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State Trading Corporation and anr. Vs. Harsha Tractors Limited - Court Judgment

LegalCrystal Citation
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 61 of 1980
Reported inILR1983Delhi263
ActsArbitration Act, 1940 - Sections 30
AppellantState Trading Corporation and anr.
RespondentHarsha Tractors Limited
Advocates: S.L. Watel,; R.K. Watel and; J.P. Chopra, Advs
Cases Referred(vide State of Punjab v. Ajit Singh and
arbitration act, 1940 - section 30--non-speaking award--principles of judicial interference--an error of law apparent on the face of award--decision of arbitrators cannot be reviewed on a question of law merely because a different conclusion may be possible--misconduct--discussed. in accordance with the terms of the contract between the appellants and the respondent a claim was made by the appellants for the refund of the excess price charged by the respondent from the customers beyond the ceiling price fixed by the government. the arbitrators while delivering a nonepeaking award, rejected the claim but directed the respondent to execute an indemnity bond for the said amount in favor of the appellants. the award was made a rule of the court. dismissing the appeal,; 1. there is no error.....s. ranganathan, j. (1) this is an appeal from a judgment of a learned single judge of this court making an award a rule of court and passing a decree in terms thereof, after rejecting an application made by the present appellant's to have it set aside on various grounds. the award is a nonepeaking award passed by broad of three arbitrators deciding certain disputes that had arisen between the state trading corporation of india ltd. (hereinafter referred to as 'the stc') and its subsidiary, the projects and equipments corporation india ltd. (''the pec') on the one hand (who are the appellants before us) and m/s harsha tractors ltd. (the respondent company). the award being a non-speaking award, learned counsel for the appellants sought to make out that it was vitiated by an error apparent.....

S. Ranganathan, J.

(1) This is an appeal from a judgment of a learned single judge of this court making an award a rule of court and passing a decree in terms thereof, after rejecting an application made by the present appellant's to have it set aside on various grounds. The award is a nonepeaking award passed by Broad of three arbitrators deciding certain disputes that had arisen between the State Trading Corporation of India Ltd. (hereinafter referred to as 'the STC') and its subsidiary, the Projects and Equipments Corporation India Ltd. (''the PEC') on the one hand (who are the appellants before us) and M/s Harsha Tractors Ltd. (the respondent company). The award being a non-speaking award, learned counsel for the appellants sought to make out that it was vitiated by an error apparent on its face and also by judicial misconduct in that certain vital disputes arising between the parties have not been considered by the arbitrators at all and certain documents vital for the consideration of the issues have also been over-looked. Though, in a matter of the type before us, the jurisdiction of the court is very much restricted and we are not really concerned with the details of the various documents and pleadings, we shall, in order to enable a proper appreciation of the contentions urged before us, set out some of the details of the transactions which gave rise to the disputes and the award.

(2) The Stc had a license for importing certain tractors in a knocked down condition from Russia. It entered into a contract with a Russian firm on 15th March, 1971. The contract envisaged that the Pec would later stand substituted for the .STC in respect of the contract. That is why the scond appellant; comes into the picture but for all practical purposes, the transactions were between the Stc on the one hand and the respondent company on the other and we may leave the Pec out of account in the following discussion.

