{"id":16703,"date":"2008-06-30T00:00:00","date_gmt":"2008-06-29T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/in-vs-companies-act-on-30-june-2008"},"modified":"2018-08-16T22:48:14","modified_gmt":"2018-08-16T17:18:14","slug":"in-vs-companies-act-on-30-june-2008","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/in-vs-companies-act-on-30-june-2008","title":{"rendered":"In vs Companies Act on 30 June, 2008"},"content":{"rendered":"
Bombay High Court<\/div>\n
In vs Companies Act on 30 June, 2008<\/div>\n
Bench: R.M.S. Khandeparkar, P. B. Majmudar<\/div>\n
                                                    -1-\n\n\n\n\n                                                                                          \n                                                                 \n                   IN THE HIGH COURT OF JUDICATURE AT BOMBAY\n\n                           ORDINARY ORIGINAL CIVIL  JURISDICTION\n\n\n\n\n                                                                \n                                    APPEAL NO. 1229 OF 2001\n                                         IN\n                    ARBITRATION PETITION NO. 416 OF 2001\n                                         IN\n\n\n\n\n                                                   \n                            AWARD NO. 24 OF 2001.\n                                 ig        \n    Oil and Natural Gas Corporation Limited,      )\n    Bombay Regional Business Centre,              )\n    Vasudhara Bhavan, Bandra (East),              )\n                               \n    Mumbai-400 051                                )..Appellants\n\n                  versus\n       \n\n\n    Dai Ichi Karkaria Limited,                                            )\n    a Public Company incorporated under the                               )\n    \n\n\n\n    Companies Act, 1956, having its Registered Office                     )\n    at Liberty Building, Sir Vithaldas Thackersey Marg,                   )\n    Mumbai-400 020                                                        )..Respondents\n\n\n\n\n\n    Sri   Dara   Zaiwala,  Senior  Advocate,  with  Sri  K.H.  Mody   and  Ms.  Chandini\n    Prakash, instructed by Little & Co., for the appellants.\n\n    Mr. D.J. Khambatta, Senior Advocate, with Sarvasri Zuber Behram Kamdin,\n    Vivek   Vashi   and   Ms.   Anuradha   Agnihotri,   instructed   by   Bharucha   &\n\n\n\n\n\n    Associates for the respondents.\n\n                                                        CORAM:  SRI        R.M.S. KHANDEPARKAR\n                                                                                                   &\n                                                                         SRI P.B. MAJMUDAR, JJ. \n\n                                              DATE:     JUNE 30, 2008\n\n\n\n\n                                                                  ::: Downloaded on - 09\/06\/2013 13:32:20 :::\n                                                    -2-\n\n    JUDGMENT (Per Sri P.B. Majmudar, J.)\n<\/pre>\n
                 This appeal is directed against the judgment and order dated 14th<\/p>\n
    August, 2001, of the learned single Judge passed in  Arbitration Petition No.<\/p>\n
    416 of 2001 by which   the learned single Judge modified   the award of the<\/p>\n
    Arbitrator   to   the   extent   of   rate   of   interest   provided   by   the   Arbitrator   by<\/p>\n
    reducing the same from 12 per cent to 10 per cent  from February, 1993  upto<\/p>\n
    the date of the award.  The rest of the award was confirmed  by the learned<\/p>\n
    single Judge.\n<\/p>\n
    2.           The facts in a nutshell are as under:\n<\/p>\n
    2.1          The   respondent,   Dai   Ichi   Karkaria   Limited,   is   a   Public   Limited<\/p>\n
    Company incorporated under the Companies Act, 1956, having its registered<\/p>\n
    office   in   Mumbai.     The   respondent-claimant   carries   on   business   of<\/p>\n
    manufacture and sale, inter alia, of Pour Point Depressant (“PPD” for short).\n<\/p>\n
    The   appellant   is   a   Public   Sector   Undertaking   engaged   in     oil   exploration,<\/p>\n
    development, production and treatment of oil and natural gas.  The appellant<\/p>\n
