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State Trading Corporation India Ltd. Vs. Indian Molasses Company Private Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberMatter No. 2337 of 1980
Judge
Reported inAIR1981Cal440
ActsArbitration Act, 1940 - Sections 5 and 30; ;Constitution of India - Article 226
AppellantState Trading Corporation India Ltd.
RespondentIndian Molasses Company Private Ltd.
Appellant AdvocateA.C. Bhabra and ;Tarun Bose, Advs.
Respondent AdvocateSankar Ghosh, ;Tapas Banerjee and ;Sudipta Sarkar, Advs.
Cases ReferredLtd. v. The State Trading Corporation India Limited) and Mr. S. C. Sinha
Excerpt:
- .....19th edition pages 160-162 and then he also referred to rules of the bengal chamber of commerce & industry being rule 14 under which the parties agreed to be bound by the said rules and he also referred to the relevant rule 14 (xvi) and submitted that the tribunal of arbitration has the right to reject the application of the petitioner represented by the legal officer even he may be there as a law officer. mr. ghosh referred to the old bombay division bench decision in atlas insurance company limited v. ahmedbhoy habibbhoy, ilr (1910) 34 bom 1 where it has been held that reference to arbitration is construed as depriving a party himself of the right of common law to have the dispute to which the submission relates decided by a court of law. therefore, in this case the.....
Judgment:
ORDER

Salil K. Roy Chowdhury, J.

1. This is an application under Sections 5, 11, 12 and 15 of the Arbitration Act, 1940, inter alia for revoking the authority of the Arbitrator being Tribunal of Arbitration, Bengal Chamber of Commerce and Industry, in respect of Case No. 143 of 1977 pending before the same and for removal of the Arbitrator and appointment of a sole Arbitrator and consequential reliefs.

2. The facts of the case which are not disputed are that by a contract in writing dated 29th of January, 1969, entered into between the parties, the respondent agreed to store imported non-edible tallow in Steel Storage Tank situated at Ram Nagar on the terms and conditions contained in the said contract. Under the said contract the respondent was appointed as the clearing storage. handling and forwarding agent in respect of the said tallow which was to be imported by the petitioner and stored in the said tank of the respondent on the terms and conditions of the said contract. The said storage tank was ready in or about June, 1969, and between June, 1969 and September. 1977, the petitioner issued diverse instructions and/or orders to the respondent authorising them to receive store and handle tallow from the vessels carrying tallow. The respondent did receive a total quantity of about 58,550,554 M. Ts. of tallow in the said storage tank from incoming vessles. The petitioner also from time to time between June. 1969 to October. 1975, issued delivery orders and/or challans in the name of its nominee or nominees and/or allottee or allottees for diverse quantities of tallow mentioned in the said delivery orders and/or challans. The respondent between June. 1969 to October, 1975, duly supplied a total quantity of 58,045.673 M. Ts. of tallow to the nominee or nominees and/ or allottee or allottees of the petitioner to whom delivery challans and/ or orders have been issued by the petitioner from time to time as aforesaid. The said contract was originally for a period of ten months with an option to the petitioner to continue the contract for a further period of twelve months. The said contract also provided for further ' extension beyond the aforesaid period to be mutually decided and was agreed between the parties. After various extensions the said contract stood determined and/or terminated and/or discharged on or from September, 1975, and thereafter, the said storage tank was emptied and drained and a quantity of 504.881 M.Ts. was found short and/or unaccounted for. Under the said contract which made the respondent liable to render true and faithful account to the petitioner in respect of the said tallow and as such, become liable for the said shortage. In spite of the demand of the petitioner the respondent failed and neglected to pay the value of the said short quantity of tallow handled by them and the loss of the petitioner was assessed at 25,72,873.50 p. for which the petitioner made a demand on the respondent together with interest at the rate of Rs. 18 per cent per annum from October. 1975, being the date of termination of the said contract until payment. The respondent made a counterclaim of about Rs. 6,25,674.83 P. alleged to be payable by the petitioner to the respondent. Consequently, a dispute and difference arose and the same was referred to for adjudication under the arbitration clause contained in the said contract by the respondent before the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry. The said Tribunal registered the case being Case No. 143 of 1977 and the pleadings were filed before the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry.