(3) In pursuance of the license and the contract with the Russian firm, the Stc entered into an agreement with the respondent company on 25th June, 1971. The principal clauses of this agreement may be briefly referred to. The agreement; envisaged that the Stc should import the goods but obtain a letter of authority permitting the respondent to utilise the imported goods in the manner set out in the agreement. As already mentioned, this Stc imported certain tractors in a knocked down condition. The respondent company was to utilise the license, take delivery of the imported goods, supply further necessary parts, accessories and components from indigenous sources, assemble the tractors and sell them and the accessories and spare part ('goods' in brief). The sales were to be made to customers recommended by the Agro-Industries Corporations of the several States to each of which a particular number of tractors was allocated by the Government the STC. The agreement, however. stipulated that the sale price of the tractors was not to exceed a maximum price to be fixed by the Government of India. The ceiling for the sale price was to be fixed by the Government within 30 days of the arrival of the first lot of tractors in the respondents' factory on the basis of the relevant documentary evidence to be subnutted by the respondents. Subject to the above ceiling, the respondents. were entitled to sell the tractors in the competitive market at any prices they may fetch. In order to ensure that the sales were made in accordance with the agreement, the respondent company was to deliver quarterly sale returns containing full information regarding the persons to whom the goods were sold. It had also to maintain clear and separate accounts of the transactions relating to import and stock-in-trade of the goods which could be inspected any time by the STC. The respondent was also to ensure, by ob taining an appropriate undertaking, that the buyer utilised the tractor purchased by him for the purpose for which it was released to him and that he would not sell or otherwise dispose of it for a period of at least one year from the date of its purchase. The respondent company was to pay a sum of Rs. 9,87,900 being 71/2 per cent of the total Cif value of the tractors to the Stc within 20 days of the signing of the agreement. The respondent was to open an. irrevocable letter of credit for another 71/2 per cent within the said 20 days. The balance of 85 per cent was payable in sixteen equal half-yearly Installments with a provision for interest. The agreement also required the respondent within 20 days from the date' of signing of the contract to furnish to the Stc a performance bond from a first class bank or L.I.C. or other insurance company in a form acceptable to the Stc to the extent of 7.5 per cent of the total Cif value of of the goods covered by the contract for the due fulfillment of all its obligations and responsibilities under the contract, the performance bond being valid till all such responsibilities and obligations were. duly discharged. The Stc was to be entitled to 'service charges' provisionally fixedat 11/2 per cent of the Cif value of the goods imported. This was however, liable to revision with the approval of the Government, and was to remain unaffected by the price for which the tractors and goods were sold. The agreement also provided that any disputes between the Stc and the respondent arising out of the agreements were to be resolved by reference to arbitration.

(4) It may be mentioned that the respondent company was not able to give a performance bond in the terms envisaged by the agreement within the period of 20 days there in mentioned. However, the company furnished to the Stc bonds executed by the Managing Director and another Director of the respondent company under which extensions of time for furnishing the said performance bond were allowed to the company on the company agreeing to indemnify the Stc to the extent of Rs. 9,87,900 in case the company failed to furnish the performance bond by the extended period provided for therein. Such bonds were executed on behalf of the company on 12-11-1971, 14-1-1972, 17-4-1972 and 21-6-1972. It appears that, in spite of these extensions of time, a performance bond in the terms of the agreement was not executed.

(5) It has been mentioned earlier that, under the agreement. the maximum price at which the tractors could be sold had to be fixed by the Ministry of Food & Agriculture of the Government of India within 30 days of the arrival of the first lot of tractors in the factory of the respondent at Ghaziabad. This, however, could not be done for various reasons and there was delay in the fixing of the maximum price as envisaged by the agreement. Pending such fixation, the tractors were allowed to be sold by the respondent company at 'tentative' prices. It appears that, the Government fixed a ceiling price for the first time on l-6-72 atRs,.14,400 and subsequently revised it to Rs. 18,500 as .against the company's request that it should befixed at Rs. 20,346. On 14-6-1972, the respondent pointed out that the price fixed by the Government was indequate and. sought and the respondent that the respondent company should review thereof. Pending consideration of these requests and 'the finalisation of the price it was agreed between the Stc and the respondent that the respondent company should be allowed to sell tractors at tentative prices which the company was charging on condition that the company shall refund to the purchasers the excess, if any, received by the company from the purchasers after the finalisation of the price by the Ministry in terms of the contract. On 15-6-1972, a director of the respondent company, executed a guarantee in favor of the Stc guaranteeing that inthe case. of the failure of the company' to refund to the purchasers of the tractors the excess, if any paid by them over and above the price finally fixed by the Ministry the quarantor himself will pay such excess on demand, to the STC.

(6) The present controversy relates to the import and sale of 1850 tractors. It appears that the ceiling price fixed by the Government eventually was (i) R.s. 16,409 per tractor in respect of 500 tractors imported up to 30-9-1972; (ii) Rs. 16,353.50 per tractor in respect of 300 tractors cleared on 4-1-1973; (iii) Rs. 16,908.04 per tractor in respect of 650 tractors cleared after 1-3-1973, and (iv) Rs. 17,078.24 per tractor in respect of the remaining tractors. The learned counsel for the appellants states that the respondent company's balance sheet as on 30-9-1973 filed before the arbitrators revealed that, by the said date, the company had received a sum of Rs. 19,33.700 in excess of the ceiling prices fixed by the Government in respect of 500 and 950 tractors that had come in the first two lots and that, even according to a statement filed by the respondent before the arbitrators, the excess price received by them was Rs. 16,53,794.

