ORDER
S. Rajeswaran, J.
1. O.P.Nos.499/2002 has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) to set aside the award dated 17.5.2002 passed by the 2nd respondent/arbitrator insofar as it is against the petitioner.
2. O.P. No. 558/2002 has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 12.5.2000 passed by the 2nd respondent/arbitrator insofar as it is against the petitioner.
3. As the issue involved in both the O.Ps. is one and the same and the facts are similar I am passing a common order.
4. In response to a tender floated by the 1st respondent corporation for the purchase of Masoor Dhall (Red Lentil) Split/Malka to be delivered at Ex-TNCSC Godown in Chennai, both the petitioners participated and quoted their rates. The petitioner in O.P. No. 499/2002 offered to supply 10,000 tonnes at the rate of Rs. 19,190/- per M.T. The petitioners in O.P. No. 558/2002 offered to supply 10,000 tonnes of Masoor Dhall at the rare of Rs. 19,653/- per M.T. After succeeding in the tender, they (both the petitioners) paid a security deposit amount of Rs. 37,38,000/- including the BMD amount of Rs. 1,00,000/- as per tender condition No. 21 and executed an agreement on 18.6.1998. On execution of the agreement, the 1st respondent corporation issued orders for the supply of 10,000 MTS on condition that 5000 tonnes should be completed before 10.7.1998 and the remaining 5000 tonnes should be completed before 9.8.1998, one month thereafter. Both the petitioners were able to supply only 19,790 MTS of Masoor Dhall at the rate of Rs. 19,190/- and Rs. 19,655/- respectively during the first spell of the supply schedule. Show cause notice was issued to the petitioners and by reply the petitioners informed the corporation that the rates quoted in the tender were based on the prices in April 1998 and the prices have now gone up by over Rs. 4,000/- per MT due to low yield in the procurement areas in U.P. and M.P. States. They further informed the 1st respondent corporation that it they supplied the entire quantity at the rate quoted in the tender, they would incur a loss of Rs. 4,00,00,000/- and requested the 1st respondent corporation for the upward revision of price at Rs. 23,000/- per M.T. The 1st respondent corporation was further informed that there was a grave error committed by them by assessing the price escalation and they requested for extension of Supply period by 90 days. But the 1st respondent corporation terminated the contract forfeiting the security deposit and Rs. 3,79,770/- being the amount unpaid for supplies made in the case of O.P. No. 499/2002 and terminated the contract forfeiting the security deposit and Rs. 5,53,764/- being the amount unpaid for the supplies made in the case of O.P. No. 553/2002. After termination of the contract, the 1st respondent corporation entered into an agreement with different suppliers for the purchase of Masoor Dhall at different rates and initiated arbitration proceedings. The petitioners resisted the claim before the 2nd respondent arbitrator and they also filed a counter claim for making refund of security deposit and the amount payable to them for the supply made. The 2nd respondent arbitrator rejected the counter claim of the petitioners and passed an award against the petitioners, in O.P. No. 499/2002 for a sum of Rs. 2,85,42,534/- and passed an award against the petitioner in O.P. No. 558/2002 for a sum of Rs. 2,46/19,520,98. Challenging these awards, these O.Ps. have been filed by the petitioners under Section 34 of the Act, 1996.
5. The following grounds have been raised by the petitioners in both the petitions:
(1) The 2nd respondent arbitrator erroneously considered and came to the conclusion regarding Ex.R6. Ex.R6 reveals that there was low yielding of Dhalls due to weather conditions. The 2nd respondent arbitrator erroneously concluded based on a report dated 17.11.1998 in the economic times, that poor yield was after the expiry of the contract period and hence it cannot be considered.
(2) The 2nd respondent arbitrator failed to consider that there was low yielding of Masoor Dhall in Madhyapradesh and Uterpradesh States and also there was Mandi Tax disputes in those States.
(3) The 2nd respondent arbitrator erroneously concluded that the impact of Pokharan nuclear blast was an inevitable reason beyond the control of the petitioners herein which made the petitioners unable to supply the Dhall as per the schedule.
