JUDGMENT
Madan B. Lokur, J.
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1. The Petitioner has filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) challenging an Award dated 2nd March, 2001 passed by a retired Judge of this Court.
2. The broad facts are that the Petitioners and the Claimant entered into a contract for the supply of 28892 meters cube of Malaysian Balau timber having a certain level of strength and other properties like density, maximum crushing strength, etc. for use as sleepers in railway tracks.
3. According to the Claimant, on receipt of the timber from Malaysia and at a pre-dispatch stage to the sub-contractors/associates of the Claimant, the timber was required to be inspected by officers of the Petitioners and if it met the contractual requirements, it was embossed with a hammer mark and a property mark.
4. It appears that in April, 1990 the Petitioners had drawn representative samples and had sent the same to the laboratory of the Government of Andhra Pradesh, Department of Industries, Vishakhapatnam to ascertain the species and origin of the timber and to carry out other related tests. The report of the laboratory was admittedly in favor of the Claimant.
5. The Petitioners paid 95% of the amount due to the Claimant but 5% bills were withheld on the allegation that the inspection memos were obtained by the Claimant in connivance with corrupt railway officials and even the laboratory of the Government of Andhra Pradesh had given a procured report.
6. It further appears that an Expert Committee was appointed by the Petitioners to ascertain whether the sleepers were as per the specifications mentioned in the contract. The Expert Committee associated the Claimant and gave its report in July, 1993, which was again in favor of the Claimant.
7. Notwithstanding this, the Petitioners took some samples and sent them to the Forest Research Institute, Dehradun and that Institute gave three reports. The first report was not in favor of the Claimant but it was mentioned therein that the samples were being sent to another department for ascertaining the strength of the wood and as and when the report from the other department is received, it would be forwarded. However, no such subsequent report was placed before the learned Arbitrator. The second report was with reference to 19 samples out of which 11 were found to be of Balau timber, 7 were found to be of Kempas and one was found to be Gurjan, which species of timber was not suitable for railway tracks. The third report pertained to only two samples. These were, however, not sent for identification of the species, but for evaluation of the composite sleeper index and the report was said to be only tentative.
8. On these facts, the learned Arbitrator framed issues and after recording evidence and hearing the parties, he gave an Award in favor of the Claimant, which has been challenged by the Petitioners under Section 34 of the Act.
9. Learned Counsel for the Petitioners urged four contentions. It was firstly contended that the appointment of the learned Arbitrator was bad in law since the learned Arbitrator ought to have been appointed in terms of the contract.
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10. This contention is rejected for three reasons. First of all, the learned Arbitrator was appointed as a result of an order dated 25th January, 2000 passed by this Court in AA No. 1/1999 (M/s. M.P. Export Corporation v. Union of India and Anr.). The order reads as follows: –
Under an Agreement between the parties there arose certain disputes which were liable to be referred to the Arbitrator. In spite of notice dated 4/5/1998 given by the petitioner to the respondent calling upon them to appoint an Arbitrator the respondent did not appoint an Arbitrator and consequently the present petition was filed under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Learned Counsel for the respondent does not dispute the existence of the arbitration agreement nor does he dispute the existence of disputes between the parties. The only contention raised by the learned Counsel for the respondents is that under the agreement it was the discretion of the respondents to appoint an Arbitrator who should have been a Gazetted Officer.
In my opinion, after the respondent has failed to appoint an Arbitrator in spite of receipt of notice under Section 11 of the Arbitration and Conciliation Act, if forfeits the right to appoint an Arbitrator and it is only the Court which can appoint an Arbitrator. Moreover, under another agreement between the same parties this Court had appointed Arbitrator. In FAO (OS) 332/96 (Union of India v. Madhya Pradesh Export Corporation Limited) this Court had appointed Justice Jaspal Singh (Retd.) as the Arbitrator to decide the disputes between the parties.
