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Sugar Mills Vs. State Trading Corporation - Court Judgment

LegalCrystal Citation
SubjectContract
CourtDelhi High Court
Decided On
Case NumberSuit Nos. 895A and 1049A of 1981
Judge
Reported inILR1982Delhi472
ActsArbitration Act, 1940 - Sections 30; Indian Contract Act, 1872 - Sections 73
AppellantSugar Mills
RespondentState Trading Corporation
Advocates: F.S. Nariman,; A.T. Patra,; K. Prasaran and;
Cases ReferredUmed Singh v. Raj Singh.
Excerpt:
(i) arbitration act - sections 30 & 33--non-speaking award-material documents ignored--award suffers form an error of law.; (ii) contract act - section 73--damages--measure of damages to be in the context of the prevailing market price--time factor has to be co-related to the time of breach--award remitted to the arbitrator.; stat trading corporation placed an order for export of 1.25 lacs tonnes of sugar on various sugar mills at the rate of rs. 290/- per quintal. dispatches were to be completed by the sugar mills by 31-5-1977, subject to s.t.c. completing all formalities at least 30 days before the last date of delivery. in case s.t.c. failed to complete the formalities sugar factories were at liberty either to dispatch the quantity or treat it cancelled. likewise in the event of.....d.r. khanna, j.(1) this will dispose of 155 cases bearing nos. 895-a to 1049-a of 1981. they involve common questions of fact and law, and have been, thereforee, taken together. the state trading corporation of lndia is the objector in all these cases. the claimants are different sugar mills, spread all over india. common arguments have been addressed.(2) the proceedings in these cases were initiated by the moving of an application under section 14(2) of the arbitration act by the indian council of arbitration. it was mentioned that 155 sugar mills had moved the council for arbitration under a contract which provided for arbitration under the rules of arbitration of the council. as such mr. justice v. bhargava was appointed as sole-arbitrator. he had given his awards numbering 155, and.....
Judgment:

D.R. Khanna, J.

(1) This will dispose of 155 cases bearing Nos. 895-A to 1049-A of 1981. They involve common questions of fact and law, and have been, thereforee, taken together. The State Trading Corporation of lndia is the objector in all these cases. The claimants are different sugar mills, spread all over India. Common arguments have been addressed.

(2) The proceedings in these cases were initiated by the moving of an application under Section 14(2) of the Arbitration Act by the Indian Council of Arbitration. It was mentioned that 155 sugar mills had moved the Council for Arbitration under a contract which provided for arbitration under the rules of arbitration of the Council. As such Mr. Justice V. Bhargava was appointed as sole-Arbitrator. He had given his awards numbering 155, and they were filed for being made the rule of the Court.

(3) Notices of the filing of the awards were given to the parties. The State Trading Corporation has now filed objections under Section 33 read with Section 30 of the Arbitration Act. Thereby the awards are sought to be set aside. These objections are controverter by the sugar mills which has resulted in the framing of the following issue in each case : 'Is the award liable to set aside for the reasons stated in the objection petitions of the respondents ?'

(4) According to the State Trading Corporation (hereinafter referred to as STC), sugar exports out of India were being canalised through it under the then prevalent Export policy of the Government of India. In March 1977 during the discussions held in the High Power Committee on sugar, it was decided that 2.5 lac tonnes of sugar would be allowed to be exported during the financial year 1977-78. On an assessment of the contracts on hand, shipments under way and the requirements of shipments, it was decided that 1.25 lac tonnes were needed to be procured for shipment during April .Tune 1977. Discussions were as such held with the Indian Sugar Mills Association and National Federation Co-operative of Sugar Factories (hereinafter referred to as Isma and Nfcsf respectively) in March 1977 and they offered on behalf of the Sugar factories to sell 1.25 lac tonnes of sugar at the rate of Rs. 290.00 per quintal. Individual contracts were prepared by the agent of Stc namely the Indian Sugar Industries Export Corporation Ltd. (hereinter referred to as ISIEC) and forwarded to individual factories for due execution. Most of the factories executed the contracts and returned them before the due date of delivery viz. 31-5-1977 while some others forwarded after that date.

(5) Confirmation of the contracts by Isma and Nfcsf on behalf of sugar mills was sent in a letter dated 23rd March, 1977 addressed to the STC. This incorporated the terms and conditions under which 1.25 lac tonnes of white crystalled sugar was agreed to be sold by Isma and Nfcsf representing the sugar mills to STC. There was a specific mention that sugar was for export from out of 1976-77 season's production. The dispatches were to be completed by the sugar factories by 31st May, 1977. This was subject to Isma and Nfcsf giving factorywise break-up of allocation immediately upon receipt of regionwise break-up from Stc and secondly all formalities required to be completed by Stc I their agents being completed at least 30 days before the last date of delivery by the factories, i.e., the factories should have in -their possession 30 days before the last date of delivery all the valid documents which were to include release orders, dispatching instructions, block transfers etc. There was next a default clause that in case the Stc or their agents failed to comply with the aforesaid condition of providing of necessary .documents to any factory before 30 days of the last date of delivery, it would be the option of the factory to either dispatch the quantity or treat it as cancelled partially or wholly. Likewise in the event of the failure of the factories to dispatch the quantities after receipt of the valid documents before 30 days of the last date of dispatch, within the stipulated period it was open to the Stc to make alternative arrangements.

(6) The Stc could however lift 58,730.4 Mts only out of the contracted 1.25 lac Mts. of sugar. The balance 66,269.6 Mts. of sugar was not lifted nor direction given for its dispatch up to the stipulated date viz. 31st May, 1977.

(7) According to the Stc, the Cabinet Committee on Economic Affairs of the Government of India decided on 19-7-1977 that 'sugar should be exported during 1977-78 to the extent of commitments made, in a manner which would minimise the extent of financial loss.' At that time there were stated to be only two firm export orders, one from European Economic Community for 25,000 tonnes and the other of I lac tonnes from Iran. The Iranian side however indicated that they were not interested in the import of Indian sugar as India had not been able to match their specifications, colour etc. The European Economic Community also informed that it might not be possible for them to lift their quota before March 1978. In this manner the Stc was left with no firm commitment for export.

(8) At that time the Stc had 47,000 tonnes of sugar stock in its port godowns besides the aforesaid balance of 66,269 tonnes with the sugar factories, totalling about 1.13 lac tonnes out of 1976-77 crop. The export of this quantity at the then prevaling international price according to Stc would have resulted in substantial loss to the extent of nearly Rs. 16 crores. Faced with this situation and constrained also by the fact that the Government had prohibited export of sugar during 1977-78 except in respect of firm commitments, the Stc sought permission of the Government to export at least 1.13 lac tonnes of sugar held in stock by (hem. However the Cabinet Committee of the Economic Affairs decided on 8-12-1977 that the said quantity should be sold in local market and not exported at a loss.

