JUDGMENT
Vikramajit Sen, J.
1. This Appeal is directed against the Judgment of the learned Single Judge dated 28.11.2005 dismissing the Objections filed by the Appellant under Section 34 read with Section 16(6), 28(1)(a) and 31(3) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’ for short) for setting aside the Arbitral Award dated 5.12.2002 passed by the Sole Arbitrator. The learned Single Judge has recorded the argument of the Appellant, predicated on Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. , that the Award is patently illegal and, therefore, deserves to be set aside. The learned Single Judge has also noted that it was a detailed and reasoned Award that was under challenge. The Petitioner’s attempt to take the learned Single Judge through the complete records in an effort to reappraise the material including the evidence on the record of the Arbitral Tribunal was rejected, as being clearly impermissible in view of the provisions of Section 34 of the Act. The scope of Inquiry before us is even more restricted and limited than before the Court dealing with an action under Section 34 of the Act.
2. Learned Counsel for the Appellant has relied on Hindustan Zinc Ltd. v. Friends Coal Carbonisation where their Lordships observed that the Supreme Court had made it clear in Saw Pipes Ltd. that it was open to the Court to consider whether an Award is contrary to the specific terms of contract since the Award would then be subject to interference on the ground that it was patently illegal and hence opposed to the public policy of India.
3. Learned Counsel for the Appellant has also drawn our attention to paragraph 59 of Mcdermott International Inc. v. Burn Standard Co. Ltd. 2006 (2) R.A.J. 661 (SC) which speaks of reasons being the link between the material on which certain conclusions are based. We are satisfied that the Award as well as the Judgment of the learned Single Judge do not suffer from this vice and are, therefore, unable to appreciate the relevance of Mcdermott.
4. Learned Counsel for the Respondent relied on Bharat Heavy Electricals Ltd. v. Globe Hi Fabs Ltd. that case it was contended that there was a specific bar in the contract against payment of interest to the contractor in view of Clause 3.3 which stated that – “no interest shall be payable by the employer on earnest money, security deposit or any money due to the contractor by the employer”. The Division Bench nevertheless held that the Award granting the interest to the Respondent was not without jurisdiction and the Award was not liable to be set aside on that ground. Our learned Brothers held that a contract did not debar payment of interest illegally withheld by the employer after it became due.
5. The Arbitral Tribunal as well as the Court cannot ignore the provisions of Section 28(3) of the Act which enjoins the Arbitral Tribunal to decide disputes before it in accordance with the terms of the contract, and while doing so to take into account the usages of the trade applicable to the transaction. “It is beyond any cavil that a Bank Guarantee must be construed on its own terms. It is considered to be a separate transaction.” See State Bank of India v. Mula Sahakari Sakhar Karkhana Ltd. . The contention of learned Counsel for the Appellant is that it was illegal to invoke the Bank Guarantee amounting to Rs. 5 lacs in respect of dues of a third party. A vain endeavor has been made before us, as before both forums below, that the subject engagement was one of a Performance Guarantee. We must record that the learned Single Judge, while issuing Notice, had restricted it to Claim Nos.4 and 5 which concerned the Bank Guarantee of Rs. 5 lacs and the Security Deposit of Rs. 1.5 Lacs. Before us learned Counsel for the Appellant stated that he had no quarrel with the Orders pertaining to the Security Deposit of Rs. 1.5 lacs.
6. The document at the fulcrum of the dispute is captioned “Proforma of Bank Guarantee in lieu of Security Deposit for Satisfactory Completion of Contract” whereby the Punjab National Bank had undertaken to pay the Respondent “an amount not exceeding Rs. five lakhs against any loss or damage caused to or suffered or would be caused to or suffered by the Corporation(Respondent before us) by reason of any breach by the Supplier/Contractor (Appellant before us) of any of the terms and conditions contained in the Purchase Order Contract”. It, therefore, becomes immediately appropriate and necessary to refer to the Terms of the Purchase Order Contract. A Bank Guarantee is a separate transaction but where it specifically refers to another contract that document would become an integral part of the Bank Guarantee. It would thus not be correct to rely solely on the short and concise enunciation of the law in Mula Sahakari Sakhar Karkhana Ltd. The Purchase Order Contract inter alia contains the following Clauses:
1.7 The Corporation shall have a lien over all or any money that may become due and payable to the contractor under this contract or any other contract or transaction of any other nature either all alone or jointly with others and unless the contractor pays and clears the claim of the Corporation immediately on demand the Corporation shall be entitled at all times to deduct, the said sum of debt due by the contractor from any money/security deposit which may have become due or become payable to the contractor under this contract or any other contract or transaction whatsoever between the contractor and the Corporation, without prejudice and in addition to other rights of the Corporation to recover the amount of any such claim by other remedies legally available.
5.0 SECURITY DEPOSIT
For due fulfilllment of his obligations under this agreement, the Handling Agent shall furnish within 15 days from award of work a security deposit @ Rs. 1.5 per M.T. of quality expected to be handled per annum subject to a minimum amount of Rs. 50,000/- by Demand draft drawn in favor of Cement Corpn. of India Ltd. In addition for storage and safe custody of stock handling agent shall furnish a Bank Guarantee amounting to Rs. 5 Lacs (Rupees five lacs only) for BG and 3 Lacs for MG and 1 lac for road only for each dump to be served. The Corporation shall have right of appropriate the said amount so deposited as security deposit either in whole or in parts and the amount of bills payable to the handling Agent to liquidate any claim of the Corporation against Handling Agent or as penalty for breach of the terms, conditions and covenants of this agreement by the handling agent. The security deposit will be refunded to the Handling Agent after termination of the agreement and after final adjustment of accounts between the parties. Any sum of money due and payable to the Handling Agent (including security deposit returnable to him) under the contract may be appropriated by the Corporation and set off against any claim as the Corporation.
7. It is not in dispute that the Bank Guarantee has been invoked in connection with the dues of a firm other than the Appellant at whose instance the Bank Guarantee was issued. What should not be ignored is that the Appellant is a partnership concern comprising a father and his sons, all of whom are also transacting business through their other partnership firms. It is trite that unlike a company incorporated under the Companies Act, a partnership concern is not a distinct legal entity. Akin to so-called sole proprietorship concerns it is only a convenience by which more than one individuals are permitted to jointly transact business with third parties in an assumed name. It is, therefore, irrelevant whether it is one firm or the other which is indebted to a particular party. If the partners are common the liability of any individual can be recovered from his assets in a firm of which he is a partner. Therefore, even if strictest of interpretations is imparted to the Bank Guarantee, the liability of the individual partners, so far as they may be trading through a firm, can be recovered from another firm in which they are partners by virtue of the clauses in the Purchase Order Contract which finds specific mention in the Bank Guarantee itself. In doing so, law looks towards the individual concerned and not the firm through which he may be trading. In the present case, the situation is hopeless for the Appellants since all the three firms were lifting cement from the Respondent. All these legal complexities have been kept in view not only by the learned Single Judge but also by the Sole Arbitrator.
8. We find no infirmity in the impugned Order. The Appeal is accordingly dismissed with costs of Rs. 5,000/-.