    floated a global tender  for supply of 2,450 metric tons of PPD  and ultimately<\/p>\n
    the tender of the respondent was accepted and the appellant placed a supply<\/p>\n
    order   dated   2nd  April,   1988   on   the   respondent.   The   respondent   agreed   to<\/p>\n
    supply 2,450  metric tons of PPD at the aggregate rate of Rs. 8,19,10,850\/-\n<\/p>\n
    plus sales tax as applicable.  Clause 29 of the supply order provided  that the<\/p>\n
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\n                                                   -3-<\/span><\/p>\n
    appellant   shall be entitled to place with the respondent repeat order for 50<\/p>\n
    per cent   of the quantity of the supply order at the same price and on the<\/p>\n
    same terms and conditions as stipulated in the supply order during the validity<\/p>\n
    of   the   supply   order   or   within   six   months   from   the   date   of   supply   order,<\/p>\n
    whichever was later.\n<\/p>\n
    2.2          The   appellant   by   its   letters   dated   13th  April,   1988   and   3rd  May,<\/p>\n
    1988   agreed that in case there was any Government notification allowing<\/p>\n
    exchange rate fluctuation, the same should be complied with in accordance<\/p>\n
    with the provisions therein.  The  appellant  agreed to this aspect pursuant to<\/p>\n
    the   request   made   in   this   behalf   by   the   respondent.     Since   the   foreign<\/p>\n
    exchange   fluctuation   had   occurred   in   the   meanwhile,   the   respondent<\/p>\n
    requested the appellant to raise the price by absorbing the foreign exchange<\/p>\n
    fluctuation.  Correspondence ensued between the parties in that behalf.  The<\/p>\n
    appellant,   however,   refused   to   comply   with   the   request   made   by   the<\/p>\n
    respondent   and on 12th  June, 1989, the appellant placed a repeat order at<\/p>\n
    the same price and on the same terms and conditions as the original supply<\/p>\n
    order   without   providing   for   foreign   exchange   fluctuation   or   assuring   the<\/p>\n
    respondent that its case would be referred to the concerned Ministry  as  per<\/p>\n
    the circular issued by the Government of India, Ministry of Finance. Following<\/p>\n
    upon the repeat order dated 12th June, 1989, a formal repeat order with some<\/p>\n
    minor amendments was placed by the appellant   on the respondent on 26th<\/p>\n
                                                               ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                                  -4-<\/span><\/p>\n
    February,   1990   and   this   amended   repeat   order     also   did   not   accept   the<\/p>\n
    request of the respondent to absorb foreign exchange fluctuation and insisted<\/p>\n
    on maintaining the same price as set out in the original supply order.\n<\/p>\n
    2.3          The respondent was not prepared to accept the amended repeat<\/p>\n
    order dated  26th February, 1990, as it was of the view that under the circular<\/p>\n
    of the Government of India, Ministry of Finance, the appellant was bound to<\/p>\n
    absorb the foreign exchange fluctuation or at least to forward the case of the<\/p>\n
    respondent  to the  concerned Ministry with its recommendation.  Thereafter<\/p>\n
    negotiations went on between the parties in this regard and in the course of<\/p>\n
    negotiations, the appellant   acceded to the request   of the respondent   for<\/p>\n
    revised price of PPD and to give foreign exchange   fluctuation by its   telex<\/p>\n
    dated 27th  July, 1990. The appellant thereafter by its letter dated 28th  July,<\/p>\n
    1990 forwarded to the respondent certain amendments to the repeat order<\/p>\n
    dated   26th  February,   1990.   These   amendments     related,   inter   alia,   to   the<\/p>\n
    dates of delivery of PPD at Nhava Seva site of the appellant and the foreign<\/p>\n
    exchange content for metric ton of PPD and also increased the price  to Rs.\n<\/p>\n
    39,287.44 per metric ton from the  original price of Rs. 33,433.51 per metric<\/p>\n