(9) It was as such that the Stc contends that it could not lift the entire quantity contracted from the sugar mills. The sugar mills however in spite of the delivery date having already expired on 31-5-1977. when the domestic prices were around Rs. 400 per quintal, continued to hold the stock, and when the prices were falling in JuneJuly 1978 decided to issue notice to Stc stating that they would have no alternative but to dispose of sugar in the market and claim damages from the STC. Thereafter they claimed to dispose of sugar locally on different dates and sought to saddle the Stc with consequential losses and interest thereon. These were disowned by the Stc and as such the disputes and differences were referred to the arbitration of Mr. Justice V. Bhargava, a retired Judge of the Supreme Court under the arbitration clause existing in those contracts.

(10) According to the sugar mills, the allocation of 1.25 lac Mts of sugar was out of levy free sugar and was meant to meet the shipment schedule of April June 1977. This sugar could not have been disposed of by the sugar mills in open market till release orders were got cancelled by Stc from the Government. These however were not got done by Stc with the result that the mills had to keep the sugar in its godowns and incur heavy storage expenses. The sugar mills had been writing to the Stc for those cancellations but they were not made available. Ultimately when sugar was decontrolled on 16-8-1978, the sugar mills become entitled to sell them in the open market. By then the prices had considerably fallen, more so of the sugar produced in the crushing season of 1976-77. The Stc was thereforee sought to be saddled with liability for those losses because of its non-lifting of the sugar under the contracts.

(11) During the course of proceedings before the learned Arbitrator, it was agreed by the parties counsel on 19th November 1980 that it was not possible to go into the details of sales by individual factories and some general principles should be evolved. The principle suggested and agreed to by both the parties was that the claimants would prepare a chart showing the rates at which various factories sold the sugar in respect of which they had filed the claims and average rate worked out excluding very abnormal cases where the sale might have been at very high price or at a very low price. The chart prepared on behalf of the claimants by 15th December 1980 was required to be filled after serving a copy on the respondent. In the light of that agreement, the Stc counsel stated that he would like to crossexamine three witnesses only. It was clarified that the average worked out need not be accepted as the final proper figure for which purpose the prevailing rates as shown in the publications of the Cooperative Federation would have to be taken into account. In any special case where the sale had been for a low price, it was left open to the claimants to rely on special circumstances which might have justified that course.

(12) At the concluding stages of the proceedings before the Arbitrator when arguments were going to be finalised the Stc moved an application for reference by the Arbitrator of special questions of law for adjudication by the Court. These questions pertained to the legal controversies arising from the disputes. The learned Arbitrator however did not allow the application and concluded the arbitration proceedings.

(13) The award delivered by the learned Arbitrator in each case after narrating the circumstances of his appointment and the nature of the claims raised by the sugar mills is non-speaking and no reasons or basis for coming to the conclusions Have been elaborated. The Stc in each case has been directed to pay certain amount to the claimant regarding loss suffered by the latter on the sale of unlifted sugar. Interest amount has also been allowed in respect of the claim up to the date of filing of the claim i.e. 3-4-1979, and in addition the Stc has been required to pay interest at 12 per cent per annum on the total amount of the two items from the date of the filing of the claim till the date of the award.

(14) The total of all the awards is stated to come around Rs. 8 crores.

(15) It is in these circumstances that the Stc has filed objections to the awards.

(16) The first contention of the Stc is that the awards are liable to be set aside as they do not bring out the reasons which prevailed with the Arbitrator for coming to his conclusions and as such prevents the Court from assessing whether the Arbitrator had duly applied his mind to the evidence placed before him and the legal contentions raised In this regard reference has been made to the following illuminating observations of H. L. Anand, J. in Bhilwara Synthetics case Air 1982 Delhi 155 :

'INthe expanding horizon of natural justice and the development of administrative law when every judicial, quasi-judicial, executive and administrative body, charged with the duty to make a decision affecting the rights and obligations, is considered under a duty to give reasons for its decision, it is quite anachronistic that an. Arbitrator in India is still immune from any such obligation. It is important to remember that duty to give reasons enlightens the party who is affected by the decision as to why the decision was unfavorable to it, illumines the path of the appellate authority, controls the tribunal itself and constitutes a built-in safeguard against arbitrariness. It is for this reason that in England the right to know reasons has been given statutory recognition. In English law, an award by an Arbitrator without reasons, even without adequate reasons, would be bad in law, but not so in India. In international arbitration, the convention recognises the obligation to give reasons. While the rule that the Arbitrator need give no reason for the award may have had its importanse at one time, there is little doubt that the power to make a non-speaking award must have given undue protection to considerable incompetence, arbitrariness and even dishonesty in the arbitral process. Unfortunately, little legal thought has so far been devoted to the problem and it is high time the matter is considered afresh so as to bring the arbitral process in India in conformity with the norms accepted elsewhere.'

(17) It has also been sought to be urged that there was frustration of the contracts as the Stc was prevented from lifting the remaining quantity of sugar because of the ban imposed by the Government on the export of sugar. In any case the learned Arbitrator, it is pointed out, fell into an error when he did not treat the date of breach of the contract in each case as 31-5-1977 which was the last delivery date. Instead the contracts were treated to be still subsisting and damages were allowed taking into consideration the sales effected by the sugar mills by the end of 1978 or even in 1979-The provisions contained in Section 73 of the Contract Act for the computation of damages in this regard it is pleaded were patently ignored and violated.

(18) It has also been sought to be urged that the contracts did not anywhere provide that the Stc was obliged to obtain cancellation of release orders from the Government. The cancellations it is pleaded could have been obtained by the sugar mills direct from the Government as was in fact done by some of the mills and thereforee there was no impediment with the sugar mills to dispose of the unlifted sugar shortly after 31-5-1977 when the local prices were much higher than the stipulated price of Rs. 290.00 per quintal. They were, in-fact, pointed out to be around Rs. 400.00 . The sugar mills thus it is contended could have easily disposed of the sugar then. In any case, no attempt was made by them to mitigate the damages as required under the law.

(19) It has also been urged that the lerned arbitrator did not take into account the clause in the contracts that there could be variation up to 5 per cent of the stipulated quantity, and as such to the extent of this 5 per cent, no damages could have been at all awarded. The contract also did not stipulate payment of any interest.

(20) In any case, it has been contended that when the control over sugar was lifted on 16-8-1978, the market rate of sugar then prevalent could have been taken into account as the sugar mills had then become free to dispose of the sugar. At that time the market rate. it is pointed out, was higher than when the sugar had been subsequently sold and the damages determined.

