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The National Small Industries Corporation Limited Vs. Golden Workshop - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit Appeal No. 421A of 1975
Judge
Reported inILR1977Delhi241
ActsArbitration Act, 1940 - Sections 14
AppellantThe National Small Industries Corporation Limited
RespondentGolden Workshop
Advocates: J.P. Chopra and; Tiryaogi Narain, Advs
Cases ReferredLucknow (U.P.) v. The State of Madhya Pradesh and
Excerpt:
.....he thinks the demand to be reasonable. in allowing interest from 1-6-1966 till the date of the claim the umpire committed another error of law and his award in that respect too is liable to be set aside.; further, that it lay within the ambit of the arbitrator's jurisdiction to award interest at the rate of 9 per cent per annum on rs. 15,374.10 for the duration of the arbitration proceedings, on the strength of the provision in section 34 of the code of civil procedure. the authority of the arbitrator comes to an end, however, when the matter is finally disposed of by the court and the umpire's direction that interest at the rate settled by him would be payable by the corporation till the claimant's dues are satisfied (i.e. even beyond the date of the decree is again against law and..........corporation by way of part of the price could not be withheld and no fault can be found with the umpire's award on that point.(5) messrs. golden workshop laid claim to rs. 68,400 as damages on the score of loss of profit suffered due to non-supply of the machine at the rate of rs. 42 per day from 1-6-1966 till november 1970. the umpire was of the view that damages could not be measured in the manner suggested by golden workshop and it could claim only the amount of the difference between the contract price and the market price of the machine on the date of the breach of the contract, besides compensation for the trouble and expense which it would have had to incur for procuring another machine like the one in question. it was conceded by him that there was no evidence on the record as.....
Judgment:

M.S. Joshi, J.

(1) On 26-4-1966 Messrs Golden Workshop,Ambala Road, Saharanpur, entered into a hire-purchase agreement with the National Small Industries Corporation Limited, New Delhi (hereinafter referred to as 'the Corporation'), in respect of a Stankoimport (U.S.S.R.) Model 3A 423 crankshaft regrinding machine. The machine was imported from Russia at the instance of the Golden Workshop and its price was fixed at Rs. 82,209.78. Out of the said amount Rs. 15,374.10 were paid by Golden Workshop to the Corporation from time to time. The machine was, however, damaged when it was being transported from Bombay to Delhi. Golden Workshop refused to take its delivery on the ground of the said damage and also because of certain payments having been asked for by the Corporation. There was a clause in the agreement that any dispute or difference which may arise between the parties with regard to its construction, meaning and effect or any part thereof or any other matter under the said agreement shall be referred to the arbitration of two arbitrators, one to be nominated by each party, and in case of difference of opinion between them by an umpire selected by them, before they entered on the reference. On the Court being approached under section 20 of the Arbitration Act in, pursuance of the said clause the matter was referred to the arbitration of two arbitrators and because they could not arrive at a unanimous conclusion adjudication of the dispute between the parties was taken up by Shri D. R. Dhamija, as the umpire. 'The umpire made his award on 1st May, 1975 and he allowed to Golden Workshop Rs. 15,374.10 by way of refund of part of the price of the machine paid to the Corporation together with interest at the rate of 9 per cent per annum from 1-6-1966 till the date of payment, Rs. 3,000 by way of damages, Rs. 200 as counsel's fee and Rs. 75 as cost of non-judicial stamp paper purchased with the funds provided by him for the writing of the award.'

(2) On 29-5-1975 the Corporation submitted a petition under section 14 of the Arbitration Act with a prayer that the umpire be directed to file the award in Court and the parties be given opportunity to raise objections thereto. This petition was registered as Suit No. 421-A of 1975. On 14-7-1975 the claimant also preferred an application under the same provision of law, registered as Suit No. 475-A of 1975 and desired that the award be got filed by the umpire and made a rule of the Court. This judgment will dispose of both these suits.

(3) The Corporation attached the award contending that it was vitiated by an error on the face of it inasmuch as the umpire's finding as to the Corporation being guilty of breach of contract and as such liable to refund the sum of Rs. 15,374.10 was perverse and based on no evidence and also because he had no jurisdiction to award Rs. 3,000 as damages or interest from 1-6-1966 till payment of Rs. 15.374.10. Exception was taken again to the award of costs. On the claimant's controverting the pleas raised by the Corportaion the following issues were framed in the case :-

(1) Whether the award is liable to be set aside for the reasons stated in para 6 of the objection-petition ?

(2) Relief.

(4) Shri J. P. Chopra, the learned counsel for the Corporation, has assailed the umpire's verdict as to the Corporation being guilty of the breach of the contract and he would like me to go through the evidence bearing on the point available on the record. But the law attaches a finality to the opinion of the arbitrator on a pure question of fact and it is not within the province of this Court to take upon itself to weigh the evidence of the parties with delicate golden scales. It is evident from the award itself that the umpire applied his mind to the material placed before him and the objector's counsel has not thereforee been able to urge that his decision is based on no evidence. It may be possible in a particular case for the court to come to a conclusion different from the one reached by the arbitrator or the umpire, but it is not permissible for it to substitute its finding for that of the arbitrator or the umpire. It is not denied by the Corporation that the machine sustained damage in the course of transit and the umpire has found that the claimant was justified in not accepting the same because of its not being in a satisfactory condition. In these premises the refund of Rs. 15,374.10 paid by the claimant to the Corporation by way of part of the price could not be withheld and no fault can be found with the umpire's award on that point.

