AGRAWAL STEELS Vs. GRASIM INDUSTRIES LTD

JUDGEMENT

(1.) In this appeal preferred under Section 37 of the Arbitration and Conciliation Act. 1996 (for brevity 'the Act'), the appellant (hereinafter referred to as 'the claimant') has called in question the sustainability of the judgment passed on 25-6-2001 by the learned IXth Additional District Judge, Jabalpur in Arbitration Case No. 36/2000 whereby the court allowed the application preferred under Section 34 of the Act filed by the respondents and set aside the award of the learned Arbitrator.

(2.) The facts which are discernible from the order of the learned Trial Judge, the memorandum of appeal and other documents brought on record and are necessitous to be stated are that the respondent No.1 is a Company registered under the Indian Companies Act, 1956 and the respondent No.2 is a subsidiary concern of respondent No.1. The respondent No.2 is engaged in manufacture of cement and as widespread business throughout the country. It carries on business through its agents and one category of agent is called consignment agent. The appellant was appointed as consignment agent on stock transfer basis in Lucknow area on 23-1-1997 by the respondent No.2 and an agreement was signed between both the parties and as put forth the said agreement was only for a period of 10 days i.e. up to 31-3-1997. The claimant was called upon to furnish a bank guarantee worth Rs.30 lacs under the said agreement. No business transaction were conducted during the said period. The Claimant had not furnished any bank guarantee under the said agreement and the said agreement did not contain any arbitration clause. After a lapse of one month, both the parties entered into a fresh agreement with certain new different conditions on 1-5-1997 which was to remain in vogue from 1-6-1997 to 31-3-1998. The said agreement contained an arbitration clause. In pursuance of the said agreement, the claimant furnished a bank guarantee of Rs.40 lakhs in favour of respondent No.2 in accordance with the terms and conditions of contract dated 1-5-1997. After furnishing the bank guarantee, the respondents started supply of cement on stock transfer basis by rail from Raipur to Lucknow. All supply of cement were entered into the stock register of the claimant and verified by the sales officers of the respondents. Daily sales book, weekly stock and sale summery stock, daily collection report, physical verification report and other statements were duly verified and signed by the sales officer and an employee oi the claimant and the original documents were sent to the Head Office of the respondents company. The claimant used to remit all sales collection either by account payee demand draft or by account payee cheques. During three months supply of 4807 MT cement was made by rail and out of the same 424.25 MT cement were damaged in transit due-to rain in July and the respondents had recovered the whole price of the damaged cement from the Insurance Company. No cement was supplied by the respondents after the July, 1997 to 31-3-1998 without assigning any reason. Because of this nonsupply the claimant suffered a huge loss because of maintenance of establishment during the contract period i.e. 1-5-1997 to 31-3-1998. On 21-10-1997, the claimant received an outstanding statement prepared by the sales officer by the respondents on simple paper contending some disputed entries like Faizabad account. But some payments made by the claimant in the month of September, 1997 and October, 1997 were not included. As there was allegation that there was over payment by the claimant under agreement in question and correspondences went on between the parties, a dispute arose. As alleged respondents maintained a sphinx like silence and they eventually encashed the first bank guarantee of Rs.15 lacs on 3-2-1998 and the second bank guarantee of Rs.25 lacs on 9-5-1998. As the dispute arose, the claimant filed a petition before the District Judge, Lucknow under Section 9 of the Act seeking relief that an arbitrator be appointed to settle the dispute between them and further to restrain the respondents from invoking the bank guarantee of Rs.40 lacs furnished by the claimant. The District Judge, Lucknow decided the matter only on the point of jurisdiction and came to hold that exact nature of the outstanding dues could only be determined by the arbitrator when appointed in terms of the agreement or in accordance with Section 11 of the Act. The Court at Lucknow expressed the view that it had no territorial jurisdiction to decide the matter. As the learned District Judge, Lucknow dismissed the petition on the ground of jurisdiction, the claimant moved the High Court at Lucknow which was dismissed and thereafter Special Leave Petition was filed before the Apex Court which was also dismissed. Being unsuccessful, the claimant preferred a petition under Sections 8 and 11 of the Act before this Court. In the said application, which formed the subject matter of MCC No.931/88, Justice B.C.Varma, Former Chief Justice of Punjab & Haryana High Court was appointed as the sole arbitrator with the consent of both the parties to adjudicate the disputes that had arisen between the parties.

(3.) The claimant filed its claim petition before the arbitrator and the respondents filed the written statement on 15-10-1999. Thereafter on 20-11-1999 a rejoinder along with the documents was filed by the claimant. Reply thereto was also filed by the respondents. Evidence on affidavit was filed before the arbitrator. The learned arbitrator on 22-1-2000 passed an order that counsel for the parties had agreed they did not propose any amendment in the issues framed earlier and accordingly treated the issues to be final. Thereafter evidence was recorded and after appreciating the evidence both oral and documentary brought on record, the learned arbitrator passed an award on 6-8-2000 awarding a sum of Rs.49.90 lacs in favour of the claimant with interest to the tune of Rs.20,38,200.00 and future interest at the rate of 18% per annum till the date of payment together with Rs.70,000.00 as costs of the proceeding including Arbitrator's fee and expenses. It is pertinent to mention that the counter claim preferred by the respondents was dismissed by the sole arbitrator.