(21) From the side of the S.T.C., reliance has been placed on the Supreme Court decision in the case Dewan Singh v. Champat Singh and others, 1970 S C 967. to the effect that it is normally an implied term of an arbitration agreement that the arbitrators must decide the dispute in accordance with the ordinary law. The rule can be departed from only if specifically provided for in the submission. The proceedings before the arbitrators arc quasijudicial proceedings. 1975 Supreme Court. 1259 (K. P. Poulose v. State of Kerala and another) (2) has also been referred to in support of the contention that where the arbitrator has misconducted the proceedings by ignoring material documents to arrive at a just decision to resolve the controversy between the parties. he has to be trieated as misconducted himself. Tn 1958 Sup C 1050 (Dr. S. Dutt v. University of Delhi) (3) the Court struck down an award which directed specific enforcement of a contract of personal service which was clearly not permissible in view of Section 21(b) of the Specific Relief Act. The award. thereforee, was treated to suffer from an error of law on the face of it, and. thereforee, invalid.

(22) The learned Solicitor General, appearing for the State Trading Corporation, has next referred to the rovisions of Section 73 of the Contract Act, and pointed out that when a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract. to be likely to result from the breach of it. The measure of such compensation, it is pleaded, has to be with reference to the period when the breach takes place. Reference was made to Bijoy Singh v. Bilasroy and Co., 1952 Calc 440, in which it was held that upon a breach of a contract for the sale of goods, the measure of damages is the difference between the contract price and the marker price at the day of the breach. Unless there is an extension of the due date, the arbitrators, it was held, cannot award damages on the basis of the rate prevailing at a later date. If the arbitrators have given damages on a wrong basis, the award is bad on the face of it, and, thereforee, should be set aside. Similarly in Hanutmull Boid v. Fatehchand Murlidhar, 1954 Calc 1, it has been observed that the arbitrators cannot award damages as arising on a date other than the due dates.

(23) Mr. Nariman learned counsel Appearing on behalf of the Sugar Mills, on the other hand. has pointed out that the awards in the present case were delivered by no less a luminary than Mr. Justice V. Bhargava, who had been a Judge of the Supreme Court, and had also been the Chairman of the Sugar Enquiry Commission, and, thereforee, was well acquainted with the incidents of sugar trade, its manufacture and the policies which the government adopted from time to time with regard to its distribution, sale or even export. He had held sittings on a large number of dates, and provided enough opoortunities to the parties to lead their evidence and produce such documents as they coisidered proper in support of their respective cases. Thereafter both the sides were heard at length, and then the awards were delivered. In these circumstances, there is every reason to proceed with the assumption that the entire evidence and the contentions raised, were duly taken into consideration. It would be erroneous to assume that he defaulted in any manner in this respect, and all that the Court is entitled, is to look at the awards, and find out whether they suffer from any error of law on the face of them, or such illegality is deductible from any document made part of the awards. The scope of the present proceedings before the Court, it is pointed out is extremely limited for finding out any such invalidity within the circumscribed sphere of looking at the award or documents appended thereto. The ambit of proceedings under Section 14117 of the Arbitration Act for making an award a rule of the Court it is urged, cannot be broadened as to require the Court to sit as an appellate authority, and probe into the merits of the controversies raised before the arbitrator, and ascertain with what mental process he arrived at his conclusions. A mistake apparent does not involve going into a long drawn process of reasoning or appraisement of facts in order to ascertain whether any patent error of law has been committed.

(24) Normally the Court, it was pleaded, must lean towards sustaining the validity of an award given by a domestic tribunal of the parties' choice. Following observations of Desai, J., in the case Guru Nanak Foundation v. Rattan Singh & Sons, 1981 Sup C 2075. have been referred to :

'INTERMINABLE,time consuming, complex and expensive court procedures impelled jurists to search for an alternative forum, less formal, more effective and speedy for resolution of disputes avoiding procedural claptrap and this led them- to Arbitration Act, 1070 (Act for short). However, the way in which the proceedings un- under the Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Courts been clothed with 'legalese' of unforeseeable complexity.'

The position of law in this regard, it is pointed out, is well settled that in India an arbitrator need not make a speaking award unless the reference enjoined it so, and in case the arbitrator does not record reasons, and does not indicate the principles of law on which he has proceeded, the award is not on that account vitiated. It is only when the arbitrator proceeds to give his reasons, or to lay down principles on which he has arrived at his decisions, the Court is competent to examine where he has proceeded contrary to law and is entitled to interfere if such error is apparent on the Face of award itself. Reliance in this regard was placed upon Bungo Steel Furniture (Pvt.)Ltd. v. Union of India, 1967 Sup C 378.

(25) Reference has next been made to the Supreme Court decision in the case Alien Berry and Co. Private Ltd. v. The Union of India, 1971 SC 696where it was observed that as the parties choose their own arbitrator. they cannot, when the award is good on the face of it. object to the decision either upon the law or the facts. thereforee, even an arbitrator commits a mistake either in law or in fact in determining the matters referred to him. but such mistake does not appear on the face of the award or in a document appended to or imported in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake.

(26) This being the settled position of law, it has been urged that there is no scope now available to the State Trading Corporation to reopen the controversies agitated before the learned arbitrator on merits, and the Court cannot purview them when the awards themselves do not reflect any mistake of law on the face of them.

(27) Without prejudice to the legal position in this regard it has been pointed out that even on merits the State Trading Corporation had no case before the learned arbitrator. The plea of frustration could not be sustained as the State Trading Corporation failed to produce any document, or notification of the government which could show that export of sugar had been entirely prohibited by the Government of India and, thereforee, the State Trading Corporation was perforce prevented from lifting the sugar meant under the contracts for export. Specific reference has, in this regard, been made to the answer given by the Minister of State for Agriculture and Irrigation in the Rajya Sabha on 27-2-1978, in which it was mentioned that export of 6.5 lac tonnes of sugar (which was the quota in effect for 1977-78 under the International Sugar Agreement) would be permitted.

(28) The distribution of sugar in the year 1977-78, it has further been pointed out, was primarily with the government, and when 1.25 lac metric tonnes of sugar had been released and assigned with the sugar mills for export in terms of the contracts placed by the State Trading Corporation, the same could not be utilised or disposed of for any other purpose unless the release orders in that direction, were cancelled by the government. The responsibility for obtaining the cancellation, it has been contended, entirely lay with the State Trading Corporation, and the sugar mills had been pressing it to do so as they were otherwise suffering considerable storage and other incidental expenses apart from the loss flowing from a falling internal market. The State Trading Corporation, however, failed to obtained the cancellation of release orders, and it was not till August, 1978, that free sale of sugar became permissible, and they become entitled to dispose of the stocks reserved from the 1976-77 production year under the contracts in dispute. As to the mode of computation of the loss, the parties had given a joint statement on 19-11-1980, as referred to para-11 above. In the circumstances, it has been pleaded that it is now too late for the State Trading Corporation to assail the damages awarded by the learned arbitrator.