(7) The respondent invoking the arbitration clause in the agreement, sought for arbitration and three arbitrators were appointed by the Indian Council for Arbitration as provided in the agreement. The respondent filed a statement of claim before the arbitrators. Its claim was very simple. It was pointed out that the Stc had recovered from the company service charges at 3 per cent as against Ii per cent provided for in the agreement. There haying been no approval by the Central Government to any revision of the service charges, such recovery was unauthorised by the agreement. The respondent thereforee, claimed that the Stc was liable to pay to it the excess recovery of Rs. 85,653.60 together with an interest thereon of Rs. '35,769.44 up to 31-12-1974 (at 17 per cent) and further interest on both the above amounts at 17 per cent till date of payment. There was also a claim for legal charges of Rs. 500 incurred prior to arbitration and for costs of the proceedings.

(8) Thereupon, the appellants, apart from denying the claims of the respondent made counter-claims against the respondent. These were that the respondent should be directed to pay to the appellants (a) the amounts found to have been recovered by the respondent; from the buyers of the tractors in question, in excess of the ceiling prices fixed by the Government of India; (b) a sum of Rs. 9,87,900 representing 7S per cent of the Cif value of the tractors imported for the respondent's failure to fulfilll its various 'liabilities and' obligations under the agreement, including that to furnish a performance bond as envisaged by the agreement; '(c) interest by way of damages on the aforesaid sums at 15 per cent per annum from the date the Government of India communicated the final ceiling prices till the date of payment of the excess amount recovered and the sum of Rs. 9,87,900 to the appellants: and (d) the appellants' costs of the proceedings.

(9) In the course of the proceedings before the arbitrators, the appellants also sought a direction by them to the respondent; to submit statements, invoices, bills, receipts, account books and all other record for verifying the position in regard to the sale of the tractors by the respondent company.

(10) The parties filed several documents (including those referred to above) before the arbitrators. There were several hearings and, ultimately, the Board of Directors gave its award on 6-9-1976. The award referred, in its preamble, to disputes having arisen between the parties retarding the performance and carrying out of the agreement dated 25-6-1971, to the claim of the respondent company and to the counter claim of the appellants. The claim of the present appellants (respondents before the arbitrators) was referred to in these terms:

'6.AND Whereas, the respondents, the State Trading Corporation of India Ltd. and the Projects & Equipment Corporation of India Ltd., by way of and in the nature of counterclaim claimed from the applicant a refund of the excess prices charged by the applicant from the customers beyond the ceiling selling price fixed by the Government as provided by Clause 13 of the said contract. 7. And Whereas further the respondents, the State Trading Corporation of India Ltd. and the Projects & Equipment Copn. of India Ltd., claimed a sum. of Rs. 9,87,900.00 equivalent to 71/2 per cent of the C.I.F. value of the tractors imported, for default the applicant in furnishing the performance bond as provided in clause of the contract'.

After mentioning the reference to arbitration the Board gave its award, the relevant portion of which reads as follow '10 Now We the said arbitrators hiving considered the matter in dispute, having perused all the documents filed before us by the parties and having heard the parties at length on various dates of the- sittings, of the Bench, Award and direct as follows: (i) That in respect of the claim by the applicant, the respondent the State Trading Corporation of India Ltd., do pay to the applicant a sum of Rs. 85,653.60 (Rupees eighty five thousand six hundred fifty three and Paise sixty only) together with interest at 12 per cent per annum w.e.f. 1-1-1973 to the date of the payment. The payment shall be made within one month from the date of intimation of this award. (ii) That the counter-claim of the respondents in respect of a sum of Rs. 9,87,900.00 representing 71/2 per cent of the C.I.F. value of the tractors for not furnishing the performance bond be and is hereby dismissed. (iii) That the applicant shall, furnish an Indemnity Bond from a nationalised bank or insurance company in the amount of Rs. 20 lakhs indemnifying the Government and the State Trading Corporation of India Ltd. against claims arising out of the contract that may be made by any of the buyers of tractors from the applicant within one year of this award.'