(4) The 2nd respondent arbitrator failed to consider Ex.R5 which proves the petitioners’ bonafides for taking steps to import Masoor Dhall from foreign countries.
(5) The 2nd respondent arbitrator failed to consider the clause 14 of the agreement which provides power to the Managing Director to modify the supply rate of Masoor Dhall to extend the same.
(6) The 2nd respondent arbitrator failed to consider that the entire amount of Masoor Dhall has to be supplied on or before 9.8.1998, but the 1st respondent corporation has terminated the agreement on 5.8.1998, prior to expiry of the last date for supply of the Masoor Dhall.
(7) The 2nd respondent arbitrator failed to consider the fact that after termination of contract, the 1st respondent corporation, purchased the Masoor Dhall from various agencies at the rate of Rs. 23,000/- per MT which shows the request of the petitioners for revision in price is a bonafide one.
6. Heard the learned Counsel for the petitioners and the learned Counsel for the 1st respondent. I have also gone through the documents filed in support of their submissions and the judgments referred to by them.
7. The learned Counsel for the petitioners submitted that the 2nd respondent arbitrator failed to advert to the fact that there was low procurement of the Dhall which is totally an unexplained circumstance and therefore the upward revision of the price sought for by the petitioners should have been accepted by the corporation in invoking clause 14(i) of the agreement dated 18.6.1998 instead of terminating the contract under Clause 14(ii) of the agreement. The learned Counsel further contended that the last date for the supply of entire 10,000 tonnes of Masoor Dhall is 9.8.1998, but the contract was terminated on 5.8.1998 and therefore the contract itself was not validly terminated. He further submitted that the 2nd respondent arbitrator has failed to consider the relevant documents to come to a correct conclusion and the award is liable to be set aside for these reasons. He relied on the following judgment’s in support of his contentions:
(1) 51 MLJ 663 (Sannidhi Gundayya v. Subbayya)
(2) AIR 1925 Mad. 971 (Chengravelu and Sons v. Venkanna and Sons)
(3) AIR 1952 SC 8 (Ganga Saran v. Firm Ram Charan)
(4) (Gomathinayagam Pillai v. Palaniswami Nadar)
(5) 1976(II) MLJ 39 (Bansilal Forma v. Thadava Co-op.Agrl. and Indus. Socy. Ltd.)
(6) (Mohd. Rajab v. State of J.&K.)
(7) (Hind Constn. Contractors v. State of Maharashtra)
(8) (Chand Rani v. Kamal Rani)
(9) (Easun Engineering Co. Ltd. v. Fertilisers and Chemicals Travancore Ltd.)
(10) (K.P. Poulose v. State of Kerala)
(11) (Trustees of the Fort of Madras v. Engg. Constructions Corporation Ltd.)
(12) (ONGC LTD. v. Saw Pipes Ltd.)
(13) (Chairman and MD, NTPC Ltd. v. Reshmi Constructions)
(14) (Union of India v. Banwari Lal & Sons (P) Ltd.
(15) (Panchu Gopal Bose v. Board of Trustees for Port of Calcutta)
(16) (Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss S. Gem Mfg. Co. Ltd.)
(17) AIR (36) 1949 Federal Court , 211 (Jainarain v. Surajmull)
(18) AIR 1958 Kerala 195 (M. Ahamed Koya v. E. Murugesa Son & Co.)
(19) (Maula Bux v. Union of India)
(20) (Fertilizer Corporation Of India Ltd. v. Rasananda Pradhan).
8. Per contra, the learned Counsel for the 1st respondent corporation submitted that the award has been properly passed after considering that the petitioners wriggled out of the contract after pressing for an upward revision in the price quoted by them in the tender. The entire action of the corporation is well within the four corners of the agreement and the award has been passed considering all the relevant facts and circumstances. The petitioners, according to the learned Counsel have not made out any grounds as set out under the provisions of Section 34 of the Act, 1996 and their attempt is to argue the matter as if it was an appeal cannot be permitted under Section 34 of the Act, 1996.