(29) Since both the sides have made reference to the government policy with regard to the export of sugar, reference may here be made to the different statements made on behalf of the government from time to time. The earliest placed before the learned arbitrator constituted of extracts from the minutes of the meeting of the cabinet committee on economic affairs held on 19-7-77. It was decided that sugar should be exported during 1977-78 to the extent of commitments made, in a manner which should minimise the extent of financial loss. According to the STC. reference in this to 'commitments made' had relevance to those made with foreign buyers, and not the sugar mills in India. By then, it is pointed out that both the E.E.C. and Iran had repudiated their commitments, and as such the Stc could not have embarked upon any other export in view of the decision of the cabinet committee. The Ministry of Commerce, Government of India, later addressed a letter to the Food Secretary, Krishi Bhawan, New Delhi, on 24-10-77 to the effect that the Stc was confident that it would be able to dispose of within a few weeks the entire stock of 1.13 lac tonnes of sugar in stock with them (which included the unlifted stock lying with sugar mills) if permission to export was granted in relaxation of the earlier decision of the cabinet taken on 19-7-1977. A note by the Commerce Secretary was as well put up in October, 1977 before the cabinet committee. There was a mention in it that 1.13 lac tonnes of sugar, if released in the domestic market, would depress the prices badly, as the normal release for the next few months was quite adequate to meet the demand. Since the sale in the domestic market was considered inadvisable, Stc was sought to find markets abroad, and the approval of the cabinet was solicited for Stc undertaking to export 1.13 lac tonnes of sugar involving a likely loss of about 15.35 crores. From one of the letters which the S.T.C. wrote on 26-10-1977 to the Nizam Sugar Factory Ltd., there was a mention that because of the suspension of the sugar export pending finalisation of the export policy by the government, the S.T.C. was not in a position to issue dispatch instructions for export quota. The sugar mill was informed that in view of its financial difficulties, as a gesture of cooperation, the S.T.C. was ready to request the government for cancellation of the quota for exports. In that manner the sugar mill would be able to release the quantities in internal market and help in tiding over financial difficulties. The sugar mill was, thereforee, required to confirm if it was agreeable to the above to enable the Stc to request the government to cancel the release orders. No reply was received.

(30) There was a controversy before the learned arbitrator about the admissibility of the copy of the extract of the meeting of the cabinet committee held on 19-7-1977. The learned arbitrator required the S.T.C. to get produced either the original minutes, or a certified copy thereof. None of them were produced, although about two months time was allowed for the purpose. An adverse inference was, thereforee, drawn against the S.T.C. This has been vehemently assailed by the STC. during the ciurse of arguments before the Court, and it is pleaded that as the documents were in possession of the cabinet committee or the government, the S.T.C. could not be blamed for nonproduction. nor any adverse inference drawn. The proper course in the circumstances, it is pleaded, was to have summoned the officer concerned with whom the minutes were lying, and in case the government sought any privilege with regard to them in accordance with the law, the arbitrator could have determined the same. Reference has been made in this regard to the Supreme Court decision in the case K.P. Poulose v. State of Kerala and Another. : AIR1975SC1259 , to the effect that even it the department did not produce certain documents before the arbitrator, it was incumbent upon him to have got hold of all the relevant documents for the purpose of a just decision. In any case, it is pointed out by the Stc that the restriction imposed by the cabinet committee gets reflected in the letter dated 24-10-1977 of the Ministry of Commerce addressed to the Food Secretary, as aforesaid. In reply to a question in the Lok Sabha. the Minister of State of the Ministry of Commerce and Civil Supplies & Cooperation had stated on 18-11-1977 that sugar export was never totally stopped, hence no loss could be ascribed to stoppage of export. It was added that in July. 1977, the government decided that during 1977-78 sugar should he exported to the extent of existing commitments. There was again a statement in the Lok Sabha by the Minister of State on. 2-12-1977 in which there was mention of the decision in July, 1977 that out of the production of the year 1976-77, sugar should be exported only to the extent of existing commitments. The quantity thus allowed was mentioned as 1.45 lac tonnes 1.20 lac tonnes to Iran. and 25000 tonnes to E.E.C.

(31) Another extract of the meeting of the cabinet committee of the economic affairs held on 8-12-1977 decided that 1.13 lac tonnes of sugar with Stc should be sold in the local market and not exported at a loss. At the same time it was directed that the Department of Food should closely monitor the internal retail price of sugar and take steps as necessary to ensure that the average retail price of the sugar remained at Rs. 390.00 per quintal, and the pi-ice should not be allowed to go above Rs. 4101- per quintal or come below Rs. 370 per quintal. This decision thus ruled out export.

(32) In answer to questions in Rajya Sabha, the Minister of State in the Ministry of Agriculture stated on 27-2-1978 that export of 6.5 lac toimes of sugar (which was the quota in effect for 1977-78 under the International Sugar Agreement) would b& permitted. That would help the factories in reducing stocks which they were otherwise carrying. It was taken note that production of sugar in the country was an all time record, and was about 10 million tonnes over that of 1976-77. The sugar industry was noted to be feeling severely the burden of having to carry substantially large stocks than last year. The Isma and Nfcsf then wrote a letter to the Stc on 30-3-1978 that since the government had by then decided to export 6.5 lac tonnes of sugar, the Stc should finalise arrangement for sales and shipments with regard to 66,000 tonnes of free sale sugar purchased by the Stc was lying unlifted for about 10 months. A confirmation was sought from the Stc that it was committed to lift this quantity, and necessary steps would be taken shortly. It is not shown that the Stc confirmed any such commitment.

(33) Apart from the above material which was placed before the learned arbitrator about the ban on export (except with respect to existing commitments), there have been, affidavits from the side of the Stc mentioning of this ban. The sugar mills also it seems were aware of this ban and never disputed the same when the Stc had been informing them of this. Later when on 27-2-1978 the Minister of State for Agriculture stated in Rajya Sabha that 6.5 lac tonnes of sugar would be permitted to be exported, the Nfcsf wrote to the Stc on 30-3-1978 that 'now it had been decided by the Government to export that quantity of sugar the Stc should finalise arrangements for sales and shipments.' In the reply dated 21-4-1980 to the rejoinder which the Nfcsf filed before the Indian Council of Arbitration. there was a mention that the export of sugar was not banned till December 9, 1977. This was stated to be much after the stipulated date of 31st May, 1977 by which the S.T.C. ought to have lifted the sugar, and in the circumstances was pleaded to have no bearing on the liability for damages for breach of contract which had taken place on 31-5-1977.