(11) An application by the respondent company under Section 14 of the Arbitration Act (which was numbered as Suit 300-A of 1977 on the original side of this court) has been allowed after rejecting the objections raised by the Stc and Pec (in I.A. 2124 of 1977) and hence the prevent appeal.

(12) It is now well settled that the grounds on which an award (particularly, a non-speaking award) can be challenged successfully are very limited. Williams J. in an early English case (Hodqkinson v. Fernie, 1875 3 C.B. 189 stated that an arbitrator's decision will be interfered with by courts only in. cases where the award is the result of fraud or corruption and in one other case viz. where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. The last of the above exceptions, though adopted with some reluctance in other decisions, has also come to stay. The scope of this exception as explained by Lord Dunedin in Champsey Bhara Company v. The Jivraj Balloo Spinning and Weaving Company Ltd. AIR 1923 Pc 66, has been adopted by the Supreme Court in M/s. Bharat Barrel and Drum Mft. Co. v. L. K. Bose and others : [1967]1SCR739 and Union of India v. Bungo Steel Furniture Private Ltd. : [1967]1SCR324 . Lord Dunedin had said :

'ANerror in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated there to, as for instance, a note appended by the arbitrator slating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract, on which the parties' rights depend to see if that contention is sound.'

Applying this principle, it is difficult to see any error apparent on the face of the award in this case.

(13) Sri S. L. Watel. learned counsel for the appellant, however, attempted to bring the present case within the recognised exception in two ways. He first attempted to anologate the present case to that reported as Dr. S. Dutt v. University of Delhi : [1959]1SCR1236 in which a non-speaking award was s'.t aside by the Supreme Court. That was a case in which, in a dispute between a Professor of a University and the University. an award was given declaring that his dismissal from service was ultra virus and mala fide and that. as such, he still continued to be a professor of the um versity. The Supreme Court, affirming the decision of the High Court, held that the award was ex-facie erroneous as it purported to enforce a contract of personnel service which was forbidden under Section 21 of the Specific Relief Act. The decision in the Champsey Bhara Company's case (supra) was referred to. It was observed that the observations of the Privy Council did not mean that there can be no error apparent on the face of an award unless reasons were given in the award or a document actually incorporated thereto. All that was necessary was that an award must contain, in itself or in some paper incorporated in it, some legal proposition which, on the face of it and without more, can be said to be erroneous. In the case before them, the award involved a legal proposition which was clearly erroneous and so it could be set aside. It is difficult to find any analogy between the present case and Dutt's case. We shall briefly refer later to the grounds on which Sri Watel seeks to characterise the award as erroneous but it is sufficient here to say that the propositions urged by him are highly debatable and arguable and the conclusion of the arbitrators car) by no stretch of imagination, be described at patently or ex facie erroneous.

(14) The second effort of Sri Watel was to urge that the scope of the exception, originally enunciated in Champsey Bara' (supra), has now been expanded and liberalised. Reliance for this contention is placed on certain observations of the Supreme Court in Rohtas Industries Ltd. v. Rohtas Industries Staff Union AIR 1967 Sc 425. In that case, two retired judges of the Calcutta High Court, functioning as arbitrators in a reference under Section Ioa of the Industrial Disputes Act, gave a lengthy and specking award. They recorded their decision on the two issues referred to them after marshalling the evidence, adducing the reasons and discussing the law. They held that a strike organized by the workers was illegal and that two consequences flowed there from : (a) they were not entitled to any wages for the period of the strike ; and (b) the company was entitled to recover from the workers compensation turn the loss of profits suffered by the management as a result thereof. It was the correctness of the second of these conclusions that was challenged successfully, before the High Court. The Supreme Court agreed with the High Court that the award of damages was the result of 'an unhappy error of law alnd-loudly obtrusive on the face of the award'. For reaching this conclusion, the court referred to the principle on the basis of which an award can be quashed as containing an error of law appearing on its face. Krishna lyer J. speaking for. the court, after reference to a passage in Halsbury (Para 623, p. 334, Vol. 2, Fourth Edn.) and decisions of the court earlier referred to, proceeded to observe:

