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The Arbitration Act, 1940 1
Section 34 in The Arbitration Act, 1940 1
The Indian Evidence Act, 1872
Section 32 in The Limitation Act, 1963
The Code Of Civil Procedure (Amendment) Act, 1956

Bombay High Court
M/S. Pancham International vs 2 B. L. Choudhary, Sole Arbitrator on 24 September, 2012
Bench: Anoop V.Mohta

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M/s. Pancham International .... Petitioner vs

1 Union of India

through The Director of Supplies,

2 B. L. Choudhary, Sole Arbitrator .... Respondents Mr. Uday Bobde i/by Mr. A.V. Yadav for the Petitioner. Mr. S.R. Rajguru for Respondent No.1.


JUDGMENT RESERVED ON : August 14, 2012

JUDGMENT PRONOUNCED ON : September 24, 2012


The Petitioner has challenged impugned Award dated 26 February 2009 passed by the sole Arbitrator. The operative part of the same is as under :

"9.1 The Claim of the Claimant/UOI as at para 5 above for of Rs.7,45,800/- towards R/P Loss and Rs. 71,704/- towards GD loss is 1allowed in favour of the Claimant and against the Respondent firm with interest @ 12% p.a from its due dates till 2 901-arbp-675-09.sxw

the date of payment. No cost of proceedings and any other incidental relief as sought are made.

9.2 The Claim of the Respondent firm at para 6(a) is 1disallowed' being `unjustified'.

9.3 The Claims of the Respondent firm as at para (b) and © are also `disallowed' being `unjustified'."

2 This typical order based upon a situation which is required to be noted for the purposes of adjudication of any arbitration proceedings specifically when the same is governed by the agreed terms and conditions and where one party is Union of India and/or State, similarly placed undertakings and/or even private undertakings. Admittedly, the Petitioner was appointed as a contractor by order dated 17 March 1992 for the supply of 10,900 sets of bush shirts, pants and slacks etc. The contract was amended in the year 1992. The said date was extended. It was further amended, but ultimately by order dated 10.06.1994 the contract was terminated. Respondent no.1, therefore, invited fresh tender and claimed damages /claims against the Petitioner. Respondent no.1 therefore claimed the compensation, stating it to be risk the purchase and for general damages. The Petitioner contested and also filed counter claim of Rs.26,80,260/-. The Arbitrator was appointed some time in the year 2002. The proceedings proceeded further. The Arbitrator in 3 901-arbp-675-09.sxw

paragraph 7 has recorded as under :

"7 Arbitration proceedings in this case were held on 14.11.2000, 6.12.2000, 6.2.2001, 28.2.2001, 28.12.2001, 31.1.2002, 19.5.2003, 20.6.2003, 8.12.2003, 8.1.2004, 20.1.2004, 4.2.2004, 20.12.2006, 17.1.2007, 18.4.2007, 5.11.2007, 6.2.2008, 7.2.2008, 9.7.2008, 10.9.2008 and finally on 14.1.09 (only 3 hearings in my time) wherein the Claimant/UOI inter- alia only made their oral submissions."

3 It is clear from these dates that arbitration proceedings in fact initiated in the year 2000, pursuance to the clause between the parties. It appears that time was extended upto 2009. It is clear from the Award itself that the present Arbitrator was appointed in the year 2008, held only three hearings in the matter and ultimately by impugned Award, the present exparte Award has been passed as recorded in para 8.10 as under :

"8.10 Though the case has been decided ex-parte, since the Respondent firm did not attend the hearing despite the fact that the notice of hearing has been served upon them but the counter statement filed by them is taken into consideration while determining the case finally. The Respondent firm in their counter statement stated that they have never neglected to supply the outstanding quantity. On the contrary, the entire quantity was ready with the Respondent for offering inspection and for further extension in D.P . However, the Claimant all of a sudden cancelled the contract illegally and thereby the Respondent firm suffered a heavy loss of Rs.2680260/- towards balance quantity as the item in question were not marketable. The Respondent also suffered a heavy loss by way of 4 901-arbp-675-09.sxw

interest which they had paid to the Bankers."

4 It is relevant to note that whenever there is monetary claim and/or counter claim, it is necessary to deal with the aspect of limitation from every angle as contemplated under the Limitation Act. From para 7 which is reproduced above, it is not clear as to what happened during this period since 2000 when admittedly arbitration proceeding commenced. It is also recorded that in the year 2006 the earlier Arbitrator terminated the proceedings as contemplated under Section 32(2) of the Arbitration and Conciliation Act, 1996 (Arbitration Act). Therefore, having once terminated the arbitration proceedings, it is not clear under what circumstances, the same arbitration proceedings was continued and the present sole Arbitrator was appointed. No reason whatsoever provided while passing the Award.

5 Admittedly, the Award is an exparte. There is nothing on record to show how and under what circumstances, having once terminated the arbitration proceedings, the Arbitrator issued notice before commencement of fresh arbitration. Whatever defence, even if available on record as filed by the Petitioner in the earlier 5 901-arbp-675-09.sxw

proceedings, just cannot be taken note of while passing the fresh Award by the new Arbitrator, unless it is specifically agreed and provided under the clause that the arbitration proceedings, would be continued based upon the material available on record. The clause, as noted above, provides that the arbitration once commenced, should be finished within stipulated period unless agreed and/or by consent, the time is extended. There is nothing on record to show that the time was extended and/or there is any consent given by the Petitioner. This is a case where, as noted above, once the arbitration proceedings terminated, there was no question of any extension. There was no question of appointment of sole Arbitrator as done in the present matter.

