UNIMEX Vs. SAVERS IMPEX

JUDGEMENT

(1.) This petition challenges an award passed by a sole arbitrator. The disputes between the parties arise out of High Seas Sales Agreements. Both parties had earlier filed their respective suits. The Respondent, who was the vendor, had filed a summary suit for recovery of amounts due to it on dishonoured cheques, whilst the Petitioner, who was the purchaser, had filed a suit for recovery of dues on account of defective goods. At the hearing of the summons for judgment in the Respondent's summary suit, the parties agreed to take their disputes before an arbitrator. The Respondent's summary suit was treated as a statement of claim, whilst the Petitioner's affidavit-in-reply to the summons for judgment and plaint in its own recovery suit were, respectively, treated as a written statement and counter-claim. Learned arbitrator, by his impugned award, allowed the Respondent's claims, whilst rejecting the Petitioner's counter-claims.

(2.) The Respondent had imported several raw materials/pharmaceutical drugs under a world bank project. The Petitioner herein, by its e-mail dated 16 August 2007, agreed to buy some of these materials on high seas sale basis. The materials included Riboflavin and Folic Acid along with some other materials. Various documents, such as high seas sale agreements and warehouse sale agreements, were executed by the parties. There were in all seven sales. The Respondent claims to have issued invoices towards these sales. Two sets of invoices appear to have been issued in this behalf. One set of invoices formed part of Exhibit R-5 collectively before the arbitrator (referred to hereinafter as 'R-Series invoices'), whilst the other set was invoices in Exhibits C-2 to C-8 (hereinafter referred to as 'C-Series invoices'). Whilst values of goods reflected in these two sets were the same in case of four invoices, in case of three (two for Riboflavin and one for Folic Acid), values reflected in the two sets were different. The aggregate invoice value of R-Series invoices was Rs.86,19,570/-, whereas that of C-Series was Rs.1,93,19,829/-. It appears that the Petitioner had handed over to the Respondent several cheques aggregating to about Rs.1.93 crores, out of which, cheques of an aggregate value of Rs.33,64,000/- were cleared, whilst 17 cheques of an aggregate value of Rs.1,59,00,400/- were dishonoured. It was the Respondent's case that these cheques were issued towards the purchase price of the goods in accordance with C-Series invoices. The Respondent had sued the Petitioner for the value of dishonoured cheques. The Petitioner inter alia pleaded the bar of limitation to oppose the claim. On merits, the Petitioner denied having agreed to purchase the material (namely, Riboflavin and Folic Acid) at the rates mentioned in C-Series invoices. According to it, the correct invoices were the R-Series invoices, which were received along with covering letters of the Respondent. Based on the Respondent's statement that R-Series invoices were issued at the instance of the Petitioner so as to understate the value of the imported goods for the purposes of customs duty, it was alternatively submitted by the Petitioner that having been party to deception of the revenue by means of issuance of R-Series invoices so as to understate the import value for customs duty, the Respondent ought not to be permitted to assert any right or claim arising out of such transaction, since such transaction was based upon an illegal and fraudulent act. The Petitioner, in other words, set up a plea of ex turpi causa non oritur actio/in pari delicto portior est conditio possidentis, based on which it prayed for rejection of the Respondent's claim. In his impugned award, the arbitrator held that the Petitioner could not evade its liability under the principle of ex turpi causa non oritur actio. The arbitrator held that the analysis of the plaint and the case pleaded and proved before him showed that the Respondent's claim was based on dishonoured cheques, and not on documents, including the R-Series invoices, which were said to be fraudulent. The arbitrator held that the price recorded in R-Series invoices for Riboflavin and Folic Acid did not reflect the true price agreed between the parties; the true price was reflected in the C-Series invoices and the Petitioner was liable to make payment accordingly. The arbitrator held the Respondent's claim to be within limitation, since the accrual of cause of action had occurred on the date of dishonour of cheques; save and except one cheque for Rs.10 lakhs, which anyway did not form part of the Respondent's claim in the arbitration reference, the claims on all other dishonoured cheques were within time. The arbitrator also considered the Petitioner's case under Sections 91 and 92 of the Indian Evidence Act as also on estoppel and held against the Petitioner on both issues. The arbitrator, in the premises, awarded a principal amount of Rs.1,38,38,878/- along with interest at the rate of 18% p.a., respectively, from the dates of dishonour of cheques till the date of the award and further interest at the same rate from the date of the award and till payment or realisation.

(3.) It is submitted by Mr. Setalvad, learned Senior Counsel appearing for the Petitioner, that the impugned award is in breach of public policy of India and also vitiated by a patent illegality appearing on the face of the award, since it grants a claim despite the claimant being party to a fraud on his own admission. Learned Counsel submits that the award is against binding judgments of Courts including the Supreme Court. Learned Counsel submits that these judgments mandate that no court should help a plaintiff on a fraudulent claim. Learned Counsel submits that this would be so even though in proving the fraudulent nature of the plaintiff's claim it is necessary for the defendant to rely on his own guilt in such fraud. Learned Counsel relies on the judgment of the Supreme Court in the case of Waman Shriniwas Kini vs. Ratilal Bhagwandas and Co., 1959 AIR(SC) 689 (V 46 C 92) , a Full Bench decision of our Court in the case of Guddappa Chikkappa Kurbar vs. Balaji Ramji Dange, 1941 AIR(Bom) 274, (28) and a decision of Full Bench of Lahore High Court in Qadir Bukhsh vs. Hakam, 1932 AIR(Lah) 503 , in this behalf. Learned Counsel, secondly, submits that the high seas sale agreements/warehouse sale agreements are written contracts and the price recorded in those contracts can alone be said to be the agreed price. As a second limb to this submission, learned Counsel, relying on Sections 91 and 92 of the Evidence Act, submits that no evidence for contradicting or varying the terms of these written contracts is admissible. Learned Counsel submits that the arbitrator's view on both these aspects discloses a clear error of law rendering the award to be contrary to public policy of India and vitiated by a patent illegality.