(15) Tucker J. in James Clark, (1944) I Kb 566 formulates the law to mean that if the award were founded on a finding which admits of only one proposition of law as its foundation and that law is erroneous on its face, the Court has the power and. thereforee, the duty to set right. While the judge cannot explore, by chasing subterranean routs or ferret out by delying deep what lies buried in the unspoken celebration of the arbitrator and interfere with the award on the discovery of an error of law by such adventure. it is within his purview to look closely at the face of the award to discern the law on which the arbitrator has acted if it is transparent, even transluscent but lingeting between the lines or merely wearing a verbal vell. If by such an intelligent inspection of the mien of the award which is an index of the mine of the author an error of law forming the basis of the verdict is directly disclosed, the decision is liable to judicial demolition. In Games Clark, the issue was posed with considerable clarity and nicety. If at its face value, the award appears to be based on an erroneous finding of law alone, it must fail. The clincher .is that the factual conclusion involving a legal question must necessarily

(16) Let us put the proposition more expressively and explicitly. What is important is a question of law arising on the facc of the facts found and its resolution ex facie or sub silentio. The arbitrator may not .state the law as .such. Even then such cute silence confers no greater or subtler immunity on the award than plain speec The need for a speaking order, where considerable numbers are affected in their substantial rights, may well be a facet of natural justice or fair procedure, although, in this case, we do not have to go so far. If, as here, you find an erroneous law as the necessary buckle between the facts found and the conclusions recorded, the award bears its condemnation on its bosom. Not a reference in a narrative but a clear legal nexus between the facts and the findings. The law sets no premium on juggling with drafting the award or hiding the legal error by blanking out. The inscrutable face of the sphinx has no better title to invulnerability than a speaking face which is a candid index of the mind. We may, by way of aside, express hopefully the view that a minimal judicilisation by statement, laconic or lengthy, of the essential law that guides the decision, is not only reasonable and desirable but has, over the ages, been observed by arbitrators and quasi-judicial tribunals as a norm of processual justice. We do not dilate on this part of the argument as we are satisfied that be the test the deeply embedded rules to issue certiorari or the traditional grounds to set aside an arbitration award 'think partition do their bounds divide' on the facts and circumstances of the present case.' It is on these observations that Sri Watel has placed considerable reliance for persuading us to go into the merits of the contentions before the arbitrators and their decision. But we are unable to say that the Rohtas Industries case lays down a principle of judicial interference, wider or more literal than that enunciated in the earlier cases. The passage from Halsbury, adopted by the learned Judge 'as. a sound statement of the law,' clearly excludes the review of a decision of the arbitrators on a question of law merely because a different conclusion may be possible. The passage reads:

'.. . .where the question referred for arbitration is a question of- construction, which is, generally speaking, a question of law, the arbitrator's decision cannot be set aside only because the court would itself have come to a different conclusion; but if it appears on the face of the award that the arbitrator has proceeded illegally, as for instance, by deciding on evidence which was not admissible, or on principles of construction which the law does not countenance, there is error in law which may be ground for setting aside the award.'

The Supreme Court interfered in the Rohtas case because the arbitrators, having found the strike illegal, 'faulted HCD/83 8 themselves in law by upholding a case for compensation as axiomatic, necessarily based on a rule of common law i.e. the English common law'. Once the strike was held illegal, they thought, the tort of conspiracy stood established and the industrial establishment entitled to damages. 'This', observed the Court was a clear lapse in the law on the part of the arbitrators manifest in the face of award'. There is no such legal proposition or foundation that can be read or discerned expressly or even implicitly into the award in the present case. The real attempt of the learned counsel for the appellant is to make out that the conclusion of the arbitration board is as patently erroneous in law on its face as in the two cases cited by him. He refers to the provisions of the Import Control Order, the terms of the import license, the terms of the letter of authority issued to, and the terms of the agreement with, the respondent company. He says that a mere reading of these is sufficient to show that the respondent company held the position of an agent or trustee for the Stc and that' any excess, profits realised by it, in contravention of the stipulations in the agreement, over and above the ceiling fixed by the Government was liable to be accounted for and made over by it to the STC. In support of this argument, he refers to Kalyanji v. Tirkaram AIR 1938 Nag. 254 to the effect that the definition of 'agent' in Section 182 of the Contract Act is very wide bat not exhaustive and to Nellie Wapshare v. Pierce, Leslia & Co. : AIR1960Mad410 , a case of unjust enrichment by exploiting a fiduciary relationship. He points out that the arbitrator did not call for the accounts of the respondent company regarding its sales though requested to do so by the Stc but that it was clear, even without' the production of the accounts, that the respondent had uniustly enriched itself. The balance sheet and statement filed by the respondent before the arbitrator admitted that it had realised huge amounts in excess of the permitted sale price. The arbitrators also seems to have realised, counsel says, that, as per the balance sheet of the respondent company, it had collected an excess of Rs. 20 lakhs over and above the ceiling price fixed but, instead of directing the respondent company to pay the said amount to the Stc, the Board contented itself with a direction to the respondents to execute a mere indemnity bond for the said amount in favor of the STC. This, says Sri Watel, is clearly an error of law appearing on the face of the award.