6 Assuming for a moment that there is arbitration proceedings invoked and continued, still fresh notice is a must. As noted, the Petitioner's counter claim was to the extent of Rs. 26 lacs and odd. The claim of Respondent No.1 was about Rs. 8 lacs and odd. The learned Arbitrator while passing the Award, without assigning any reason, not even mentioned and/or referred the reasons for disallowing the counter claim of the Petitioner.

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7 There is nothing on record to show that any evidence was led by Respondent No.1 to claim risk purchase loss. For any such assessment or granting such claim, it is necessary for the parties/claimant to place on record and prove the alleged loss by leading proper evidence on record. If Petitioner was absent, therefore, there was no question of admission of any documents, including the claim. There is nothing on record to show that the Petitioner, at any point of time, has even admitted the said claim.

8 As already recorded, the Award of such claim, therefore, is also without any evidence and material on record.

9 In the present case, as noted above, as per the agreed clause itself, the Arbitrator was under obligation to give reasons while awarding the claim so raised as the amount involved is of more than Rs. One lac.

10 Strikingly, Respondent no.1 added more reason than given by the learned Arbitrator, by filing a reply affidavit to Section 34 Petition. First of all, it is not the procedural requirement that in every Section 34 Petition, the other side should file a reply. The scope and purpose 7 901-arbp-675-09.sxw

of Section 34 is defined and quite limited. The filing of supporting material and/or missing document and/or supporting affidavit, even if is practice and accepted mode, but still it is not permissible for the party who wants to support the Award, just to add more reasons which were missing while passing the final Award by the Arbitrator. In my view, no reasons can be added for the first time and/or there is no question of elaborating and/or giving explanation which the Arbitrator ought to have given while passing the final Award. Respondent no.1 to give justification by filing affidavit on every aspect which, in my view, is impermissible. The Arbitration Act, no where contemplates and/or permits the parties to justify the same by giving fresh reason for the first time and/or elaborate the reasons already given by filing such affidavit in Court.

11 The Court, under Section 34 of the Arbitration Act, need to consider the reasons and the Award so passed, based upon the material available on record. If case is made out and it falls within the ambit of those principles laid down and settled, the Court may interfere and/or the Court may not interfere. The Court definitely, in my view, is not empowered to accept the contention and/or the averments so raised for the first time though in support of the Award, 8 901-arbp-675-09.sxw

but is nothing but the additional reasons while passing such order. 12 I have already observed in Sahyadri Earthmovers vs. L & T Finance Limited & anr.1 as to which are the basic requirements for Arbitral Tribunal to consider while passing the final Award, as follows: "Pleading - Claim-defence- counter claim- inspection documents

(i) The Petitioner/claimant to file claim petition with details particulars and supporting documents, if any. The Respondents be permitted to file reply/defence/rejoinder/counter claim/ set off and supporting documents, if any. The Arbitrator may direct the parties to file a list/ compilation of documents and call for more informations or details. The parties may admit or deny the documents, after due inspection of the documents. Binding Procedural Rules to conduct Arbitration-

(viii) Once all the parties appear, the Arbitrator must decide and/or discuss the procedure to be followed in conducting the proceedings, if not already decided or agreed, including the 1 2011 (4) Mh. L. J. 200

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governing law.

Equal and fair treatment

(xvii)The Arbitrator must give equal opportunity to both the parties and, therefore, bound to follow the principles of natural justice, fair play and equity.

CPC & Evidence Act

(xviii) Though Code of Civil Procedure and the Evidence Act are not applicable strictly, (Section 19), but the settled principles do apply. The power of Arbitral Tribunal to determine the admissibility, relevance, materiality and weight of any evidence just cannot be overlooked."

13 I have already observed in M/s. Gulraj Engineering Construction Co. vs. Hotel Corporation of India Ltd. (Arbitration Petition No.341 of 2009, dated 7 September, 2012, that under Section 34 (4) of the Arbitration Act read with other provisions, the Court is empowered to remand the matter. The Section itself contemplates that in a given case, on a particular point and/or points, the Court can remand the matter for fresh adjudication, based upon the material available on record and/or in a given case, may permit the Arbitrator to take on record from evidence and/or material, 10 901-arbp-675-09.sxw

provided those issues are severable and/or are not interconnected and/or interlinked. I have already observed that when the claim and counter claim read with the issues are interlinked and interconnected and it is difficult for the Court to remand the matter only for a particular point. In such situation, the Court, in my view, will have no option but to remand the matter as a whole. This is a case where, in view of the reasons so referred above, apart from giving no reason whatsoever, while dismissing the counter claim, the proceedings so initiated and proceeded subsequently by the Arbitrator, though arbitration proceedings itself terminated in the year 2008, goes to the root of the matter. All issues are interconnected and inter linked. Mere quashing of the Award will not serve the purpose. It will cause injustice to all the parties. Therefore, based upon whatever material available on record, the learned Arbitral Tribunal, as per the Rules, required to reconsider all the issues afresh as per the arbitration clause. If same Arbitrator is not available, the parties to take steps to appoint a new Arbitrator and the matter be accordingly proceeded before the new Arbitrator. In view of the fact that the matter is very old, the Tribunal to proceed expeditiously.

14 Resultantly, the following order :

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(I) Award dated 26 February 2009 is quashed and set aside. (II) The matter is remanded back for rehearing and reconsideration.

(III) The Arbitrator to pass Award after giving opportunity to both the parties as expeditiously as possible.

(IV) All points are kept open.

(V) There shall be no order as to costs.