(34) There is no gain-saying that when a public undertaking embarks upon commercial nature ventures, it has to be fully alive to the norms and incidents which any commercial body is expected to adhere to. If commercial openings of profitability get available, there are corresponding risks and pitfalls which cannot be overlooked. The bigger are the enterprises, equally great are the responsibilities. Such undertakings have thereforee to be managed and their affairs handled by incumbents having advance commercial expertise and deep insight into the working trends of the business world. In case thereforee they fumble for lack of proper judgment or for reasons unforeseen, they have to squarely face the consequences especially when valuable commercial rights of third parties are involved. Contractual obligations bind them as much as any other. If poorly analysed or reckless ventures are embarked upon or orders placed, and they turn out as commercial disasters, the public undertakings cannot run away from them, and must face the music. The occasional ruthless impact of market fluctuations can also not be escaped. If in this process losses of crores suddanly start staring they cannot be avoided. It is in this context that the present awards involving about 10 crores have to be looked at, and the Court need not get alarmed at the magnitude of the liability which the Stc may now find itself saddled with. The Stc which has entered the international trade in a big way and is handling the country's foreign trade to a substantial extent cannot seek soft pedalling when it finds the matters rendered into a veritable mess.

(35) At the same time. the shrewd sophistication and subtitles which big commercial houses not unoften display have to be understood in their correct perspective. Ostensibly simple looking affairs may occasionally be subterfuges of deep manipulation, and unless they are analytically discerned with equal deep grasp of economic affairs, they may escape unnoticed, enabling them to muse and laugh in their sleeves. The approach has of course to be balanced, neither too obsessed with suspicion of smelling rats every where, nor of the simpleton 'Bhole Nath' who speaks no wrong, hears no wrong and sees no wrong. When circumstances justify lifting of veil to see the realities is permissible, and there is no point in being either populist or attempt to wear blinkers.

(36) Having said so, the facts of the present case may be adverted to. There is no dispute that the Stc did place the order for the supply of 1.25 lac Mt of sugar for export with the Isma and Nfcsf and the same in turn was allocated in different parts to various sugar mills in India. All this sugar was to be exported out of India, and for this purpose release orders were to be obtained from the Government of India to enable the sugar mills to release sugar to that extent for export. At that time the distribution and release of sugar was controlled by the Government and till this was made permissible, the sugar mills could not deal with or dispose of the sugar otherwise. In one of the clauses in the orders which the Stc placed, it was specified that the Stc would enable the issue of release orders for export.

(37) It is next also clear from the facts of the present case that the Stc on its part held firm orders from foreign countries for supply of the said quantity of 1.25 lac Mt, of sugar. In fact it was in pursuance of the commitment received from abroad that the Stc had placed the orders with the sugar mills. It was thus not a case of indiscreet act or reckless judgment on the part of the STC.

(38) It is further apparent from the orders placed by the Stc that it was to lift supplies of sugars from the sugar mills latest by the end' of May 1977. The sugar mills were accordingly as well to complete the supplies up to then. It is not the case of any of the parties that the sugar mills were not in position to make those supplies. Rather it was Stc which had failed to lift them or make any arrangement in that direction. thereforee, a clear breach of contract was committed by the Stc and it opened itself to liabilities resulting from such breach under the law. There was no escape from the same, and no exception whatsoever can be taken to the learned Arbitrator coming to the conclusion accordingly.

(39) Before proceeding further, a note may be taken here of the contention of Stc that it on its part was as well the victim of breaches committed by the overseas buyers on their failure to abide by their commitments. Firstly the E.E.C. declined to lift 1 lac Mt of sugar and left the matter to be considered later in early 1978. Iran also declined the supplies on the ground that the sugar was not I up to the standard desired. It is not shown that the Stc had specified that standard while placing the orders with the sugar mills which could entitle it to shift and place the blame for the poor quality of sugar on the sugar mills. Rather it seems that the backing out was the result of fall in the international sugar market prices and the Stc suddenly found itself left in the lurch and stranded. However, for this unfortunate development, the Stc could not absolve itself of the resultant breaches which in turn perforce flowed of the commitments made by it to the sugar mills. In commercial world, such situations do arise and the Stc having ventured in that field could not turn round and seek favor as a public undertaking. Its remedy, if any, lay against the foreign buyers. So far as the sugar mills were concerned, it committed breaches of contract in not lifting the sugar.

(40) At the same time as noted above the latest by which the Stc was obliged to lift sugar from the sugar mills and the latter too were to complete the supplies, was by the end of May, 1977. The breach of contracts thus took place then and the measure of damages had to be in the context of the prevailing market conditions of the same commodity in India then. It need hardly be impressed in this regard that the quantum of compensation payable for violation of agreement so far as time factor is concerned, has to be corelated to the time of the breach itself, and it is not open to the party entitled thereto to shift that to another unless agreed to by the other party or rendered so by its acts or omissions. That apart the party entitled to damages must show genuine attempts on its part to mitigate them. Reference may here be made to para 3 of the claim which the sugar mills submitted before the Indian Council of Arbitration in which it was mentioned that the Stc was to take delivery of sugar latest by 31st May, 1977. While meeting the contention of the Stc that the Government had purportod to impose ban on export of sugar and thereforee the contracts were rendered frustrated, the sugar mills have pleaded that what transpired after 31-5-1977, could not be taken into account nor absolve the Stc from lifting the sugar by 31-5-1977.

(41) Now in the present case there is no dispute that the damages were not claimed nor allowed in the award in the context of the prevalent prices in vogue by the end of May or early June, 1977. Perhaps none would have existed as the market rate then ranged around Rs. 4UO per Mt against the contracted rate of Rs. 290 per MT. The sugar inills rather computed their damages on the sales effected by them by the end of the year 1978 and during the year 1979 up to the month of August. At that time there had already taken place a crash in the internal market resulting in the prices going far below the contract rate of. Rs. 290 per MT. The learned Arbitrator has allowed these damages and it is on this ground that the awards have been primarily assailed by the learned Solicitor General.

