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Steel Authority of India Ltd. Vs. R.N. Datta - Court Judgment

LegalCrystal Citation
SubjectArbitration;Limitation
CourtKolkata High Court
Decided On
Case NumberAward Case No. 85 of 1981
Judge
Reported inAIR1984Cal118
ActsArbitration Act, 1940 - Sections 29 and 30; ;Limitation Act, 1963 - Section 5
AppellantSteel Authority of India Ltd.
RespondentR.N. Datta
Appellant AdvocateDipankar Ghosh, Adv.
Respondent AdvocateBhabra, Adv.
DispositionApplication dismissed
Cases ReferredCourt. In Mondal & Co. v. Slate of West Bengal.
Excerpt:
- .....to arbitration in accordance with the arbitration agreement in the contract. it appears from the award dated 30-1-81 that the main claim of the respondent before the joint arbitrators was damages for non-accept-ance of goods by the petitioner. the arbitrators made and published their award dated 30-1-81 in favour of the claimant. r. n. datta as follows :--'that the respondent to pay to the claimant the sum of rs. 2,30,814.48 as damages for failure to accept 66,326 metres of 1/2' m. s. black pipes which was the subject-matter of contract between the parties.'3. the petitioner's counsel submits that in the statement of claim, the claimant alleged that the time to deliver the goods was from january 1975 to february. 1976. according to the claimant the petitioner committed an anticipatory.....
Judgment:
ORDER

Pratibha Bonnerjea, J.

1. This is an application by the petitioner Steel Authority of India Ltd. for setting aside the award dated 30-1-1981.

2. Pursuant to the invitation to tender No. MP/69132/1B/1311 dated 14-11-73, the respondent submitted a tender dated 23-11-73 for manufacture and supply of 2,40,000 metres of 1/2' M. S. Black Pipes and the same was accepted by the petitioner by acceptance of tender dated 28-2-74. Disputes and differences arose between the parties in connection with the said contract and the same were referred to arbitration in accordance with the arbitration agreement in the contract. It appears from the award dated 30-1-81 that the main claim of the respondent before the joint arbitrators was damages for non-accept-ance of goods by the petitioner. The arbitrators made and published their award dated 30-1-81 in favour of the claimant. R. N. Datta as follows :--

'That the respondent to pay to the claimant the sum of Rs. 2,30,814.48 as damages for failure to accept 66,326 metres of 1/2' M. S. Black Pipes which was the subject-matter of contract between the parties.'

3. The petitioner's counsel submits that in the statement of claim, the claimant alleged that the time to deliver the goods was from January 1975 to February. 1976. According to the claimant the petitioner committed an anticipatory breach of contract by asking the claimant not to despatch goods by letter dated 5-6-75. Under the circumstances two options were open to the claimant, first to accept the breach committed on 5-6-75 immediately and secondly to wait until expiry of the last date of performance on 28-2-76. Therefore the date of breach could be either on 5-6-75 or on 28-5-76. The damage should have been assessed on the basis of difference between the agreed price and the market price on 5-6-75 or 28-2-76. The claimant, however, claimed damage on the basis of alleged loss suffered by it on resale of the goods on 10-9-77. Resale could only be made if all the conditions laid down in Section 54(2), Sale of Goods Act, are fulfilled. But the claimant was not the unpaid vendor, property in the goods did not pass to the petitioner and no notice of resale was served on the petitioner by the respondent before resale. Not a single requirement of Section 54(2) was fulfilled. Hence Section 54(2), Sale of Goods Act. could not be invoked in the present case. If the arbitrators awarded damage on the basis of Section 54(2), Sale of Goods Act, the award was based on a wrong proposition of law. If, however, the damage had been assessed on the basis of Section 73, Contract Act. then the arbitrators would be guilty of legal misconduct as they did not have any iota of relevant evidence of market price on the date of the breach and as such could not have awarded any damage on that basis. In either case, the award is liable to be set aside. In support of his contention he relies on : AIR1952Cal440 . He further submits that the arbitrators must act according to law as held in (1929) 56 Ind App 128 at p. 136 : (AIR 1929 PC 103 at p. 106).

4. In (1949) 53 Cal WN 828, which is a Division Bench decision of this High Court, the transaction was in jute goods and during the period of contract, the ceiling price of jute was controlled by the Jute Price Control Order then in force. The due date of delivery was within June 1946. In 1947, the control was lifted. In August 1947, the buyer demanded supply and due to non-supply, referred the matter to the Bengal Chamber of Commerce for arbitration. The Tribunal awarded damage of Rs. 7312.80. There was no case of extension of due date nor there was any evidence in support of extension of due date before the arbitrators. It was, however, admitted that the damage had been awarded on the basis of price of jute exceeding the ceiling price prevalent during the period of contract. It was argued that as there was no error appearing on the face of the award it was not open to court to make an enquiry about the basis of damage. But the court held that the Tribimal could not have awarded damage unless they had held by implication that the due date was extended till Aug., 1947 and that would amount to legal misconduct on the part of the arbitrators as there was no such case or evidence before them. It was further held: --

