F.A.O No.2954 of 2006 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH.
F.A.O No.2954 of 2006
Date of Decision: 03.09.2009
M/s Setia Rice Mills, Jalalabad Road, Muktsar
....Appellant
Versus
Punjab State Co-operative Supply and Marketing Federation Limited
(Markfed) and another
...Respondents
CORAM : Hon'ble Ms. Justice Nirmaljit Kaur
Present:- Mr. S.K. Singla, Advocate
for the appellant.
Ms. Deepali Puri, Advocate
for the respondents.
*****
1. Whether Reporters of Local Newspapers may be
allowed to see the judgment ?
2. To be referred to the Reporters or not ?
3. Whether the judgment should be reported in the
Digest ?
**
NIRMALJIT KAUR, J.
This is an appeal against the order dated 15-12-2005 passed
by District Judge, Faridkot, vide which, the objections of the appellant
against the award dated 18-11-2004, were dismissed. The dispute, in this
case, is with respect to the delivery of rice by the end of February, 1996.
As per the claim, the appellant-miller failed to shell 3149 bags weighing
2046.85 quintals of IR-8 and 41493 bags weighing 26970.45 quintals of
paddy within the stipulated period. It was alleged that the appellant-miller
violated the terms and conditions of the agreement and did not mill and
supply the rice as per the contract.
The solitary argument raised by learned counsel for the
F.A.O No.2954 of 2006 2
appellant is that as per the terms of the agreement, the appellant-miller
was to deliver the rice of the paddy supplied to it by the end of February,
1996. It was agreed between the parties that in case of failure of the
appellant-miller to supply the resultant rice within the fixed period of milling,
he would be liable to pay an interest at the rate of 21% per annum on the
basis of economic cost of left over quantity. The appellant-miller failed to
deliver the rice within the stipulated period and as per the specifications.
Therefore, he is liable to pay interest at the rate of 21% per annum as
mentioned in the agreement. It was stated that the Managing Director of
the Corporation appointed the Arbitrator to settle the disputes between the
parties instead of deciding it himself in accordance with Clauses 6(iii), 7(iii)
and 20 of the agreement.
For proper adjudication, it would be appropriate to reproduce
Clause 6(iii) and Clause 7(iii), which read as follows :-
“Clause 6 :
(i) and (ii) xxx xxx
(iii) The Miller shall complete delivery of the rice
within 10 days of issuance of paddy to him and rice due
to the State Govt. on the total quantity of paddy issued
to him or in joint custody released at regular interval
shall be delivered not later than the 28th February,
1995. The miller shall further ensure milling of Govt.
paddy and delivery of rice in the following manner :-
October/November : 20%
December : 26%
January : 26%
February : 28%
In the event of his failure to supply rice within the
stipulated period he shall be liable for an interest @
21% on the basis of economic cost of left over
quality/stocks of paddy/rice. The decision of Director in
this behalf shall be final.”
Clause 7(iii)
F.A.O No.2954 of 2006 3Clause 7(iii) of the agreement reveals that in the
event of failure of the miller to supply the rice within the
stipulated period, he shall be liable for an interest at the rate
of 21% per annum on the basis of economic cost of left
over stock/quantity of paddy/rice and the decision of the MD
in that behalf shall be final. The clauses of the agreement
also show that the shortage on the part of the miller would
be recovered at 1.5 time the economic cost of equivalent
paddy according to the variety involved. No doubt, as per
the aforesaid clauses of the agreement, the `excepted
matters’ were to be determined by the Managing Director
himself and were not to be referred for arbitration, but the
Managing Director of the Corporation had no judicial power
under the agreement. If the miller fails to supply the rice as
per the clauses of the agreement, then who is to decide
those matters regarding the payment of the price of left over
stock and interest for late delivery. In that situation, only the
Arbitrator, who will be either the Managing Director himself
or any other person appointed by him in that behalf, will
decide the said matters. No doubt, the `excepted matters’
cannot be referred to arbitration as per the clauses of the
agreement, but that does not mean that the MARKFED
cannot recover the price of the left over stock/shortage and
the interest for late delivery, as provided in the agreement.