(42) The sum and substance of the case of the sugar mills is that since the release orders issued by the Government for 1.25 lac Mt of sugar were for the exclusive purpose of export in terms of the orders placed by the Stc, and further at its instance, they could not have marketed the sugar internally or otherwise till those specific release orders were got cancelled from the Government. The responsibility in this regard it is stated entirely rested with the STC. Its failure to obtain those cancellations perforce made the sugar mills to keep sugar in stock awaiting the instructions of STC. It was not till the lifting of the control on the distribution of sugar on 16th August, 1978 that they became competent to deal with that in any manner or dispose of the same at their discretion. The computation of damages in the circumstances it is pleaded had to be deferred accordingly.

(43) The relevant clause with regard to dispatches may be reproduced here in verbatim :

'THEdispatches would be completed by sugar factories by 31st May, 1977. This. however, is subject to (i) Isma and Nfcs giving factorywise break-up of allocation immediately upon receipt of region-wise break-up from Stc and (ii) all formalities required to be completed by Stc their agents being completed at least 30 cays before the last date of delivery by factories, i.e. the factories should have in their possession 30 days before the last date of delivery all the valid documents which include (i) Release Orders (ii) dispatching Instructions (iii) Block Transfers and AR4A forms etc. Further, factories dispatching by rail would have fulfillled their obligations after placement of their indents with the Railways. In case the Stc or their agents fail to comply with the aforesaid condition of providing all the necessary documents to any factory before 30 days of the last date of delivery, it would be the option of the factory to either dispatch the quantity or treat it as cancelled partially or wholly. Likewise, in the event of failure on the part of the factory to dispatch the quantity, after receipt of all the valid documents before 30 days of the last date of dispatch, within the stipulated period it will be open to the Stc to make alternative arrangements'.

(44) It was thus stipulated that the Stc should complete all formalities at least 30 days before the last date of the delivery by the factories, i.e. the factories should have in their possession 30 days before the last date of delivery, all documents which included release orders. In case of default by the Stc, the sugar mills were given option to either dispatch the quantity or treat the contracts as cancelled partially or wholly. Likewise on the failure of the sugar factories to dispatch the sugar after the receipt of valid documents 30 days before the last date of dispatch, it was open to the Stc to make alternative arrangements. According to the sugar mills, since the Stc was to furnish documents which included release orders, the obligation for their procurement from the government lay with the STC. Infact, release orders for export could not have been issued by the government without the Stc intimating the placement of the export orders on the sugar mills. As a consequence, it has been contended that the responsibility for obtaining cancellation of release orders also lay with the STC. This had not been specifically provided in the contracts, but is sought to be deduced as a necessary corollary or inference from the obtaining earlier of the release orders at the instance of the STC. Reference in this regard has been made to the letter dated 7-7-1978. which the Stc wrote to the department of Food, in which there was a mention of the legal opinion given in the case, and accordingly the government was requested to cancel the existing release orders which according to the legal opinion would put an end to the existing contract, as on the date of the withdrawal of release orders. The STC. on the other hand. has vehemenly contested that any such obligation lay on it for obtaining cancellation of the release orders. The legal opinion referred to in the letter of 7-7-1978. it is urged, was erroneous, and not borne by any material on record, and, thereforee. could not prevent the Stc from talcing the right stand in law later. In this regard, it is pointed out that 42 sugar mills had of their own applied for cancellation of the release orders from the gvernment. and they, in fact. succeeded in obtaining them. In this manner cancellation of release orders to the extent of 12,193 tonnes of sugar was obtained. Even otherwise. the sugar mills all through continued writing to the Stc taking the stand that the unlifted sugar should be taken delivery of. In none of the letters written to the Stc, cancellation of release orders was sought. Rather the Stc wrote to the Nizam Sugar Factory on 26-10-1977 that in case financial difficulties were felt. the Stc was ready to request the government for cancellation of the release orders, and sought confirmation from the sugar mill if it was agreeable to this cancellation. No reply was sent to this. In another letter which the Laxmi Sugar and Oil Mill wrote I.S.I.E.C. on 7-12-1977, it was intimated that in the event of the inability of the latter to lift 6662 bags of sugar, the sale be treated as cancelled enabling the sugar mill to approach the government for release of the sugar for immediate disposal in the market. This letter thus also did not require the Stc to obtain cancellation of release order. The sugar mill itself asserted its right to claim cancellation.

(45) Initially the Stc had of course in March 1977 sent telex messages to I.S.I.E.C. to approach the Ministry for issue of necessary release orders in favor of different sugar mills. The I.S.I.E.C. also wrote to the Directorate of Sugar for export to the extent of 1.25 lac tonnes. The release orders were however released by the Directorate of Sugar directly to the sugar mills. At the same time the documents on the arbitration record show that after the expiry of the stipulated date 31-5-1977, the emphasis throughout by the sugar mills was that the Stc should make arrangement for taking delivery of the unlifted sugar. It were only some of the mills which obtained cancellation of release orders because of their individual financial and storage etc. difficulties. The rest did not seek such cancellation. The Nfcsf for the first time on 26th June 1978 required the sugar mills to get the sugar released for internal sale at the risk and responsibility of the Stc and apply to the Directorate of Sugar for release of the unlifter sugar for sale in the free market. This happened shortly before the decontrol of sugar on 16-8-1978 and perhaps was to forestall that. It was not mentioned in this letter that the Stc should be required to obtain cancellation of release orders.

(46) Rajinder Singh, the Chief Marketing Manager of Stc, in his affidavit dated 23-9-1980 has deposed that the Stc had at all material times whenever asked for by individual factories for any reason recommended to the government the cance

(47) It thus seems that the sugar mills were not themselves keen to obtain, cancellation of release orders, and their interest and emphasis throughout was that the Stc should lift the sugar from them. The reason for that, it appears, was not far to seek as the sugar stocks lying with the mills were very large, and there was a bumper production. The internal market too could not absorb that quantity of sugar without considerable fall in the prices taking place. That would have been imevitable if all that sugar was released in the local markets. The sugar mills it seems. were keen to retain higher prices in this market so that their profitability on the bulk supplier already marked did not substantially come down. It was as such that there was a decision of the cabinet committee to not release sugar internally which would render prices lower than Rs. 370 per quintal. The sugar lobby thus it seems, was playing a shrewd and calculated role in prevailing upon the government to sustain the prices at higher level by not releasing further sugar for internal consumption. This endeavor by the government to sustain, sugar prices at higher level was obviously for the benefit of the sugar mills and to the deteriment of the consumer. It is sometime well said that men may lie but circustances do not. The commercial Secretary had also written a note in October, .1977 that sale of sugar in the domestic market was considered inadvisable and the Stc should be required to effect exports involving a loss of about Rs. 15.35 crores. The Cabinet committee did not approve of this export and the matters were thus allowed to drift. The inference seems irresitable that it was at the instance of the sugar mills that the government was withholding the sugar, and the sugar mills were also interested in its withholding from the internal market. This explains for the sugar mills insisting that the Stc should lift the sugar and not approaching it or the government at any time to cancel the export release orders. It were only some of the mills (numbering 44) because of their special circumstances of storage etc. which obtained release orders and there is nothing to show that they had any difficulty in obtaining them or there were any legal constraints in the same till the Stc gave its approval. The sugar mills thus while enjoying profits on the bulk of sugar which was internally marketed were it seems playing subtle game to prevent the further marketing of sugar and at the same time continued keeping the Stc in ransom and saddle it with liability for future losses which were inevitable.