9. The facts are not in dispute. The petitioners participated in the tender for the supply of Masoor Dhall and their tenders were accepted and supply orders were issued by the corporation, after entering into an agreement on 18.6.1998.
10. As per Clause 14(i) of the agreement, the petitioners in O.P. No. 499/2002 agreed to supply 10,000 MTS of Masoor Dhall at the rate of Rs. 19,190/- and the petitioners in O.P. No. 558/2002 agreed to supply 10,000 MTS of Masoor Dhall at the rate of Rs. 19,655/-. Clause 6 of the agreement deals with the period of supply, according to which, both the petitioners agreed to complete the supply of the agreed quantity of dhall strictly within the period as specified below under any circumstances.
i) 5,000 tonnes should be completed before 10.7.93.
ii)5,000 tonnes should be completed before 9.8.98. Clause 6(v) makes it very clear that the petitioner would not be given any extension of time beyond the above specified date and to avoid last minute rush and uncertainty in the supply, the sellers would arrange to supply the entire quantity of dhall in various spells as given in the agreement by regulating their supply and complete the same within the last date by effecting delivery proportionately.
11. Under Clause 8 of the agreement, the security deposit shall be liable to forfeiture for failure to supply the Masoor Dhall in terms of the deal and or if the supplier resile from or modifies his offer and or to commit default of the terms of any deal or to cover any loss suffered by the corporation due to the act of commission or omission by the supplier.
12. It is reiterated in Clause 10(i) of the agreement that supply of dhall should be completed at any cost within the period stipulated in condition 6(11) of the agreement. In the event of failure by the supplier, it is open to the first respondent corporation to purchase from any other source at the prevailing market rates at the risk and responsibility of the supplier and to claim any loss suffered by the 1st respondent corporation from the supplier besides forfeiting the security deposit. In this clause the supplier has specifically agreed to make good the loss and allow the corporation to forfeit the security deposit if the supplier fails to deliver the agreed quantity of dhall as per the time schedule. Under Clause 14(i) the Managing Director of the corporation reserves his right to waive or to modify any of the terms and conditions of the termination with the written consent of the seller. Under clause 14(ii), the Managing Director of the corporation has the right to terminate the contract at any time during the currency of the contract for the reasons stated in that clause.
13. It is not disputed that both the petitioners were not able to adhere to the 1st schedule itself i.e., supplying 5,000 MTS of Masoor Dhall on or before 10.7.1998. They were able to supply only a meagre quantity. Both the petitioners informed the corporation that they committed a grave error while assessing the price fluctuation and sought for an upward revision of the price at Rs. 23,000/- per MT and also for extension of time for the supplies by 90 days. It was also informed by them that if they have supplied the entire quantity at the rate quoted by them in the tender, they would incur a huge loss of Rs. 4,00,00,000/-. They cited the low yield in the procurement areas in M.P. and U.P. States as a reason for a sudden increase in the price. They relied on Clause 14(i) of the contract to seek the above modification. The 1st respondent corporation was willing to extend the time provided both the petitioners supply the dhall at the contractual rate. As the petitioners did not come forward to comply with the supply at the rate quoted by them, the contract was terminated and further purchases were made from other sources at the risk of the petitioners. Thereafter, the 1st respondent corporation filed a claim before the 2nd respondent arbitrator.
14. Before the 2nd respondent arbitrator it was contended by the petitioners that the rise in price of Masoor Dhall was abnormal and terminating the contract even before the last date of the supply of the entire quantity of dhall was illegal.
15. Insofar as the rise in price is concerned, the 2nd respondent arbitrator after going through the evidence let in by the petitioners, before her came to a conclusion that these contentions were not at all acceptable. She further held that both the petitioners violated Clause 6 of the agreement blatantly.