3. It is now alleged by the petitioner that the question of law as stated in paragraph 15 and various sub-paragraphs thereunder has arisen inter alia whether the petitioners' claim is barred by limitation, whether the Arbitration Rules of the Bengal Chamber of Commerce and Industry are appropriate for the adjudication of the disputes arising in the instant case, whether the respondent is accountable to the petitioner as principal and agent, whether the law of paramount applies in this case, if not, what is the liability of the respondent as a bailee, whether the Tribunal is competent to determine the complicated questions of law arising between the parties, whether the admitted shortage of 504.881 M.Ts. of tallow is arbitrable, whether the respondent is entitled to set off and/or counterclaim any amount against the claim of the petitioner.

4. On the 4th of July, 1980, the petitioner applied before the said Tribunal of Arbitration. Bengal Chamber of Commerce and Industry under Rule XXIII of the Rules of Tribunal of Arbitration, Bengal Chamber of Commerce and Industry, for reference of the questions stated hereinbefore to the Hon'ble High Court as a special case for its opinion. By a letter dated 7th of October, 1980, the petitioner was informed by the said Tribunal of Arbitration that they have decided in the instant case that it was not necessary to state as a special case and for the opinion of the Hon'ble High Court. Thereafter, the petitioner in view of the said complicated questions which the Tribunal of Arbitration has taken upon itself to decide sought the permission of the Tribunal of Arbitration to be represented by a lawyer which was denied. Even a full time employee of the petitioner being the Legal Adviser was not permitted to represent the petitioner in the reference. In the premises on the grounds as set out in paragraph 20 and various sub-paragraphs thereunder the petitioner is asking for the Relief as prayed for in this application and the present application was filed on the 12th of November, 1980, and on that date an ad interim injunction was issued in terms of prayers (d) and (e) inter alia restraining the respondent from taking any step in the said reference and also all proceedings before the Tribunal of Arbitration. Bengal Chamber of Commerce and Industry. After filing affidavits directions for which was given on the 14th of November, 1980 the matter was heard at length.

5. Mr. A. C. Bhabra, appearing with Mr. Tarun Bose, for the petitioner, drew my attention to Section 5 of the Arbitration Act. 1940, which provides for leave to revoke the authority of the Arbitrator. He submitted that in this particular case the agreement was dated 22nd of January, 1969, where-from clause (1) and the Payment Clause (8) and Clause (15) being the arbitration clauses were referred to and he submitted that on the 30th of August. 1977, disputes were, referred to the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry, the arbitrators appointed under the arbitration clause contained in the said agreement. Statements and counter-statements were filed and in October, 1980, the petitioner asked the Tribunal of Arbitration to state a special case before the Court as it involves various complicated questions of law as stated above and formulated in the petition but the same was refused. Thereafter, the petitioner made an application for appearing through the lawyer which was refused by the Tribunal of Arbitration and subsequently, the petitioners' Law Officer was also refused by the Tribunal of Arbitration to appear for the petitioner and in these circumstances, it must be held that the arbitrators are biased or at least there is apprehension of bias against the petitioner and the refusal to allow the Law Officer of the petitioner to appear in the reference amounts to misconduct and, therefore, the authority of the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry, should be revoked and a sole Arbitrator to be appointed to adjudicate the disputes between the parties. Mr. Bhabra cited a decision of the Supreme Court in Paradip Port Trust v. Workmen, : (1976)IILLJ409SC where the question of allowing appearance of a lawyer in a reference of dispute under the Industrial Disputes Act. Section 36(21)(4) came up for consideration, it was held that a lawyer simpliciter cannot appear before the Industrial Tribunal with the consent of the opposite party and with the leave of the Tribunal merely by virtue of a power of attorney executed by the party. It was further held that a Lawyer can appear before the Tribunal in the capacity of a office-bearer of a Registered Trade Union or an Officer of Associations of employers and no consent of the other side and the leave of the Tribunal will then be necessary. The said observation is at paragraph 26 at p. 45 of AIR 1977 SC. Mr. Bhabra also referred to paragraphs 16 and 19 of the said AIR 1977 SC at pages 42 and 43 where it has been held that an Officer having legal qualification and a legal practitioner cannot be debarred from appearing before the Tribunal and no consent of the other party or leave of the Tribunal is necessary and he is a mere representative of the party appearing before the Tribunal in the reference. Mr. Bhabra rightly submitted relying on the said decision that although the same is under the Industrial Disputes Act, but the same principle is also applicable to a reference to the Tribunal of Arbitration under the Arbitration Act, 1940. Therefore, Mr. Bhabra submitted that refusal to allow an employee lawyer of the petitioner to represent the petitioner in the reference is a legal misconduct and in this particular case various difficult questions of law are involved and, therefore, it is required to be represented by the Law Officer of the petitioner and refusal of such reference amounts to a misconduct and entitles the petitioner to the relief asked for by revoking the authority of the arbitrator and appointment of a sole Arbitrator under Sections 11 and 12 of the Arbitration Act, 1940. Mr. Bhabra referred to the facts of this case in detail which I have already set out before from which it appears that there is an apprehension of bias against the petitioner of the Tribunal of Arbitration and as such, the Arbitrator should be removed apart from the legal misconduct in refusing the legal officer of the petitioner to appear in the reference. Mr. Bhabra, therefore, submitted that an order should be made as prayed for.