    ton. The letter dated 28th  July, 1990 made it clear that all other terms and<\/p>\n
    conditions   of   the   repeat   order   dated   26th  February,   1990   will   remain<\/p>\n
    unaltered.   The respondent, however,  not prepared to accept the amended<\/p>\n
    repeat   order   dated   28th  July,   1990,     since   the   amendments   did   not   fully<\/p>\n
                                                             ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                                   -5-<\/span><\/p>\n
    concede the request made by the respondent in its letters dated 14th  June,<\/p>\n
    1990 and 5th July, 1990, and accordingly the said repeat order dated 28th July,<\/p>\n
    1990   was   not   accepted   by   the     respondent   which   resulted   into   further<\/p>\n
    negotiations   between   the   appellant   and   the   respondent.     Considerable<\/p>\n
    correspondence ensued between the parties and in the course of which  the<\/p>\n
    appellant addressed  a letter dated 31st January, 1992 clarifying its position in<\/p>\n
    regard   to   the   various   issues.   The   appellant   also     set   out   a   new   delivery<\/p>\n
    schedule   for   supplies   of   PPD   without   imposing   liquidated   damages,   as   a<\/p>\n
    special case, and  accordingly as per the new delivery schedule, delivery was<\/p>\n
    to  commence at  350  Metric   ton  per month  from  February,  1992  onwards.\n<\/p>\n
    The appellant also made it clear that the respondent  may accept 4 per cent<\/p>\n
    price reduction  if new specifications  were to be applied or in the alternative<\/p>\n
    the respondent may supply material as per the specifications indicated in the<\/p>\n
    original supply order. The appellant also requested the respondent to convey<\/p>\n
    its option immediately so that the supply order could be amended suitably, if<\/p>\n
    necessary.  The respondent  by its letter dated 4th February, 1992, reiterated<\/p>\n
    its   contention   that   it   was   entitled   to   the   benefit   of   foreign   exchange<\/p>\n
    fluctuations.     Accordingly,   the   proposal   made  by   the   appellant   in   its   letter<\/p>\n
    dated  31st January, 1992 was not accepted by the respondent. This resulted<\/p>\n
    into   further   negotiations   between   the   parties   and   ultimately   an   amended<\/p>\n
    repeat order dated   12th  October, 1992 was issued by the appellant which<\/p>\n
    was accepted by the respondent.  As per the aforesaid amended order dated<\/p>\n
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\n                                                    -6-<\/span><\/p>\n
    12th October, 1992, a clause was incorporated to the effect that “other terms<\/p>\n
    and   conditions   of   the   subject   order   will   remain   unaltered”.    So   far   as   the<\/p>\n
    orders dated   26th  February, 1990 and 28th  July, 1990 are concerned, both<\/p>\n
    expressly   stated   that   the   sales   tax   was   payable   as   “extra   as   applicable”.\n<\/p>\n
    There was no delivery schedule specified in the amended order dated 12th<\/p>\n
    October, 1992.     The respondent actually completed the supplies under the<\/p>\n
    amended order dated 12th October, 1992 by February, 1993.\n<\/p>\n
    2.4          While making payment of the price for the supplies made by the<\/p>\n
    respondent, the appellant deducted an aggregate sum of Rs. 24,06,356.00<\/p>\n
    towards liquidated damages for delay in supplying PPD.  The appellant also<\/p>\n
    refused  to  grant  foreign exchange fluctuations   to the  respondent  and  also<\/p>\n
    failed to reimburse the difference of 6 per cent in sales tax payable under the<\/p>\n
    Maharashtra Sales Tax Act which had increased from 4 per cent to 10 per<\/p>\n
    cent   with     effect   from   1st  June,   1992.   The   respondent   thereupon   sought<\/p>\n
    arbitration in respect of its claim against the appellant in accordance with the<\/p>\n
    provisions  in that behalf contained  in the original supply order and the matter<\/p>\n
    was   referred   to   the   sole   Arbitrator   to   adjudicate   upon   the   claim   of   the<\/p>\n