16. When the 2nd respondent arbitrator has rejected the claim of the petitioners on the basis of evidence let in by them to prove that the rise in price was abnormal, this Court under Section 34 of the Act, 1996 cannot re-evaluate and re-appreciate the same to come to a different conclusion even if it is possible.
17. Both the parties admit that they could not supply the agreed quantities within the stipulated time but they only pleaded that the unexpected rice in the price of the dhall was unforeseen and therefore the 1st respondent corporation should have accepted the increase of the price of Rs. 23,000/-_per MT as requested by them by invoking Clause 14(i) of the agreement. Clause 14(i) of the agreement gives power to the Managing Director of the corporation to waive or modify any of the terms and conditions of the contract, but it does not mean that the Managing Director should do it at the instance of the suppliers. It is only an enabling provision to modify or waive the terms and conditions of all the parties agree to do so.
18. Insofar as the next contention of the petitioners herein is concerned with regard to the termination of the contract by the corporation even before the last date of the supply of entire quantity, the 2nd respondent arbitrator after going through Clause 14(ii) of the agreement, has rightly held that the agreement can be terminated by the Managing Director at any time during the currency of the agreement, if it is proved that the performance of the supplier is detrimental or not satisfactory, etc.
19. I have also gone through Clause 14(ii) of the agreement and I am convinced that the contract may be terminated at any time during the currency of the contract under the Clause. I do not accept the contention of the learned Counsel for the petitioners that the contract can be terminted only after 9.8.1998, i.e., the last date for completing the supply of the second batch of supply of dhall.
20. As rightly contended by the learned Counsel for the 1st respondent corporation, the award has been passed on the basis of evidence let in keeping in mind the relevant clauses contained in the agreement and no grounds as set out in the provisions of Section 34 of the Act, 1996 are available to assail the award.
21. Now let me consider the decisions relied on by the learned Counsel for the petitioners.
22. In 51 M.L.J. 663 (supra), a Division Bench of this Court held as follows:
It has been found that the defendant used his best endeavours to secure the waggons but failed. If we regard the obligation to deliver the bags of rice as absolute in spite of the waggon restrictions and. priority rules enforced by Government, it would imply that the seller had undertaken to perform a contract contrary to the rules enforced by the Government and hence illegal. The argument that the parties should have provided for the failure of performance in the contract itself and since that was not so done, the defaulting party should suffer cannot apply in a case like the present where the parties knew that owing to the restrictions introduced by Government rules, shortage of waggons may occur and performance for that reason may be rendered impossible. As pointed out by Viscount Reading, C.J. in In re, Anglo-Russian Merchant Traders, Ltd. and John Batt and Co. (London) Ltd., (1917) II KB 679, so, in this case, we cannot see “why the law should imply an absolute obligation to do that which the law forbids”. The learned vakil for the appellant was not able to distinguish the present, case from the case in In re, Anglo-Russian Merchant Traders, Ltd. and John Batt and Co. (London) Ltd. (1917) II KB 679. In our opinion the reasonable view of the contract in this case is that the seller agreed to supply the promised number of bags of rice if after using his best endeavours he was able to secure the necessary number of waggons. The obligation to perform the contract was not therefore absolute, but impliedly conditional. In this view we set aside the decision of the learned Judge and restore the decree of the Trial Court. The appellant will get the costs in the District Court and in the High Court
23. In the above case, the defendant entered into a contract with the plaintiff for delivery of certain bags of rice and the delivery was by railway waggons. At that time as a war measure the Government imposed waggon restrictions and priority certificates all over the Presidency and the existence of those restrictions was well known to all the parties. Owing to the shortage of waggons on account of the enforcement of the rules the defendant was not able to perform its contract. In a suit for damages for breach of contract, the defendant pleaded impossibility of performance as a defence and the Division Bench held that the obligation to perform the contract was not absolute but conditional and as the defendant failed to secure the waggons in spire of his best endeavour he was not liable.