6. Mr. Sankar Ghosh, appearing with Dr. Tapas Banerjee and Mr. Sudipta Sarkar, for the respondent, firstly submitted that the petition is mala fide and in any event, the petitioner is not entitled to any relief in this application as there is waiver and acquiescence. He submitted that after the refusal was made by the Tribunal of Arbitration to allow the petitioner to be represented by a Lawyer there was no protest, that is, after the letter of 24th of January, 1979, by which the Tribunal of Arbitration refused appearance through the Lawyer. Mr. Ghosh submitted that the letter dated 15th of May, 1979, is a positive evidence of the petitioner as to the decision of the Tribunal of Arbitration and it must be held that they have waived the same and acted upon the decision of the Tribunal of Arbitration without protest. He further submitted that delay in making this application is a factor to be taken into consideration and, therefore, no relief should be allowed. Mr. Ghosh also submitted that there is no prejudice caused to the petitioner by refusal on the part of the Tribunal of Arbitration to be represented by a Lawyer as that would enhance the costs and expenses and in fact, parties have incurred costs and expenses after the refusal. In short. Mr. Ghosh submitted referring to paragraph 25 of the affidavit-in-opposition filed on behalf of the Respondent affirmed by one Asfar Hossein Roohani on the 28th of November, 1980. He submitted also after referring to paragraphs 18 and 19 that after extensive arguments by both the sides the Arbitrators wanted the petitioner to file the survey report and stock verification during the relevant time and thereafter, the petitioner with a view to frustrate the arbitration proceeding and object of harassing the Respondent has made this application three years after the reference was made by the Respondent making its claim before the Tribunal of Arbitration in 1977. Mr. Ghosh submitted that there are about 8 letters after the refusal by the Tribunal of Arbitration to be represented by a Lawyer no protest was made and it is only after the survey report was asked for after protracted hearing, the present application has been made. Mr. Ghosh referred to the principles of leave to revoke the authority of the Arbitrator when to be granted by Court as formulated in Russel's on the Law of Arbitration, 19th Edition pages 160-162 and then he also referred to Rules of the Bengal Chamber of Commerce & Industry being Rule 14 under which the parties agreed to be bound by the said Rules and he also referred to the relevant Rule 14 (xvi) and submitted that the Tribunal of Arbitration has the right to reject the application of the petitioner represented by the Legal Officer even he may be there as a Law Officer. Mr. Ghosh referred to the old Bombay Division Bench decision in Atlas Insurance Company Limited v. Ahmedbhoy Habibbhoy, ILR (1910) 34 Bom 1 where it has been held that reference to arbitration is construed as depriving a party himself of the right of common law to have the dispute to which the submission relates decided by a Court of Law. Therefore, in this case the petitioner must be deemed to have waived the right to dispute the jurisdiction of the Tribunal of Arbitration who are governed by the rules which bind the parties including the petitioner. Mr. Ghosh also referred to a English decision in Robinson v. Davies, (1879) 5 QBD 26 and also the decision in Hart v. Duke, (1862) 32 LJ QBD 55 where the question of misconduct in a particular case is to be decided and in the facts of those cases those were not misconduct. Therefore, it must be held that there is no ground of substance in the application of the petitioner and it must be dismissed.