    respondent.\n<\/p>\n
    2.5          Parties   filed   their  respective  pleadings  before  the  Arbitrator   and<\/p>\n
    after hearing the parties, the learned Arbitrator came to the conclusion that<\/p>\n
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\n                                                 -7-<\/span><\/p>\n
    since no time for delivery was specified in the   amended order   dated 12th<\/p>\n
    October,   1992,   it   is   implied   that   the   supplies   should   be   made   within<\/p>\n
    reasonable time  from the date of amended order. The sole  Arbitrator found<\/p>\n
    that the respondents had complied with this obligation and complied delivery<\/p>\n
    of the supplies by February, 1993 and that there was no delay on the part of<\/p>\n
    the respondent   in making supplies of PPD to the appellant and, therefore,<\/p>\n
    appellant   was   not   entitled   to   deduct   any   amount   by   way   of   liquidated<\/p>\n
    damages   from the price payable to the respondent. The learned Arbitrator<\/p>\n
    accordingly held that the   respondent was entitled to recover the amount of<\/p>\n
    Rs. 24,06,356\/-  from the appellant  together with interest thereon at the rate<\/p>\n
    of 12 per cent per annum from February, 1993 upto the date of the Award.\n<\/p>\n
    The Arbitrator also granted difference of   of 6 per cent sales tax   under the<\/p>\n
    Maharashtra Sales Tax Act on supplies of PPD made by the respondent. The<\/p>\n
    Arbitrator found that the refusal  by the appellant to pay the difference of 6 per<\/p>\n
    cent by way of sales tax was not justified  and accordingly awarded        Rs.\n<\/p>\n
    28,87,627\/- towards the difference in the sales tax together with interest at<\/p>\n
    the rate of 12 per cent from 28th February, 1993 till the date of the Award.\n<\/p>\n
    2.6         So   far   as   original   claim   of   the   respondent   regarding   foreign<\/p>\n
    exchange   fluctuation   is   concerned,   the   same   was     given   up   by   the<\/p>\n
    respondent   before   the   Arbitrator.   The   Arbitrator   accordingly,   by   his   award<\/p>\n
    dated   8th  March,   2001,   awarded   an   aggregate   sum   of   Rs.   52,93,983\/-\n<\/p>\n
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\n                                                   -8-<\/span><\/p>\n
    together with interest thereon at the rate of 12 per cent from 28th  February,<\/p>\n
    1993  upto the date of the Award and thereafter at the rate of 9  per cent  per<\/p>\n
    annum till payment.\n<\/p>\n
    2.7          The appellant instituted Arbitration Petition under Section 30 of the<\/p>\n
    Arbitration   Act,   1940,   challenging   the   award   of   the   sole   Arbitrator   being<\/p>\n
    Arbitration Petition No. 416 of 2001. The learned single Judge rejected the<\/p>\n
    contention of the appellant  in connection with the liquidated damages as well<\/p>\n
    as the payment of difference in connection with the sales tax.   The learned<\/p>\n
    single Judge, however, modified the award to the extent of rate of interest by<\/p>\n
    reducing interest from 12 per cent as awarded by the Arbitrator to 10 per cent<\/p>\n
    from February, 1993 upto the date of the Award and the rest of the Award of<\/p>\n
    the Arbitrator was  confirmed  and accordingly  the   Award as  modified  was<\/p>\n
    made a decree of the Court.\n<\/p>\n
    2.8          It   is   the   aforesaid   order   of   the   learned   single   Judge   which   is<\/p>\n
    impugned in this appeal at the instance of the appellant.\n<\/p>\n
    3.           At   the   time   of   hearing   of   this   appeal,   the   learned   counsel<\/p>\n
    appearing   for   the   appellant   attacked   the   award   of   the   Arbitrator   on   the<\/p>\n
    following grounds:\n<\/p>\n
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\n                                                  -9-<\/span><\/p>\n
    3.1         That in view of the delay in supplying the material, the respondent<\/p>\n
    was   liable   to   pay   liquidated   damages   and,   therefore,   the   appellant   was<\/p>\n