Even otherwise, there is no other remedy available to the
Corporation to recover the amount of the alleged `excepted
matters’ except by including the same in its claim submitted
before the Arbitral Tribunal.”
The relevant part of Clause 20 of the agreement reads thus :
” Arbitration : All the disputes and difference arising
out of the or in any manner touching or concerning this
agreement whatsoever extend except as to any matter the
decision of which is expressly provided for in the contract
shall be referred to the sole arbitration of the M.D. PSWC
or any person appointed by him in this behalf.”
Thus, the aforesaid dispute or claim for the delayed supply and
shortage was covered under the Agreement between the parties and there was
no need to refer the Arbitrator for adjudication. This being the only dispute, a
combined reading of Clauses 6(iii), 7(iii) and Clause 20, clearly shows that the
F.A.O No.2954 of 2006 4
remedy of the dispute is made available in the agreement itself. The decision
given by the Managing Director would be final. The Managing Director was the
only competent authority under the agreement to decide the dispute. The
reference to the Arbitrator was illegal.
In a case Shree Krishna Rice Mills v. The Punjab State Co-op
Supply and Marketing Federation Ltd., The Punjab Law Reporter-Vol CXXXV
(2003-3) 341, this Court, on a similar proposition of law, has observed in para 12
of the said judgment that :-
“12. Therefore, the combined reading of Clauses
18, 5 and 6 of the aforesaid agreement, clearly show that
all disputes between the Markfed and the Miller were liable
to be referred to the arbitration concerning the agreement
except disputes regarding the matters, the decision of
which is expressly provided for in the contract. Under
Clauses 5 and 6 of the aforesaid agreement, the decision
with regard to 1.5 times economic costs and interest at the
rate of 21% is clearly provided in the agreement, itself and
as such, the aforesaid matters were not liable to be referred
to the Arbitrator and reference in this regard was beyond
the scope of arbitration clauses and the proceedings before
the Arbitrator were clearly liable to be terminated on the
short ground alone. In such circumstances, neither the
Managing Director had any authority to refer aforesaid
dispute to the Arbitrator, nor the Arbitrator had any
jurisdiction to continue with the proceedings under any
circumstances. The observation of the learned Additional
District Judge at page 13 of the judgment that the claim with
regard to the economic cost and interest was liable to be
decided by the Arbitrator and the dispute is not frivolous, is
not based on the appreciation of Clause 18 read with
Clauses 5 and 6 of the agreement but he has
misinterpreted these clauses and had failed to appreciate
the same properly and as such, has misdirected himself.
Consequently, the findings of the Additional District Judge
on this score cannot be sustained.”
The Special Leave Petition filed against the aforesaid judgment was dismissed.
This Court, vide order dated 28-07-2009, while deciding FAO No.
F.A.O No.2954 of 2006 5
3521 of 2007 titled as District Food and Supplies, Controller, Moga vs. M/s
Aggarwal Rice Mlls, Baghapurana, Distt. Moga, disposed of a bunch of similar
appeals, by relying on the judgments of Hon’ble the Apex Court, rendered in the
case of `Food Corporation of India v. Surendra, Devendra and Mahendra
Transport Co.’ , The Punjab Law Reporter Vol. CXXXIII (2003-1) 843 and
`Shree Krishna Rice Mills v. The Punjab State Co-op Supply and Marketing
Federation Ltd.’, (supra).
Learned counsel for the respondents, however, does not dispute
that the same is also covered by the above judgments.
Accordingly, the appeal is allowed and the order dated
15-12-2005 passed by District Judge, Faridkot, vide which, the objections
of the appellant against the award dated 18-11-2004, were dismissed, is
set aside. The Managing Director is at liberty to recall the record of the
arbitration proceedings and proceed with the matter, in accordance with
law.
(NIRMALJIT KAUR)
03.09.2009 JUDGE
gurpreet