(48) This happened on 16-8-1978, when the sugar was decontrolled. Immediately thereafter there was a crash in the prices. The sugar mills instead of bearing them thought it expedient to pass the buck on to the STC. The time game was thus studiously played to the industry's entire advantage. According to the Stc, the learned arbitrator appears to have missed to see through this. the picture. If in the absence of fresh release orders, the sugar would have continued to lie in. the godowns of sugar mills, and would have been subject to market fluctuations at the risk of the sugar mills, no responsibility for damages. it would appear, could pass on to the STC. Thus N.S. Jain witness of the sugar mills admitted in his deposition on 19-9-1980 that cancellation of release orders was not alone enough to enable the sugar mills to sell the sugar in the market. They had to get fresh release orders from the government before the same could be sold.

(49) At the same time, the Stc, it would appear, can- not escape from the blame of inaction and vaciliations. Once the stipulated date of 31-5-1977 had expired and the sugar had not been lifted on account of backing out by the Eec and Iran, and the government too was not permitting the Stc to enter into fresh export commitments, and there was a sharp fall in the international prices of sugar, it was plain to the Stc that the contracts for purchasing sugar from the Indian sugar mills could not be abided with. It should have, thereforee, intimated them accordingly, and if required informed the Directorate of Sugar to cancel the export release orders. There was not Justification to adopt an attitude of drift then. Whether future exports were permitted by the government or not, was a matter of policy decision. If that export was at any time thereafter made open, the Stc could have well placed fresh orders with the sugar mills. There was no point in informing them that efforts to lift the sugar would be made on the government allowing export.

(50) Adverting to the computation of damages, as noted above, the stipulated last date for delivery of sugar was 31-5-1977. Before that the Stc was to supply documents, give dispatching instructions etc. It was not the case of the sugar mills before the arbitrator or in the Court that those documents were not made available. Only dispatching instructions could not be given as the Stc admittedly committed default in not lifting the sugar by that time. In the claim which the sugar mills submitted before the Indian Council of Arbitration for seeking reference to arbitration, their emphasis throughout was that the breach of contract had taken place on that date. Rather the plea of the Stc about the alleged ban on export of sugar was sought to be thwarted on the ground that the breach having taken place on 31-5-1977, what transpired thereafter could not be relevant nor absolve the Stc from liability for damages. In the claims set up during the arbitration, the sugar mills claimed interest also from 31-5-1977 on the damages which were to be awarded.

(51) A perusal of the relevant clause with regard to the dispatches as existed in the contract shows that in case the Stc failed to comply its part, it was in the option of the sugar mills to either dispatch quantity or treat that as cancelled partially or whilly. No such dispatches tookplace, and the other alternative thus available with the sugar mills was to treat the contract cancelled. Similarly the Stc was made competent to make alternative arrangements if the sugar mills failed to dispatch the sugar within the stipulated period. Thus time appeared to be the essence of contract, and in case of default by any of the parties. the cancellation followed. The contention of the sugar mills is that the contract was kept alive as the sugar mills were approaching the Stc for lifting of the sugar even after 31-5-1977 and the Stc was also intimating that they would consider doing so if the ban on exports was lifted. This is refuted by .the Stc and it is pleaded that this case was not initially set up by the Stc when they moved the Indian Council of Arbitration. However the fact remains that the parties were alive to this aspect when they agreed before the learned arbitrator on 19th November 1980 about the ascertainment of average price of sale. The case of the Stc however is that what was then stated was dependent upon whether any damages at all could be awarded, and if so whether they could be on the basis of sales effected.

(52) In any case the Nfcsf and Ismas on behalf of the sugar mills categorically wrote to the Stc on 26-6-1978 that 'now that the export of the sugar has been resumed' the balance unlifted 66,269.6 Mts sugar should be lifted within 15 days. and in case within that period no dispatch instructions were received, the Stc would be treated in breach of contract and the sugar mills would have the sugar sold in free market at its risk and cost and claim losses damages suffered by them. The contract thus absolutely stood closed after 15 days of the receipt of this letter by the STC. The damages thereforee it seems had at the most to be computed as per market conditions on the expiry of those 15 days.

(53) In any case the Stc on 7-7-1978 addressed a letter to the department of food to the effect that the legal opinion given by the lawyer was that the existing contract would be cancelled as on the date of the withdrawal of the release orders. It was, thereforee requested that action in the matter be expeditiously taken to avoid any further complication in the case. Although the Stc has now pleaded that this legal opinion and the existence of contract were erroneous and not borne out by any material on record, it hits been urged that after the writing of this letter, the ball passed on to the government and it was for the Directorate of Sugar to issue cancellation and fresh release orders. So far as the Stc was concerned, it absolved itself of any delay occurring thereafter. The computation of damages in the circumstancs, (it appears, could not be deferred to any other further date.

(54) Furthermore, in any case, when the control over sugar was lifted on 16-8-1978 the release orders or their cancellation lost all significance. Thus sugar mills thereafter became absolutely free to market their sugar at their discretion. The damages thereforee if at all computable, could at worst be vis-a-vis the market condition on that date and no further. It is not shown that the sugar mills made any attempt to effect the sales then in order to mitigate the damages. T.C. Kapur appearing on behalf of the sugar mills could not say in his depostition why the sugar was not sold on 16-8-1978, when the controls were lifted.

(55) The Stc has rather pointed out that sales were effected long after 16th August 1978 and in some cases they were as late as August -1979 when the prices had reached rock bottom because of release of sugar in that buinper year of production. It has also been pointed out that even in cases where release orders were cancelled in May 1978, the sales were not effected for several months thereafter and in some cases even in early 1979. Damages were inspire of that allowed by the learned arbitrator on the basis of those belated sales.

(56) Sugar mills have placed copies of some letters which the Directorate of Sugar addressed to some of them in which they were asked to approach the Stcisiec for cancellation amendment of relevant export order enabling the Directorate to release the sugar for internal consumption. The Stc has objected to them on the ground that they were not placed before the learned arbitrator and in any case their authenticity cannot be verified by them. It is also not shown that the sugar Mills then approached the Stcisiec for that purpose.