24. The facts in the above decision are entirely different from the facts on hand.
25. In 1925 Madras 971 (supra), a Division Bench of this Court held that where the parties have agreed that the performance of their respective promises is to be simultaneous, one party cannot sue the other for damages for breach of contract unless he alleges and proves that he was ready and willing to perform his part of the contract at the appropriate time. This court further held that in order to be considered to be ready and willing to deliver, a seller need not be in physical possession of the goods.
26. I do not think that this decision is helpful to the petitioners as it is not obligatory on the part of the Managing Director of the 1st respondent corporation to modify the price at the instance of the petitioners. This Clause, i.e., 14(i) of the agreement, is only an enabling clause to modify the terms of the contract.
27. In AIR 39 (1952) S.C. 9 (supra), the Hon’ble Supreme Court held that when the defendant having admitted in his evidence that he was in a position to supply the contracted goods at that time when the breach of contract took place, it could not be held that the performance of the contract had become impossible unless he proved that the failure on his part was due to circumstances beyond his control and consequently the doctrine of frustration could not be availed when the non-performance of the contract was attributable to his own default.
28. This decision is also not helpful to the petitioners’ case as the petitioners failed to establish before the 2nd respondent arbitrator that their failure to deliver the quantity of dhall was due to circumstances beyond their control.
29. In AIR 1967 S.C. 868 (supra), the Hon’ble Supreme Court held that fixation of period within which contract is to be performed does not make stipulation as the time is the essence of the contract. In the case on hand, extension of time is not at all an issue as 1st respondent corporation was willing to extend the time provided the petitioners supplied the goods at the price quoted by them in the tender.
30. In 1976(11) M.L.J. 39 (supra), a Division Bench of this Court held as follows:
22. Before quantifying the damage to which the appellant in A.S. No. 724 of 1969 would be entitled to, we would like to touch upon the law of frustration as in force in our country. Law is well settled that the doctrine of frustration takes into its fold not only cases of physical or literal impossibility, but also circumstances which make it impossible and illegal on the part of one of the contracting parties to perform the contract in terms agreed upon. There may be circumstances where Court may be inclined to opine that a case of literal impossibility has not been established. But such literal impossibility by itself is not the sole ground for accepting the non-performance of the contract on the ground of doctrine of frustration. If in a given case there is acceptable material to show that the events supervening after the formation of the contract have shaken the very root of it and the foundation of the contract having thus been shaken it would be impracticable to accept performance of the contract by a responsible and prudent person; then only Courts will excuse the performance. The conclusion must be arrived at by sitting in the arm chair of prudence and practical wisdom. A priori and theoretical consideration ought not to weigh while deciding whether a contract has become frustrated or not. The decision should be the dictate of common sense, practical wisdom and normal commercial experience. Judged by these standards, we have to accept the case of the Society that on and after 17th April, 1963 contracts as a whole have become frustrated in so far as their, undischarged and unperformed portion are concerned and therefore the claim of the plaintiff for damages for alleged nonperformance is opposed to Section 56 of the Contract Act. Presumably because of this well-established principle Mr. P.V. Subramaniam would not pursue this aspect before us
31. The petitioners cannot rely on this decision in support of his case because the petitioners were not able to establish before the 2nd respondent arbitrator with acceptable material to show that the events supervening after formation of the contract have shaken the very root of it and the foundation of the contract having thus been shaken it would be impracticable to accept performance of the contract.
32. In AIR 1974 S.C. 887 (supra), the Hon’ble Supreme Court held as follows:
7. In fact, the appellant has examined 8 witnesses to show that, after the notification, the price of milk went up and they supplied milk to the appellant at Rs. 23.50 per maund. The witnesses examined on behalf of the respondents have also stated that after the control of the price of milk by the notification, the price of the milk went up in the market. Thus, the evidence adduced on behalf of the respondents also shows that the price of milk went up in the market after the notification. As already stated, the positive evidence of PWs. 1 to 3 is to the effect that the appellant himself purchased milk from them at the rate of Rs. 23,50 per maund after the aforesaid notification.
