram was received on the next date on behalf of the appellant to seek an opportunity to defend himself. The relevant portion of the arbitration award reads as follows :-

"14. The president accordingly appointed Shri V.S. Kapur as an Umpire which was duly intimated to the Arbitrators and the parties vide the Association's letter dated 2-4-1993.

The Arbitrators were requested by the Umpire vide Association's letter dated 4-4-96 to attend a meeting on 17-4-1996 fixed by him to hear their view point on the only issue which was before the Umpire i.e. the rate at which settlement difference was payable to the Plaintiffs. It was added further in the said letter of the Association dated 4-4-96 that in case any of the Arbitrators was not in a position to attend the meeting, he could very well submit his views to the Umpire in writing.

On 17-4-1996, the date fixed for hearing, Shri. V.S. Kapur the Umpire was present with Shri. O.P. Gupta, Secretary of the Association in attendance. A written statement filed by Sh. Inder Nath Minocha, Arbitrator of the Plaintiffs was placed before the Umpire wherein he stated that according to him the rate of Rs. 1750/- per maund fixed by the Board of Directors of the Association must apply to all the undelivered sale contracts and settlement difference becomes payable at this rate and he saw no reason to make any alteration therein.

The Arbitrator appointed by the Defendants, however, did not file his appearance nor cared to send any written statement as asked for. As such, the Umpire was left with no alternative but to proceed with the case ex-parte."

Heard learned counsel for the appellant and perused the record of the case.

This Court observes that in the interest of justice, it would be appropriate to provide an opportunity to the appellant to defend his case before the Umpire. This Court is conscious of the fact that an interim order was passed, staying the effect of the award on 28.11.2002 and the interim order stood confirmed on 06.10.2006 and despite such interim orders, none appears for respondents, even when the appeal itself is about 18 years old.

This Court finds that the proceedings before the learned District and Sessions Judge, Hanumangarh, which resulted into impugned order of 22.02.2002 has also not taken into consideration the fair opportunity, which ought to have been granted to the present appellant to defend his case before the Umpire. This Court has also taken into consideration the judgment cited by learned counsel for the appellant rendered by Hon'ble Calcutta High Court reported in AIR1974Cal345 (Union of India Vs. Romesh Kumar Rajgharia, wherein Hon'ble Calcutta High Court has opined that;

"Arbitration - security deposit - Arbitration Act, 1940

- Court observed that under Clause 52 appellant has general lien over securities as well as monies that were due and payable by appellant to respondent under contracts - claim to refund of security deposit is irretrievably connected with claim of appellant for damages or extra expenses suffered - refund of security deposit cannot be ordered without hearing claim for damages and extra expenses and claim made by appellant to recover such damages - arbitrators did not hear parties on question of damages and extra expenses incurred or to be incurred by appellant as claimed by him under counter statement - held, interim award directing payment of security deposit to respondent must be held bad and accordingly set aside."

In light of aforesaid limited observations and looking into the fact that there is no contest to the matter for last 18 years and appellant's stand is unrefuted before this Court, despite an interim order operating since beginning, therefore, this Court is left with no other option but to remand the matter back to the Umpire, who may pass a considered order on merits after giving proper opportunity of hearing to both the parties.

In view of the above, the present appeal is allowed and the impugned order dated 22.02.2002 passed by learned District and Sessions Judge, Hanumangarh and impugned arbitration award dated 17.04.1996 are quashed and set aside and the matter is remanded back to the Umpire to pass a fresh award after giving proper opportunity of hearing to both the parties. It is made clear that umpire need not be the same person but has to be the authority so existing for the adjudication.