GAIL INDIA LTD Vs. ADVANCE GLASS WORKS

JUDGEMENT

(1.) THIS appeal has been preferred against an order of learned Arbitrator made under Section 17 of the Arbitration and Conciliation Act, 1996.

(2.) THE brief facts relevant for purpose of deciding this appeal are that the appellants were supplying natural gas to the respondent under a contract of supply of gas. The quantity of gas being supplied was measured by a meter installed at the premises of the customer. The meter was installed in a skid. The door of the skid used to be locked and at the time of meter reading the skid used to be opened and the meter reading used to take place in presence of the customer. The meter skid used to be sealed under various seals. Supply of the gas prior to 1st April was being made by the petitioner at specified rate upto 31st March, 2006. With effect from 31st march, 2004 supply of quantity of gas over and above the contracted quantity was allowed and the petitioner was given liberty to charge at higher rate of rnlg (Re-liquified Natural Gas) for extra gas. Petitioner's case is that soon after rise in prices, loss of gas was noticed indicating that the respondent was using unrecorded gas. The petitioner suspected pilferage, ostensibly due to insecure locks, insecure paper seals on doors, and gaps at bottom of skid and top of skid. A joint inspection of the turbine meter at the factory of the respondent was conducted on 26th October, 2004 and a joint inspection report was prepared and signed by both the parties. The inspection report showed that all seals, locks, etc. were intact except the turbine manufactures seal which was shown as 'not OK' by GAIL but the representative of the respondent disagreed with it. The petitioner, suspecting that the meter had been tampered with, on the same very day, after inspection, took out the meter and sealed the same with signatures of both the parties at 20. 50 hours on 26. 10. 2004 in a container, so that the meter could be got checked from Rockwin Flow Meter India pvt. Ltd. at Ghaziabad. After removal of the meter and sealing it in a sealed container having signatures of both the parties, petitioner gave a notice to the respondent that the meter would be inspected/checked at Rockwin Flow Meter India Pvt. Ltd, Ghaziabad on 27th october, 2004 and respondent should send his representative to Rockwin on 27 th october, 2004 at 10. 00 am. It was also made clear to the respondent that in case respondent failed to depute representative to Rockwin Flow Meter at ghaziabad for joint inspection and calibration at the laboratory, then the inspection and calibration would be conducted in the absence of the respondent. Petitioner also wrote that if any irregularity was found with the meter during inspection and calibration by Rockwin Flow Meter, action would be taken by the petitioner as per contract. The respondent replied to this letter of 26th october, 2004 that he was not in a position to come to Ghaziabad on 27th october, 2004, therefore, inspection be postponed to some other date and date be informed. However, the inspection at Rockwin Flow Meter India Pvt. Ltd was carried on 27 th October, 2004 as scheduled and since respondent had not sent its representative it was carried in the absence of the respondent. The observations of Rockwin Flow Meter Pvt. Ltd. in respect of the meter were as under:

(3.) ROCKWIN Flow Meter Pvt. Ltd. gave a report that meter was tampered and was recording supply of gas as 44% less than of actual quantity. Thereafter, the petitioner served a demand notice on the respondent on 18th January, 2007 on account of pilferage of gas and demanded a sum of Rs. 86,54,350/ -. This demand was revised to Rs. 97,33,411/ -. The respondent on receiving this demand filed an application under Section 9 of the Arbitration and Conciliation Act before the District Judge, Ghaziabad seeking an order that this amount be not recovered as respondent intended to invoke the arbitration clause. District judge, Ghaziabad issued an injunction against recovery of this amount till appointment of an arbitrator in accordance with the contract. After appointment of Arbitrator, when Arbitrator was seized with the matter, this application under Section 17 of the Arbitration and Conciliation Act was filed by the respondent that the amount be not recovered. The application was opposed by the petitioner who wanted that the respondent be, at least, asked to pay 50% of the demand and furnish security of balance 50% of the demand.