'An award can be set aside on the ground of error of law when it is manifest on the face of the award. It is, however, open to the court to look into the relevant statements filed before the arbitration Tribunal. If the court is satisfied that the arbitrators were guilty of misconduct then the court should set aside their award. The expression 'legal misconduct' is an ambiguous term. It means and includes some honest though erroneous breach of duty causing a miscarriage of justice. If there has been a mishandling of the arbitration proceeding or serious neglect of duties on the part of the arbitrator vested with judicial authority to determine the rights and liabilities of parties which is likely to lead to substantial miscarriage of justice, then the court is justified in setting aside the award.'

5. Mr. Ghose very strongly relies on the above observations and submits that going through the pleadings before the arbitrators in the present case, it would be clear that the date of breach was 5-6-75 or 28-2-76, but damage was awarded on the basis of the market price of September, 1977. The case of resale being impossible on the facts of this case, the arbitrators erred in law in measuring the damage on the basis of market price prevalent long after the date of breach. This award is liable to be set aside.

6. Mr. Bhabra, the respondent's counsel submits that the above observation in (1949) 53 Cal WN 828 has been overruled by implication by : [1967]1SCR633 which is as follows: --

'An award may be set aside by the court on the ground of an error of law apparent on the face of the award but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed mistake in arriving at his decision.'

7. According to Mr. Bhabra, Mr. Ghose is trying to establish an error of law committed by the arbitrators by his inferences and arguments which is exactly what has been prohibited by the Supreme Court. No error of law is apparent on the face of the award in the present case. Mr. Ghose is trying to demonstrate the error of law by his own reasoning. No reason has been assigned by the Arbitrator for arriving at their decision. Under the circumstances, court cannot set aside the award. He further submits that an award can only be challenged on the grounds laid down by the Supreme Court in : [1967]1SCR633 :

'It is only when the arbitrator proceeds to give his reasons or to lay down the principles on which he had arrived at his decision that the court is competent to examine whether he has proceed-ded contrary to law and is entitled to interfere if such error of law is apparent on the face of the award itself.''

8. Mr. Bhabra also supports his argument by citing : [1975]2SCR811 that mere violation of law is no ground for setting aside the award unless the same appears on the face of the award. In this case the arbitrator allowed a time barred debt but this was not clear on the face of the award.

In paragraph 12 of this report, it was held :--

'The umpire as sole arbitrator was not bound to give a reasoned award and if in- passing the award, he makes a mistake of law or fact, that is no ground for challenging the validity of the award. It is only when a proposition of law is stated in the award and that is erroneous can the award be set aside or remitted on the ground of error of law apparent on the face of the award (record)?'

9. According to Mr. Bhabra, so far as the merit of the award is concerned, the court cannot examine it unless on the face of the award, error of law or fact is apparent

10. The petitioner's counsel, Mr. Ghose also strongly relies on the case reported in : AIR1952Cal440 . In this case the supplier agreed to supply B. twill up to September. 1946 when Jute Control Order was in force. This control order was in force for the entire period of performance. The damage was claimed on the basis of ceiling price in October, 1946. The issue whether there was any extension of due date of performance was raised before the arbitrator but he did not decide the same expressly. Damage was awarded on the basis of October rate holding:

'First free market available thereafter was in October, 1946.'

11. This award was set aside on the ground that the award could only be made by holding that there was an extension of due date for which there was no evidence on record. So the arbitrators had misconducted the proceeding. According to Mr. Ghose, the award in : AIR1952Cal440 did not contain any finding regarding extension of time. There was no error apparent on the face of that award still the award was set aside as the court felt that the arbitrators had misconducted the proceeding by impliedly holding extension of due date without any evidence to that effect. Mr. Bhabra points out that in : AIR1953Cal621 this : AIR1952Cal440 was cited in support of the contention that even if the award did not indicate the basis on which damages was awarded, the court had the right to set aside the award. This contention was rejected. Referring to the contents of the award in : AIR1952Cal440 'First free market available thereafter was in October 1946'' the court held that there was clear indication on the face of the award that the damage had been assessed on the basis of free market price of jute in October 1946 as will appear from the observations : AIR1953Cal621 :

''But in the application to set aside an award, the court does not make a sifting investigation of the entire proceedings before the Arbitrators. Before that can be done, the award must be shown to be bad on the face of it.....

Here again, Mr. Sethia has relied on : AIR1952Cal440 . But then the point was entirely different in that case. There the Arbitrators in the award itself gave the ground about the availability of the market and goods on the contract date and came to a conclusion regarding the availability of markets on a particular date. This will be found at page 441 of the report.'

