SABOO SODIUM CHLORO LTD Vs. SAMBHAR SALTS LTD

JUDGEMENT

(1.) THE appellant is challenging the Order dated 10. 5. 2006, passed by the District and Sessions Judge Jaipur whereby the learned Judge has rejected the objections filed under Section 34 of the Arbitration and Conciliation Act, 1996 (henceforth to be referred to as `the Act', for short) by the appellant against the award dated 24. 8. 2000 passed by the Sole Arbitrator.

(2.) THE brief facts of the case are that the appellant and the respondent No. 1 had entered into a contract whereby the respondent No. 1 had agreed to supply 30,000 Metric Ton (MT) plus or minus 15% of "kyar salt" to the appellant @ of Rs. 394/- PMT (per Metric Ton ). THE said salt was to be duly loaded into trucks in loose. THE contract was for a period of one year, namely from 1. 8. 96 to 31. 7. 97. THE prices were framed and on escaltation provision during the currency of the contract was envisaged. As per Clause 89 of the Contract an Earnest Money deposit amounting to Rs. 2,00,000/- was to be furnished in the shape of Bank Guarantee by the appellant to the respondent No. 1. THE appellant had deposited the said Earnest Money with the respondent No. 1. According to the contract, the appellant was required to lift 2500 MT in each month effective from 1. 8. 96. THE said contract also contained an arbitration clause-Clause No. 11, which is as under: In the event of any question, dispute, breach of difference arising up or in connection with this contract the same shall be referred to the Sole Arbitration of the Chairman and Managing Director, Sambhar Salts Ltd. , Jaipur or a person appointed by the Chairman and Managing Director to act as Arbitrator in the matter. THEre will be no objection if the Arbitrator is an employee of the Company, its holding Company or his duties as an employee expressed views on all or any of the matters in the dispute or difference. THE award of the Arbitrator shall be final and binding on the parties to this Contract. THE expenditure on the arbitration shall be borne by the party who invokes the Arbitration Clause. It seems the appellant did not adhere to the lifting schedule and lifted only 5694. 804 MT out of a total of 30,000 MT, which they were, supposed to lift within the period of one year. Since the appellant did not lift the entire amount as required by the contract, the respondent No. 1 had to necessarily sell off the salt to other buyers. However, the respondent were forced to sell the salt at a reduced rate of Rs. 368/- PMT to M/s. PNFC Ltd. Chandigarh @ Rs. 368/- till February 1997 and @ Rs. 365/- PMT since March 1997. In total, the respondent No. 1 sold 23,300. 80 MT to the PNFC Ltd. Since the agreed price with the appellant was Rs. 394/- PMT, and since the respondent No. 1 was forced to sell the said salt at a reduced price, it consequently suffered a loss of Rs. 6. 50 lacs. Vide letters dated 4. 7. 97 and 1. 8. 97, the respondent No. 1 invoked the arbitration clause against the appellant. THE respondent No. 1 sent the said letters to the appellant. In terms of Clauses 11, it appointed Mr. R. Prakash, the then Chairman and Managing Director as the Sole Arbitrator. Vide notice dated 24/27. 9. 99, the learned Sole Arbitrator informed respondent No. 1 to submit its claim petition and also informed the appellant to submit its written statements within twenty days from the date of the receipt of the claim petition. However, the respondent No. 1 sought further time for filing the claim petition through its application dated 20/21. 10. 99. THE claim petition was eventually filed on 3. 12. 99. According to the claim petition, the respondent No. 1 had invoked the Bank Guarantee of Rs. 2 lacs, but the respondent No. 1 was still entitled to recover Rs. 4. 50 lacs from the appellant as the appellant had breached the contract. Thus, in total the respondent No. 1 claimed that it was entitled to a compensation of Rs. 650 lacs along with 18% interest per annum. In order to substantiate its case, the respondent No. 1 had submitted thirty- one documents. During the course of the arbitration proceedings, the learned Sole Arbitrator, due to pre-occupation as the Salt Commissioner and as the Chairman and Managing Director of Hindustan Salts Ltd. and of its subsidiary, Sambhar Salts Ltd. , though it proper to appoint Mr. M. P. Pareek in his place as the Sole Arbitrator, Mr. M. P. Pareek, the new Sole Arbitrator decided to hold the arbitration proceedings on 27. 1. 2000. Information about the holding of the proceedings was also sent to the appellant. However, on 27. 1. 2000, the appellant neither appeared personally nor through a counsel before the Sole Arbitrator. Instead, it sent a letter dated 22. 1. 2000, wherein it stated that it is not agreeable for arbitration by any employee or representative of the Sambhar Salts Ltd. A copy of the said letter was also given to the respondent No. 1. THE respondent sought time to reply to the said letter. On 27. 1. 2000 itself, the respondent No. 1 pointed out to the Sole Arbitrator that the appellant had accepted the contract which contained the arbitration clause. According to Clause 11 of the contract, the parties could not object if the Arbitrator is an employee of the Company. since the claim petition had already been filed, since a copy of the claim petition had already been sent to the appellant, according to the respondent No. 1, it was too late for the appellant to raise any objection about the appointment of the new Sole Arbitrator. After hearing the respondent No. 1 and in the absence of the appellant, the new Sole Arbitrator rejected the objection raised by the appellant and continued the arbitration proceedings. THE arbitrator had drawn up the proceedings of 27. 1. 2000, had sent a copy of the proceedings to the appellant. He had informed the appellant that the case is fixed for further hearing and for filing of written statement for 11. 2. 2000. However, again on 11. 2. 2000, the appellant was absent. Since the Sole arbitrator wanted to do complete justice with the parties, he adjourned the proceedings till 13. 3. 2000 and informed the appellant abut holding the proceedings on day-to-day basis so as to complete the proceeding at the earliest. But, even on 13. 3. 2000, no one appeared on behalf of the appellant. THErefore, the Sole Arbitrator decided to proceed ex-parte against the appellant. He framed four issues as under: 1. Whether the allegations made by the Non-Applicant regarding supply of bad quality of salt are correct and who is responsible for the breach of Contract between the parties i. e. to say the applicant or the non-applicant? 2. Whether the applicant is entitled to forfeit and retain the amount of Earnest Money Deposit of Rs. 2. 00 lacs recovered by them after invoking the Bank Guarantee furnished by the Non- applicant in terms of contract between the parties? 3. Whether the applicant company has suffered a loss of Rs. 6. 50 lacs on account of breach of contract and non-lifting of salt as per scheduled programme as envisaged in the contract? 4. Whether the applicant is entitled for recovery of interest @ 18% p. a. On account of damages, if any, found recoverable from the award and from what date?