In my opinion, as another matter between the same parties has already been referred for arbitration to Justice Jaspal Singh (Retd.) it will be appropriate that this matter is also referred to him for arbitration. I accordingly appoint Justice Jaspal Singh (Retd.) as the Arbitrator to decide the disputes which have arisen between the parties under Agreement No. N- 88/IK/III/MSW/9 dated 23rd December, 1988/10th January, 1989. In the circumstances of the case the parties are left to bear their own costs. A copy of this order be given dusty to the learned Counsel for the parties.
11. The Petitioner was entitled to challenge this order but did not do so. On the contrary, it seems that the Petitioner accepted this order without demur. Secondly, the Petitioner was entitled to challenge the jurisdiction of the arbitral tribunal in terms of Section 16 of the Act but no such objection was raised before the learned Arbitrator. Finally, in the petition filed under Section 34 of the Act, there is not a single ground taken to the effect that the appointment of the learned Arbitrator is bad in law. The Petitioner has taken seven grounds (one of them being without any number) and there is nothing in any of these grounds to suggest that the appointment of the learned Arbitrator was contrary to the contract or otherwise bad in law. Under the circumstances, I am not inclined to entertain an oral objection on behalf of the Petitioner.
12. The second contention of learned Counsel for the Petitioner was that the Central Bureau of Investigation (CBI) has filed a chargesheet against some of the employees of the railways and the Government of Andhra Pradesh who gave the clearances in favor of the Claimant. It was submitted that because cases Page 2212 are pending against the so-called corrupt officials, the learned Arbitrator should not have proceeded in the matter.
13. The Award shows that the learned Arbitrator was aware of the fact that the matter was pending with the CBI at the relevant time and was careful enough to refrain from saying anything in the matter, and deciding the proceedings before him on the basis of the available evidence. No fault can be found in the approach adopted by the learned Arbitrator. I am of the view that there was no reason to stay the arbitration proceedings merely because some criminal case is going on and which may take several years to get decided. There is nothing in law to support the view canvassed by learned Counsel for the Petitioners.
14. The third contention of learned Counsel for the Petitioners was that the learned Arbitrator had failed to properly take into consideration the reports of the Forest Research Institute. There is no substance even in this contention. The learned Arbitrator has noted in the Award as follows: –
With regard to all the three Reports what must be remembered is that no person who took these samples has been examined. The Reports also do not show as to how and by whom the samples were picked up and from where and in what manner. The Railways have placed on the record three covering letters of May 24, 1994 (page 60), June 1, 1994 (page 62) and of September, 1995. In none of these covering letters it is mentioned that the samples were taken out of the Sleepers supplied by the Claimant Corporation. They also do not make any reference to any hammer and property mark.
It was further stated by the Arbitrator as follows: –
This is not all. The three Reports placed on the record do not specify what tests were carried out, by whom and what was the data collected. The Reports also do not indicate that the person/persons who carried out the tests were even qualified to be called as experts. What is more, the so-called expert has not even been examined. It may be noted that when earlier an Expert Committee was appointed under the Chairmanship of Mr. Wazir Prasad, due notice was given to the Claimant Corporation to joint the Committee and to send a representative. Why no such notice was sent to the Claimant Corporation when the samples were being lifted for dispatch to the Forest Research Institute.
15. While deciding a petition under Section 34 of the Act, it is not possible for me to substitute my view for that of the learned Arbitrator. In any case, the learned Arbitrator has given cogent reasons for arriving at the conclusion that he did.
16. The fourth contention urged by learned Counsel for the Petitioners was that the Claimant is not entitled to any interest and that the Petitioners were entitled to withhold the amount due to the Claimant.
17. In so far as this is concerned, interest is not imposed by way of a penalty but is normal accretion on the capital. The Petitioners may have been entitled to withhold the payment but when it becomes due to the Claimant it has to be paid with interest, which the Claimant would have earned had it been given the due amount at the appropriate time. The award of interest @ 12% by the learned Arbitrator is normal and reasonable.
18. Consequently, the impugned objections are dismissed. The Petitioners will pay to the Claimant costs of Rs. 5,000/- within a period of four weeks from today.