S.DAVE & COMPANY Vs. TATA CHEMICALS LIMITED

JUDGEMENT

(1.) This appeal arises from a judgment of a Learned Single Judge dated 9 December 2011 on a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 to challenge an award of a sole Arbitrator. By the award, the sole Arbitrator allowed the claim of the Respondent in the amount of Rs.1.48 crores together with interest at the rate of 10% per annum from the date of the filing of the claim, till realisation.

(2.) The First Appellant, which is a partnership firm, was a distributor of the Respondent admittedly for a period of nearly fifty years. The claim before the Arbitrator proceeded on the basis that the First Appellant was appointed as a distributor for several years under agreements for distribution which were renewed from time to time. The last of those agreements was for the period from 1 April 2002 to 31 March 2004. In pursuance of orders placed by the Appellants, the Respondent sold, supplied and delivered goods under the aforesaid agreements to the Appellants. Several cheques were issued by the Appellants in partial discharge of their liabilities, which were dishonoured on presentation, leading to the institution of proceedings under Section 138 of the Negotiable Instruments Act, 1881. On 9 April 2004, the Respondent addressed a communication to the Appellants requesting them to confirm an outstanding balance of Rs.1.48 crores as on 31 March 2004. The claim proceeded on the basis that the Appellants confirmed the amount by placing their endorsement at the foot of the said letter. By an Advocate's letter dated 14 June 2004, the Respondent called upon the Appellants to pay an amount of Rs.1.48 crores together with interest. In reply, the Appellants by their letter dated 12 July 2004 acknowledged that the dues were indeed payable, there being no dispute in respect of the amount payable to the Respondent. The Appellants, however, stated that there were liquidity problems and sought time to pay the dues. According to the Respondent, the acknowledgement of liability by the Appellants as evidenced in the document at Exh.E to the statement of claim together with letters of acknowledgement at Exhs.G and H, reflected a jural relationship of debtor and creditor and constituted a contract and/or promise by the Appellants to pay a sum of Rs.1.48 crores to the Respondent. It was on this basis that the claim was made in arbitration for the recovery of a principal sum of Rs.1.48 crores together with interest at the rate of 18% per annum.

(3.) The Appellants examined two witnesses, namely, (i) a General Manager; and (ii) A Commercial Assistant. In the course of the Examinationin-Chief, the first witness deposed that under the pratice prevailing between the First Appellant and the Respondent, on the expiration of the term of an earlier agreement, the distributorship was renewed on identical terms. The agreement for the period from 1 April 1998 to 31 March 2000 was renewed for the period between 1 April 2000 and 31 March 2002. As on 31 March 2002, a sum of Rs.1.66 crores was payable. In accordance with the prevailing practice between the parties, the earlier agreement was renewed on identical terms for the period from 1 April 2002 to 31 March 2004. An amount of Rs.1.48 crores was due as on 31 March 2004. The second witness, who was examined by the Claimant-Respondent, deposed to the accounting practice of the Claimant and stated inter alia that during the period of the distributorship, two reconciliation statements were signed by a partner of the Appellants and countersigned by the witness whereby accounts as of 15 December 2002 and 31 March 2003 were verified and admitted as correct. In addition, it was stated that the Appellants faxed him a reconciliation statement as of 31 March 2001. The witness stated that reconciliation statements were signed after giving effect to the opening balance as of 1 April of every financial year and as of 31 March 2004, the closing balance was Rs.1.48 crores. Certain aspects of the cross-examination, particularly of the first witness, to which a reference has been made during the course of the submissions, would be dealt with in a subsequent part of this judgment. The sole Arbitrator held that the claim was within limitation; that the Appellants were bound by the acknowledgement of liability contained in the letter dated 9 April 2004 and that the claim was not barred by limitation. The sole Arbitrator held that an amount of Rs.1.48 crores was due and payable by the Appellants to the Respondent for the period between 1 April 2002 and 31 March 2004 and the claim consequently has been allowed with interest.