The relevant clause in the agreement runs as follows:
The contractor shall be paid at the rates against each of the article as below for the supplies to be made by him;
Approved rate/quantity required 4200 maunds; Rs. 15.90 (Rupees fifteen & ninety naya paise) Gr. No. II S. No. 3 Name of articles Milk Cost : Rs. 66780.00 Provided if any of the articles is controlled during the period of operation of this agreement the contractor shall be paid at controlled rates for the supplies of that article made by him.
The mere fact that a commodity could be sold in the market below the price fixed by a notification fixing the minimum price by government would not indicate that there was no control. Control of any of the articles contemplated by the parties under the agreement was a control of the price of the articles. We do not think that the parties could have visualized any other control in the context of “the contractor being paid at the controlled rates.
8. We think that fixation of the maximum price at which an article shall be sold is the controlled rate for the supply of that article within the meaning of the agreement. The fact that sellers are free to sell the article at a price lower than the maximum fixed by the government would not show that there was no control of the commodity. We do not understand how an article can be controlled under Section 3 of the Hoarding and Profiteering Prevention Ordinance, except by a notification fixing the maximum price for the sale of the article. We think chat the appellant’s case is covered by the express term of the agreement and he was entitled to get the amount as decreed by the trial Court.
9. We, therefore, allow the appeal and set aside the decree passed by the Division Bench and restore the decree passed by the learned single Judge. As the respondent has not appeared in this Court, we make no order as to costs.
33. As seen above, the facts in the above case are different and easily distinguishable.
34. In AIR 197 9 S.C. 720 (supra), the Hon’ble Supreme Court held that the question whether or not time was the (Sic) of the contract would essentially be a question of (Sic) intention of the parties to be gathered from the terms the contract. Where time has not been made as the (Sic) of the contract or, by reason of waiver, a reasonable time may foe fixed for the completion of the (Sic).
35. This decision is also not applicable to the facts the present case as the 1st respondent corporation was (Sic) much willing to consider the request of the petitioners for extension of time for a reasonable period provided they agree to make supplies of entire quantity of Masoor Dhall at the price quoted by them in the tender.
36. In AIR 1993 S.C. 1742 (supra), the Hon’ble Supreme Court held that in the case of sale of immovable property there is no presumption as to time being the essence of the contract.
37. This judgment is also not helping the case of the petitioners for the reasons given by me earlier.
38. In AIR 1991 Mad. 158 (supra), this Court held that where after the contract for the supply of transformers there was subsequently 400% rise in the price of transformer oil due to the war. There was frustration of contract and war condition was an untoward event or change of circumstances which totally upset the very foundation upon which parties rested their bargain.
39. In the case on hand there was not a subsequent 400% of rise in the price of Masdoor Dhall due to war. Even the Pokhran nuclear bomb that took place in May 1958 which was cited as a reason by the petitioners for not importing the dhall from other countries, took place in May 1998. Whereas the agreement was entered into on 18.6.98, i.e., after the Pokhran war.
40. In AIR (36) 1949 Federal Court 211 (supra),it was held as follows:
12. If after a .contract is concluded and its terms settled further negotiations are started with regard to new matters, that would not prevent full effect being given to the contract already existing, unless it is established as a fact that the contract was rescinded or varied with the consent of both the parties treated it as incomplete and inconclusive. Once completed the contract can be got rid of only with the concurrence of both parties….
41. The facts in the above decision are distinguishable and this decision cannot possibly help the petitioners.
42. In AIR 1958 Kerala 195 (supra), a Division Bench of the Kerala High Court held that a party to the contract is not entitled in law to cancel a concluded contract unilaterally and having entered into an agreement it is not open to a party to resile from the same on untenable grounds as he pleases and therefore such a cancellation has no effect in law.