7. The main questions whether in the facts and circumstances of t his case the Court should revoke the authority of the Arbitrator and secondly, whether the Arbitrators by refusing representation in the reference through a Law Officer of the petitioner amounts to legal misconduct in the facts and circumstances of this case.

8. From the facts which cannot be disputed as it is appearing from the records that it is true that the petitioner initially asked for representation by a Lawyer which was refused and subsequently represented that they want to be represented by their employee being the Law Officer of the Respondent in the reference which was also refused. Therefore, the Arbitrators must be held to be guilty of misconduct in view of the principles laid down in the Supreme Court decision referred to by Mr. Bhabra although the same is a case under the Industrial Disputes Act, where there is a specific section being Section 36, But, in my view, the principle applicable in that case and the facts therein are almost identical to the present one and applies with full force as that is based on the fundamental principles of Arbitration being fair play, impartiality and proceeding according to law. It is a well settled principle that the Arbitrators are not beyond the law but they are not bound by the technicalities of procedure as in a Court of law but they are bound to follow the well settled principles of law. Here, in this case admittedly the Arbitrators have refused representation to the petitioner through their employee being the Law Officer of the petitioner. Therefore, it must be held that the Arbitrators are guilty of legal misconduct. A question was raised that whether in the facts and circumstances of this case there is acquiescence and waiver on the part of the petitioner, but, in my view, acquiescence and waiver can only relate to irregularity in the procedure but cannot extend the jurisdiction of the Arbitrator relating to a substantive legal right which is involved in this case, that is, representation by an employee who happens to be a Law Officer of the petitioner in the reference being refused for which the Arbitrators have no jurisdiction. Therefore, in my view, there cannot be any question of acquiescence and waiver to the legal misconduct of the Arbitrators. The principle on which the Court can revoke the authority of the Arbitrator is laid down in Russels' on the Law of Arbitration. 19th Edition, to which Mr. Sankar Ghosh, appearing for the Respondent, has referred being Pages 160-165. The said principle has been approved by the Supreme Court in the decision of Amar Chand Lalit Kumar v. Sree Ambica Jute Mills Limited, : [1963]2SCR953 . Therefore. I am satisfied in the facts of this case that it must be held that the Arbitrators are guilty of misconduct and their authority should be revoked and they should be removed and a sole Arbitrator should be appointed as asked for by the petitioner exercising power under Section 12(2)(a) of the Arbitration Act, 1940.

9. In the result, there will be an order in terms of prayer (a) revoking the leave of the Arbitrators, Tribunal of Arbitration, Bengal Chamber of Commerce & Industry, in the Award Case No. 143 of 1977 pending before them (Indian Molasses Company private Ltd. v. The State Trading Corporation India Limited) and Mr. S. C. Sinha, Advocate is appointed sole Arbitrator in place and stead of the said Tribunal of Arbitration, Bengal Chamber of Commerce & Industry, in respect of disputes and differences referred.

10. The Arbitrators which are removed by this order to hand over all papers and documents to the sole Arbitrator appointed by this order forthwith.

11. The Tribunal of Arbitration, Bengal Chamber of Commerce & Industry, the outgoing Arbitrators, Mr. S. C. Sinha, the incoming Arbitrator, and all parties to act on a signed copy of the minute.

12. Costs of this application would be costs in the arbitration proceedings.


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