12. It is obvious that the award in : AIR1952Cal440 , was set aside as the error was manifest on the face of the award. An award can be set aside on legal misconduct of a technical nature inter alia non-service of notice, refusal to hear or admit evidence or due to moral turpitude or other technical breach of duty on the part of the arbitrators leading to miscarriage of justice and also on other grounds mentioned in Section 30, Arbitration Act. But if it is intended to challenge the award on the basis of its contents and/or merit, it must be shown that the error is manifest on the face of it. He submits that this proposition of law has been reiterated by Courts since Champsey Bhara's case reported in AIR 1923 PC 66, followed by three decisions of the Supreme Court reported in : [1967]1SCR633 , : [1967]1SCR105 and : [1967]1SCR324 as well as in : [1975]2SCR811 . It is now too late in the day to submit otherwise. I accept this submission of Mr. Bhabra. Paragraph 1 of the award, in the present case, does not indicate on what basis damage had been awarded and it is, therefore, not open to Court to make sifting investigation of the proceedings before the arbitrators to find out what was the basis of this award. This award therefore stands.

13. In the second paragraph of the award, the arbitrators allowed interim interest on the sum awarded. The rate is not mentioned. It is submitted on behalf of the petitioner that the arbitrators had no jurisdiction to decide about the question of interim interest. Mr. Bhabra invited my attention to the statement of claim paragraph 4 (v) where interim interest was claimed by the claimant specifically. The issue No. 5 was raised on this pleading. The respondent's counsel submits that this dispute was expressly referred to the arbitrators who have given their decision on this issue. It has been held in : [1967]1SCR105 that if question of pendente lite interest is referred to the Arbitrators, they have jurisdiction to award interim interest. In : [1967]1SCR105 , the disputes in the pending suit including the claim for interim interest were referred to arbitration under Section 21, Arbitration Act. It was held :--

'Though in terms Section 34 C. P. C. 1908, does not apply to arbitration, when it is implied term of reference in suit that arbitration would decide dispute according to law and would give such relief with regard to pendente lite interest as Court could give, if it would decide the disputes, arbitrator can award pendente lite interest'.

In : [1967]1SCR324 it was also held (at p. 1035) :--

'The reason is that it is an implied term of the reference that the arbitrator will decide the dispute according to existing law and give such relief with regard to interest as a Court could give if it decided the dispute.''

14. This view is also supported by : [1972]3SCR233 . In awarding pendente lite interest, the Arbitrators have expressly decided this dispute referred to them. They certainly had the jurisdiction to do so.

15. The provision for payment of interest in paragraph 4 of the award has been attacked by the petitioner on the ground that there are two clear errors apparent on the face of the award, first the award provides payment of interest on interest and secondly, that the arbitrators have allowed interest 'until payment' which includes the period after the decree. The arbitrators have no jurisdiction to award such interests under Section 29. Arbitration Act, it is only the Court which can allow interest from the date of the decree and not the arbitrators. This award must be set aside. In my opinion, this submission has lot of force. The Arbitrators have no jurisdiction to award interest after the date of decree. The word 'till payment' means until realisation of the sum awarded by the Arbitrators. Next comes the question of Arbitrator's jurisdiction to award interest on interest as has been done in paragraph 4 of the present award. It appears that the Arbitrators have exceeded their jurisdiction and this point is arguable. But the respondent's Counsel submits that before the award can be set aside the Court will have to consider the question of limitation involved in this case. The petitioner has taken out an application under Section 5. Limitation Act, for condonation of delay in making this application. It is admitted on the face of this petition that the petitioner had knowledge of the filing of the award since 15-5-1981 from the respondent's letter dated 6-5-1981. Section 14(2) notice was served on the petitioner on 26-6-1981 and the present anplication was taken out on 4-8-1981. The reason for delay shown in the petition is the alleged wrong advice by the lawyers that time will not run unless notice under Section 14(2) is served or any informal notice of filing of the award innovates from Court. In Mondal & Co. v. Slate of West Bengal. I have already held that even an informal notice from whatever source it may be, intimating the petitioner that the award been filed, will start the time running from the date of such informal knowledge. Hence in this case limitation will start from 15-5-1981 Moreover the petitioner is absolutely silent as to when and how he obtained the legal advice. If he had allowed entire time to elapse before he took the legal advice, that will not entitle him to avail of Section 5, Limitation Act. He will have to prove that he was diligent and will have to explain day to day delay from the last day of limitation i.e. 14-8-1981. The petitioner is absolutely silent on this point as to when he took legal advice and when he came to know the advice was wrong and as such the delay remains unexplained. Before Court can exercise the discretion under Section 5, Limitation Act, in favour of the petitioner, Court has to be satisfied that the petitioner is not guilty of any laches or negligence and has taken all reasonable steps in the matter but has been prevented by some unforeseen circums--tances beyond his control from taking out the application for setting aside the award in time. On the averments in the petition, I am not satisfied that the petitioner was diligent or that has failure to take the application in time was a bona fide mistake on his part.

16. In that view of the matter, the application is bound to be dismissed with costs.


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