(57) Another contention raised from the side of the Stc has been that even if it was assumed that the responsibility for obtaining cancellation of the release orders lay on it. the non-obtaining of cancellation itself amounted to breach of contracts and thereforee the computation of damages could not be deferred any further. It is not shown that the concerned sugar mills wrote to the Stc accordingly, and the latter declined to recommend cancellation amendment.

(58) Since there has been no discussion in the award of the basis on which the damages were awarded, the questions arises whether the Court can probe into the same and hold that a patent error of law has been committed. It is only from the dates from which interest has been allowed in the awards, that it can be deduceable that the damages were awarded on the basis of the sales effected by the sugar mills. The Stc has placed reliance upon the two decisions of the Calcutta High Court, as referred to above, in support of the contention that if the arbitrator has allowed damages ignoring the provisions of the Contract Act, the award suffers from an error of law. However, this controversy came before the Supreme Court in that case of Bungo Steei Furniture Pvt. Ltd. v. Union of India, : [1967]1SCR633 where by a majority judgment it was held that it an award allows certain amount of compensation without giving reasons as to how it was arrived at. it cannot be held to be erroneous on face of record by testing its validity on the basis of law applicable to breaches of contract.

(59) So far as the plea of frustration set up by the Stc on the ground that there was a restriction on the export of sugar, in case the breach of contract is said .to have taken place cm 31-5-1977, anything that transpired thereafter could have no relevance. The Stc opened itself to liability for damages on that date, and the damages had to be computed accordingly. If, however, the contract is treated as having been kept alive and operative after that date, the ban imposed on export of sugar except with respect to existing commitments became significant. The learned arbitrator did not take into account the minutes of the meeting of the cabinet committee on economic policy on the ground that the original or certified copies were not produced. An adverse inferenct was drawn against the STC. However, once the contract was treated as alive, the decision arriver at by the government restricting further export as aforesaid could not be lightly ignored .The relevant documents could be got summoned from the government. Moreover, the strict technical provisions of the Evidence Act are not essentially applicable in arbitration proceedings. In any case, the decision. of the cabinet committee, arrived at in July, 1977, limiting sugar export to existing commitments only, sot reflected the Food Secretary, in which also there was a mention of the discussed above. Even the Minister admitted that in Parliament, and the sugar mills too throughout worked under that premises. The Joint Secretary of Ministry of Commerce. Government of India, wrote a letter dated 24-10-1977 to the food Secretary, in which also there was a mention of the ban, and it was stated that the Stc was confident that it would be able to dispose of the entire stock of I.I? lac tons within a few weeks if permission to export was granted in relaxation to the earlier decision of the cabinet in July, 1977. The allowance of export of 1.45 lac tons was redundant as both the Eec and Iran had already repudiated their contracts. The Stc was thereafter not left free to have any fresh export contracts. The allowance of 6.65 lac tons of sugar, February, 1978 could, it seems hardly be taken benefit of by the sugar mills the stipulated date of 31-5-1977 had long back expired, and in the meanwhile the Stc had been prevented from further exports. The Stc was still to nogotiate with new foreign buyers about the price etc. These material documents having bearing on the controversy between the parties, appear to have been ignored by the learned allowance in this regard.

(60) Another clause of the contract between the parties lias stipulated that delivery of 5 per cent more or less of the contracted quantity was permissible. The Isiec was left free to take delivery up to 5 per cent less than the agreed quantity. The Stc was on the face of it, entitled to the benefit of this clause, and could not, it seems, be liable for damages up to 5 per cent of the contracted sugar. It is not disputed that the learned arbitrator has not allowed any allowance in the regard.

(61) So far as the contention of the Stc that the learned arbitrator ought to have referred certain questions of law laid before him for decision of the Court, I do not find any force in the same. The questions suggested were not of any legal complication, and were more of the nature as commonly arise in arbitration. Moreover, the learned arbitrator in the present cases, was of a stature and competency before whom all legal points could be raised and got adjudicated.

(62) The sugar mills have -made reference to a letter dated 10-1-1978. addressed by the Isiec to Nfcsf, in which it was mentioned that Shri Deora had sent that letter to the Stc, not agreeing to cancellation. That letter, however, was not, produced, and, thereforee, it is very difficult to say what its implications were.

(63) I have referred to in some details the controversies as have been agitated before me, and as were said to have been laid before the learned arbitrator. The purpose of their reference here has not been in order to enable the Court to go into the merits thereof, or to sit as an appellate authority thereto. I am fully conscious of the limitation of the Court in this regard in the existing state of law in our country. They have, however, been referred in order to ascertain whether the contention of the Stc that the learned arbitrator fell into a basic error in computation of damages, and further ignored certain material evidence placed before him, has any bases. As has been observed by the Supreme Court in the case K.P. Poulose v. State of Kerala (supra), if very material documents are ignored while arriving at a just decision to resolve the controversy between the parties, the award can he treated to suffer from an error of law. I am equally conscious that the awards in the present cases have imanated from a legal luminary of the stature of Mr. Justice Bhargava. whose deep study of law, judicial approach, analytical mind and further the study of workings of sugar industry and government policies thereof are unquestioned and provide guide to others. I personally have profound respect in this regard. Stc had rather itself suggested his name as the arbitrator. At the same time it may not be out of place to refer here the observations of Bhagwati, I.. in Umed Singh v. Raj Singh. 1975 S C 43.

(64) In my considered opinion, the awards in the present cases suffer from infirmity when the learned arbitrator overlooked the very material documents relating to the restrictions placed by the government in July. 1977 on the export of sugar. The position about these documents has been discussed at some length above in paras 29, 33 and 59. It is for the learned arbitrator to consider their implications on the controversies raised before him whether the contracts became frustrated, and whether they could not be treated us alive after 31-5-1977 or July. 1977. Those documents can also throw light how far the observations made above, specially in paras 47 and 48, with regard to the non-marketing of the sugar in domestic market after 31-5-77 have relevance, and the sugar mills and government were interested to not allow the domestic price of sugar to fall. How far in that case the Stc could be made liable, has to be considered. The clause in the contract about 5 per cent of the stipulated quantity being less lifted, has not been referred to by the learned arbitrator. In present cases where damages have gone to crores, those 5 per cent can have material bearing. Similarly documents referred to in paras 48 and 51 to 54 and others having bearing on the computation of damages may be looked into. Their probative value has to be considered for arriving at just decisions. I am, in the circumstances. constrained to remit back the awards to the learned arbitrator for consideration of all these aspects.

(65) Looking at the circumstances, no order as to Costs. Awards sent hack to Arbitrator for re-consideration.


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