(3.) ON the other hand, Mr. Rajendra Arora, learned counsel for the respondents, has vehemently argued that the word used in Section 31 (5) of the Act is "delivered" and not "dispatched" by the arbitrator. Thus, what is pertinent is that the copy of the award should be delivered to the appellant. Since both Sambhar Salts and Hindustan Salts Companies are in the same building and are under the same Chairman & Managing Director, a copy of the arbitrator award was sent by Hindustan Salts Ltd. through Registered A. D. The said Registered A. D. was received back after the copy of the award was delivered to the appellant. In fact, the issue whether the copy was duly served and was duly received by the appellant was decided by the Executing Court vide its Order dated 23. 7. 2004. The executing Court clearly held that a copy of the award was delivered to the appellant. In fact, the issue whether the copy was duly served and was duly received by the appellant was decided by the Executing Court vide its Order dated 23. 7. 2004. The executing Court clearly held that a copy of the award was, indeed, received by the appellant. The said order has not been challenged by the appellant. Therefore, it has reached a finality. Hence, the appellant is estopped from raising the same issue afresh. Moreover, once the copy had been received by the appellant on 1. 9. 2000, the filing of the objections in the year 2004 was delayed by four years. According to Section 34 (3) "an application against the arbitral award can be made within 120 days or 3 months from the date of the award. If the Court is satisfied that the appellant is prevented from sufficient cause from making the application within the said period of three months, it may entertain the application within a further period of thirty days, but not thereafter. " According to the learned counsel the said limitation period cannot be extended beyond the period prescribed by the proviso, as the proviso uses the word "but not thereafter". Therefore, Section 5 of the Limitation Act dealing with condonation of delay is inapplicable to an application filed under Section 34 of the Act. In order to substantiate his contention, the learned counsel has referred to the case of U. O. I. vs. Popular Construction Company (2001 (8) SCC 470 ).