(17) We do not find it possible to accept this contention. The legal position relating to the rights and liabilities of the Stc on the one hand and the Harsha Tractors on the other is not that simple or free from difficulty as contended for by learned counsel. There can, it seems to us, be at least two possible approaches to the dispute in the present case. We shall assume, for purposes of argument', that the line of argument presented by Sri Watel represents one of them and that it is possible to come to a conclusion, as urged by him, that the respondent company is in the position of agents or trustees and is bound to make good the exicess prices charged by them to the STC. But this is. not the only view that is possible. Another basis for determination of the controversy can also be suggested which is perhaps equally tenable and it is this. Even granting that the respondent company had illegally charged and recovered from its customers prices in excess of the price ultimately fixed by the Government, it may not necessarily follow that the Stc is entitled to recover and retain for itself the excess prices so collected. The stipulation that prices in excess of the ones fixed by the Government should not be charged is intended for the benefit of the purchasers of the tractors and is a restriction as much on the Stc as on the respondent company. The very decision of the Supreme Court in the Nawabganj Sugar Mills case : [1976]1SCR803 on which Sri Watel relied makes it clear that the really affected party in such cases is the ultimate consumer for whose benefit the entire scheme is drawn up and it is he who is entitled to recover the excess moneys charged from him. Neither the respondent nor the Stc can become entitled to the moneys. The correspondence exchanged between the parties and referred to earlier clearly shows that the Stc itself recognised this position. This is the reason why the Stc, while permitting the respondents to sell the goods at tentative prices, imposed the condition that in case the sale price exceeded the fixed price, excess should be returned to the consumer. It is true that the purchasers are not parties to the agreement regarding the 'sale price but, as pointed out by Sri Watel himself, the terms of the Import Control Order as well as the Conditions of the license impose on the Stc and the respondents a legal obligation not to charge more than the price fixed by the Government. This obligation can also be spelt out de hors the agreement and is capable of enforcement by the purchaser not only against the respondent but also against the Stc which is the authorised importer of the goods and perhaps even against the Government in view of the statutory effect of the Import Control Order. In the light of this consideration it is legitimate for the arbitrators to come to the conclusion that the Stc was not entitled to recover the excess moneys charged by the respondent but that the Government and the Stc needed to be indemnified againsi; possible claims made on them by the ultimate purchasers who had been charged in excess. This can be claimed to be the basis of Paragraph IO(iii) of the award which contains the arbitrators' finding on the counter-claim of the STC.

(18) We are not called upon in these proceedings to cons.ider the above two views in depth on the merits and express any concluded opinion as to which of them is correct. As pointed out by the Supreme Court' in Chellappan v. Kerala S. E. Board : [1975]2SCR811 where a dispute involving questions of Fact and law is. referred for arbitration, it is open to the arbitrator to consider the matter and come to his own conclusions in the matter. He may arrive at the right conclusion or even at a wrong conclusion. The Court will not proceed to reconsider the issues or examine the evidence for the purpose of finding out whether or not the arbitrator has committed an error of law. It will not set aside the award even if the conclusion, in its opinion may be erroneous, particularly where the award is a non-speaking award and the reasons for the arbitrators' conclusion are not available to the Court. As pointed out earlier, it is only in cases where the award, on its face, enunciates. or basis itself on a proposition of law which is patently erroneous that Court will interfere. The present one is not such a case and we, thereforee, see no grounds to interfere with the award.