    justified in withholding the amount in question towards liquidated damages.\n<\/p>\n
    3.2         That   the   appellant   was   not   required   to   pay   the   difference     in<\/p>\n
    connection with the increase in the rate of sales tax and the appellant was<\/p>\n
    required to pay only 4 per cent of the sales tax irrespective of increase of the<\/p>\n
    same subsequently.\n<\/p>\n
    3.3         There is no provision for payment of interest in the contract and<\/p>\n
    that the Award in connection with the payment of interest is not sustainable<\/p>\n
    and the respondent was not entitled to get any interest in connection with the<\/p>\n
    amount awarded by the Arbitrator, and <\/p>\n
    3. 4        That  the  award  of   the   Arbitrator  is   contrary   to   the   terms   of  the<\/p>\n
    contract which would necessitate interference of the court on the ground of an<\/p>\n
    error apparent on the face of record.\n<\/p>\n
    4.          To   substantiate   the   argument,   the   learned   counsel   for   the<\/p>\n
    appellant  relied upon the decision of the Supreme Court in the case of   Oil<\/p>\n
                                                              ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                                   -10-<\/span><\/p>\n
    and Natural Gas Corporation Ltd.   vs.   Saw Pipes Ltd.1.       On<\/a> behalf of the<\/p>\n
    respondent,   the   learned   counsel     has   supported   the   order   of   the   learned<\/p>\n
    single Judge as well as the Award of the Arbitrator.\n<\/p>\n
    5.           It is submitted on behalf of the respondent that the powers of the<\/p>\n
    Court in a petition under Section 30 of the Arbitration Act, 1940 (hereinafter<\/p>\n
    referred to as “the Act”) is very limited as it is neither an appeal on facts nor<\/p>\n
    an   appeal   on   law   and   the   Court   is   required   to   consider   only   whether   the<\/p>\n
    Arbitrator has committed an  error apparent on the face of record and while<\/p>\n
    doing so, the Court cannot re-appreciate the evidence on record.  It is further<\/p>\n
    submitted   that   from   the   material   on   record,   the   respondent   has   clearly<\/p>\n
    established   that   the   appellant   was   not   entitled   to   withhold   any   amount<\/p>\n
    towards       liquidated   damages   especially   when   no   delivery   schedule   was<\/p>\n
    fixed.     It is  also  submitted  that  the  appellant  was  bound  to  reimburse  the<\/p>\n
    difference in the payment of sales tax.   On the question regarding grant  of<\/p>\n
    interest,  it  is   submitted  that  the  Arbitrator was within  his   right   in  awarding<\/p>\n
    interest for which a reference was made to the decision of the Supreme Court<\/p>\n
    in the case of  Board of Trustees for the Port of Calcutta    vs.    Engineers-De-\n<\/p>\n
    Space-Age2 , the decision of a single Judge of this Court in the case of Oil and<\/p>\n
    1 (2003) 5 SCC 705
\n    2 (1996) 1 SCC 516<\/p>\n
                                                               ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                                 -11-<\/span><\/p>\n
    Natural Gas Commission  vs.  Macqreqor-Navire Port Equipment and others<\/a>3 and<\/p>\n
    the decision   of another   single Judge of this Court in the case   of  Oil and<\/p>\n
    Natural Gas Corporation Ltd.  vs.  Western Geco International Ltd.4<\/a><\/p>\n
    6.           The learned counsel for the appellant relied on the decision of the<\/p>\n
    Supreme Court in the case of  Sikkim Subba Associates  vs.  State of Sikkim5,<\/p>\n
    to substantiate the argument on the ground that if there is an error apparent<\/p>\n
    on  the face of record,  the order  of the  Arbitrator  can be  set aside  by  the<\/p>\n
    Court.  The Arbitrator having acted beyond his jurisdiction is a ground which<\/p>\n
    is different from an error apparent on the face of record.  The appellant has<\/p>\n
    also relied upon various other judgments on the ground that if the Arbitrator<\/p>\n