(5) MESSRS. Golden Workshop laid claim to Rs. 68,400 as damages on the score of loss of profit suffered due to non-supply of the machine at the rate of Rs. 42 per day from 1-6-1966 till November 1970. The umpire was of the view that damages could not be measured in the manner suggested by Golden Workshop and it could claim only the amount of the difference between the contract price and the market price of the machine on the date of the breach of the contract, besides compensation for the trouble and expense which it would have had to incur for procuring another machine like the one in question. It was conceded by him that there was no evidence on the record as to the difference between the contract price and the market price of the machine on the date of the breach of the contract and there was similar paucity of evidence as to the trouble and expense necessary for securing another such machine and yet he held the respondent liable to pay damages even if nominal because it had committed breach of the 'contract'. It was possible for the price of the machine to go up between the date of the contract and the date of its breach and it was equally possible for the same to climb down. The award of Rs. 3,000 as damages to the claimant was thus wholly arbitrary and unjustified. It amounted to an error apparent on the face of the award.

(6) The Corporation has pleaded that the matter of award of interest was never referred to the umpire and he had no competence, thereforee, to allow anything as such to the claimant. Shri Tiryogi Narain contends that Golden Workshop did lay claim to Rs. 10,780 on account of interest for the wrongful detention of Rs. 15,374.10 at the rate of 12 per cent per annum 16-3-1971 as well as to future interest on the above amount till realisation in its statement of claim and the Corporation never urged before the umpire that he could not go into the matter because it had not been referred to him. The record would show that the whole dispute between the parties, under the agreement became the subject matter of the reference and even otherwise, having submitted to the jurisdiction of the umpire and taken the chance of winning a favorable finding the objector cannot challenge the umpire's authority to adjudicate upon the issue of interest before this Court. The claimant did not, however, admittedly allege any usage or contract entitling it to claim interest from the Corporation and there is no provision of law as would sustain its demand for interest from 1-11-1968 to the date of institution of the arbitration proceedings. Interest has been demanded on the express basis of wrongful detention of money and this demand is not countenanced by law. Interest can be claimed under the Interest Act, if, inter alia, there has been a demand in writing staling that interest will be demanded from the date of the demand and if that essential condition is not satisfied an arbitrator cannot allow interest simply because he thinks the demand to be reasonable. (See Thawardas Pherumal and other v. Union of India, : [1955]2SCR48 ) (1). In allowing interest from 1-6-1966 till the date of the claim the umpire committed another error of law and his award in that respect too is liable to be set aside.

(7) Section 34(1) of the Code of Civil Procedure provides that 'where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the Court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit'. It was observed in Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore : [1967]1SCR105 (2) that though, in terms, section 34 of the Code of Civil Procedure does not apply to arbitrations, if it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law he can allow such interest as can be allowed by the Court The Supreme Court held again in Union of India v. Bungo Steel Furniture Private Ltd. : [1967]1SCR324 (3) in the same manner that the principle of section 34 of the Code of Civil Procedure can be applied by the arbitrator for awarding interst in cases where it could be allowed by the court having jurisdiction in the matter provided that the question of interest had been referred to him. Vide the State of Madhya Pradesh v. M/s. Saith and Skelton (P) Ltd. and others : [1972]3SCR233 (4) where all the disputes including a claim for payment of the amount with interest is referred to the arbitrator, the arbitrator can award interest pendente lite i.e. during pendency of the arbitration proceedings. The High Court of Madhya Pradesh found in a recent case, M/s. Umraosingh and Co., Mahanagar, Lucknow (U.P.) v. The State of Madhya Pradesh and others : AIR1976MP126 (5) that if there is a dispute as to interest which is referred to arbitration or if all matters in difference are referred to arbitration the arbitrator may award interest on principles analogous to section 34 of the Code of Civil Procedure.

(8) We learn from the order of the High Court, dated 17-11-1970, that the entire dispute between the parties under the relevant hire-purchase agreement was taken to arbitration and Golden Workshop demanded interest on the sum of Rs. 15,374.10 not only up to the date of the claim but till realisation. It lay within the ambit of the arbitrator's jurisdiction consequently to award interest at the rate of 9 percent per annum on Rs. 15,3 74.1 Of or the duration of the arbitration procedings, on the strength of the provision in section 34 of the Code of Civil Procedure. The authority of the arbitrator comes to an end, however, when the matter is finally disposed of by the Court and the umpire's direction that interest at the rate settled by him would be payable by the Corporation till the claimant's dues are satisfied (i.e. even beyond the date of the decree) is again against law and is tantamount to an error on the face of the award.

(9) The objections of the Corporation are thus accepted partly and the award of the umpire is set aside so far as it allows damages in the amount of Rs. 3,000 and interest on Rs. 15,374.10 from 1-6-1966 up to the date of the claim i.e. 16-3-1971 and future interest at the said rate beyond the date of this order. In consequence the said award shall be made a rule of the Court and a decree passed in accordance therewith to entitle the claimant to recover Rs. 15,374.10 and interest on this amount at the rate of 9 per cent per annum from the date of the claim, 16-3-1971, to the date of this order and Rs. 275 by way of costs incurred by the claimant in respect whereof nothing has been urged on behalf of the Corporation. There shall be no order as to costs of the proceedings before this Court. The suits aforesaid are disposed of accordingly.


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