(19) Sri Watel also contended that the rejection, by the arbitrators, of the counter-claim based on the bonds executed by the -respondent company in favor of the appellants on 12-11-1971, 14-1-1972, 17-4-1972, 15-6-1972 and 21-6-1972 under which the respondent company was bound to indemnify the Stc in the sum of Rs. 9,87,900 for its failure to execute a performance bond as stipulated in the agreement is patently erroneous. This contention is also of the same nature as the earlier contention of learned counsel and cannot be accepted. Though the agreement envisaged the execution of a performance bond by the respondent company within thirty days, the Stc was content to extend the stipulated period from time to time by taking a guarantee from the directors of the company. It is doubtful whether the amount payable under such guarantees can be sought to be enforced in the arbitration of disputes between the company arising out of the agreement. It is, again, arguable whether an undertaking to pay a sum of Rs. 9 lakhs and odd for the non-execution of a performance bond can be enforced by a court of law without some correlation between this default and some valuable damage to the Stc either in regard to its right to recover the excess price charged from the respondent' company or in any other manner whatsoever as, without such correlation, the clause may be read as nothing but a term of penalty. These considerations apart, the respondent' company's plea was that it was not at all liable to execute a performance bond as there had been substantial alterations in the situation which released the company from this obligation. Here again, it is not for us to decide whether these contentions are well founded or have been correctly adjudicated upon or not. The matter was left to the arbitrators to decide and whether they decided it rightly or wrongly, the parties have to accept the same as this conclusion like the earlier one, cannot be said to be patently erroneous.

(20) Learned counsel for the appellant also contended, alternatively, that the award was liable to be set aside for misconduct on the part of the arbitrators. The acts of misconduct the attributed to the arbitrators were : (a) failure to decide the most material issue in the case viz., the STC's plea that it was entitled to recover the excess sale price charged by the respondent company and deciding a totally different issue of indemnity which was not raised at all; (b) failure of the arbitrators, despite repeated requests, to call upon the respondent company to produce its account's which was indeed the major relief-claimed so as to enable the arbitrators to determine the amounts due to the STC; (c) failure of the arbitrators to advert or consider the material evidence in the form of the several bonds executed on behalf of the respondent company resulting in failure of justice and award the moneys due there under to the STC.

(21) The earlier discussion will show that these contentions proceed on a misapprehension. The arbitrators have not failed to decide the main issue in dispute; they have decided it by saying that the Stc is not entitled to recover the moneys but only to get an indemnity. They have not failed to call for the accounts, they have considered the details of the account unnecessary as in their view, the Stc is not entitled to any recoveries but, accepting broadly the figures of the balance sheet, they have directed the company to give the Stc an indemnity to that extent. They have also not failed to consider the bonds but, having considered them, decided that the STC's claim based thereon was liable to be rejected.

(22) To sum up, the award, in our opinion, shows that the arbitrators have considered all the claims and counter claims and documents and contentions and have set out their conclusions in a non-speaking award. It is true that a resolution of the disputes involved questions of law and fact but, apart from the fact that the parties have agreed upon the course of arbitration for this and should abide by the result, the Board of Arbitrators in this case consisted of men learned in the law and highly competent to deal with the issue involved. We, thereforee, agree with the learned single judge that there are no grounds to interfere with the decision of the arbitration and that the award should be made a rule of court.

(23) A minor point on which Sri Watel challenged the order of the learned single judge was that he should not have confirmed the grant by -the arbitrators of interest on the amounts awarded to the respondent company till the date of their realisation. Here the claim of interest was also one of the claims referred to the arbitrators and they were competent t'o award interest pendente lite: (See Firm Madanlal Roshanlal v. Hukamchand Mills, : [1967]1SCR105 ) and The State of Madhya Pradesh v. M/s. Saith and Shelton (P) Ltd. and others, : [1972]3SCR233 . It has been pointed out by a Full Bench of the Punjab High Court' that the arbitrator has power to grant interest till the date of realisation: (vide State of Punjab v. Ajit Singh and others, ). That apart, the Court has also power to grant interest under Section 29 of the Arbitration Act. We, thereforee, see no error in the order of the learned single judge on this aspect as well.

(24) The appeal, thereforee, fails and is dismissed. As the respondents have succeeded, they will be entitled to the costs of the appeal.

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