43. This decision is also not helpful to the petitioners as the 1st respondent corporation is well within his right to cancel the contract under Clause 14(ii) of the contract at any time during the currency of the contract if it is proved that the performance of the supplier is detrimental, not satisfactory or erratic, etc, Having signed such an agreement deserving such a right to the Managing Director to terminate the contract at any time during the currency of the contract, it may not be open to the petitioners to contend that the termination of the contract by the 1st respondent before the period of the contract is illegal.
44. In AIR 1970 S.C. 1955 (supra), the Hon’ble Supreme Court held that earnest money is a part of the purchase price when the transaction goes forward it is forfeited when the transaction falls through by reason of the fault or failure of the vendee. Similarly amount deposited by the contractor as security for guaranteeing due performance of the contract for supply of goods cannot be regarded as earnest money.
45. There is no controversy about the sound legal principles as laid down by the Hon’ble Supreme Court in the above decision, but the same is not useful to the petitioners in the facts and circumstances of the case.
46. In AIR 1986 Ori. 18 (supra), the Orissa High Court held as follows:
Where the dispute between the parties is that the contract itself does not subsist either as a result of being substituted by a new contract or by rescission or alteration that dispute cannot be referred to arbitration as the arbitration clause itself would perish if the averment is found to be invalid. In view of the admitted fact that there had been rescission of the contract by both the parties even if the arbitration agreement existed it was no longer available to be acted upon.
47. This decision is also not helpful to the case of the petitioner in view of Clauses 15 and 16 of the agreement, according to which, the 1st respondent corporation is empowered to refer the dispute to the decision of the arbitrator for recovering the losses and damages suffered by them.
48. In AIR 197 5 S.C. 1259 (supra), the Hon’ble Supreme Court held that an arbitrator is guilty of legal misconduct if on the face of the award he arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision.
49. In 1995 (5) SCC 531 (supra), the Hon’ble Supreme Court held that the error apparent on the face of the award contemplated by Section 16(1)(c) as well as Section 30(c) of the Act, 1940 is an error of law apparent on the face of the award and not an error of fact.
50. In 2003 (5) SCC 705 (supra), the Hon’ble Supreme Court held as follows:
74. In the result, it is held that:
(A) (1) the court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:
(i) a party was under some incapacity, or
(ii)the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii)the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not failing within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.
(2) The court may set aside the award:
(i)(a) if composition of the Arbitral Tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act.
ii). if the arbitral procedure was not in accordance with;
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with part I of the Act.
However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate.
(c)If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged:
(a)as provided under Section 13(5); and
(b) Section 16(6) of the Act.
(B)(1) The impugned award requires to be set aside mainly on the grounds:
(i) there is specific stipulation in the agreement that the time and date of delivery of the goods was of the essence of the contract;
(ii) incase of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages;
(iv) on the request of the respondent to extend the time-limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;
(vi) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.
(vii) In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care of by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract:
51. In 2004 (2) SCC 664 (supra), the Hon’ble Supreme Court held that normally an accord and satisfaction by itself would Dot affect the arbitration clause but if the dispute is that the contract itself does not subsist, the question of invoking the arbitration clause may not arise.
52. In 2004 (5) SCC 304 (supra), the Hon’ble Supreme Court held that an award can be set aside when an arbitrator misconducted the proceedings and misconduct refers to legal misconduct which arises if the arbitrator on the face of the award arrives at a decision ignoring material documents The error of law must appear from the award itself.
53. Citing the above decisions, the learned Counsel for the petitioners submitted that the awards passed in both the above petitions are vitiated and are liable to be set aside.
54. I do not accept this contention of the learned Counsel as T am not able to see an error of law on the face of the award nor the 2nd respondent arbitrator is guilty of committing any misconduct as contended by the learned Counsel for the petitioners. The awards in both the petitions have been passed on the basis of the evidence let in, that to, after correctly analysing the clauses contained in the agreement. Therefore I do not find any ground to interfere with the two awards passed by the learned 2nd respondent arbitrator under Section 34 of the Act, 1996.
55. In the result, both the O.Ps. are liable to be dismissed and consequently they are dismissed. No costs. A. No. 3076/2002 is closed.