    has   committed   any   error   apparent   on   the   face   of   record,   or   if   he   has<\/p>\n
    exceeded his jurisdiction, the Court can interfere with such   an Award.  It is<\/p>\n
    also   submitted   that   the   Arbitrator   cannot   act   arbitrarily,   irrationally,<\/p>\n
    capriciously or beyond the contractual terms.\n<\/p>\n
    7.           We   have   heard   the   learned   counsel   for   the   parties.   We   have<\/p>\n
    perused   the   documentary   evidence   placed   on   record,   the   Award   of   the<\/p>\n
    Arbitrator as well as the order of the learned single Judge. We have also<\/p>\n
    3 2002 (1) Bom.C.R. 278
\n    4 2006 (3) Bom.C.R. 848.\n<\/p>\n
    5 2001 (2) Arb. LR 17 (SC)17<\/p>\n
                                                              ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                             -12-<\/span><\/p>\n
    considered the rival submissions advanced  by the counsel appearing for the<\/p>\n
    parties.    The first point which is required to be considered is as to whether<\/p>\n
    the Arbitrator has exceeded his jurisdiction in awarding the amount deducted<\/p>\n
    by the appellant towards liquidity damages.  After considering the voluminous<\/p>\n
    documentary evidence on record, the Arbitrator has found that   considering<\/p>\n
    the  amended  order    dated 12th  October, 1997,  no   time  limit  was   fixed  for<\/p>\n
    supply and in that view of the matter there was no delay on the part of the<\/p>\n
    respondent.  It is required to be noted that the appellant at the first instance<\/p>\n
    placed reliance on the supply order issued to the respondent   on 2nd  April,<\/p>\n
    1998. Under clause (6)   delivery in respect of that supply order was to be<\/p>\n
    completed by February, 1989. As per clause 18, the expression used in the<\/p>\n
    same is  that “Sales tax extra as applicable”.  Clause 20 provided  that in the<\/p>\n
    event the Contractors failed to deliver or any instalments thereto    within the<\/p>\n
    period fixed for such delivery in the schedule or at any time of contract before<\/p>\n
    expiry of such period, the purchaser without prejudice to any other remedy<\/p>\n
    available to him, may recover damages in breach of the contract.   Clause 29<\/p>\n
    provides as under:\n<\/p>\n
           “Repeat order can also be placed with the supplier upto  50% of
\n           the quantity of this order on the same terms and conditions as
\n           stipulated in this original supply order during the validity of that
\n           supply  order  or within 6 months from the  date of this  supply
\n           order whichever is latter.  It is the condition of this order which
\n           will be obligatory on the part of the supplier to execute such
\n           repeat order also as the consideration of this dealing in favour<\/p>\n
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\n                                                    -13-<\/span><\/p>\n
            of   the   purchaser   forms   part   of   the   main   consideration   in   its<\/p>\n
            order.”\n<\/p><\/blockquote>\n
    8.           The appellant thereafter placed repeat order on 13th  June, 1989<\/p>\n
    and   the   delivery   was   to   be   made   upto   March,   1990.   Subsequently<\/p>\n
    correspondence ensued between the parties.   On   31st  January, 1992, the<\/p>\n
    appellant wrote a letter to the respondent informing them that the case of the<\/p>\n
    respondent had been examined in detail   taking into consideration various<\/p>\n
    letters  and that, as a special  case, appellant agreed for reimbursement of<\/p>\n
    excise duty on production of proof of payment of excise duty.   The said letter<\/p>\n
    further states that the delivery was to commence against the order at the rate<\/p>\n
    of 150 metric tonnes  per month from February, 1992 onwards.\n<\/p>\n
    9.           So   far   as   the   delivery   schedule   set   out   in   the   letter   dated   31st<\/p>\n
    January,   1992     is   concerned,   the   same   was   never   accepted   by   the<\/p>\n
    respondent as the respondent did not  accept the proposal contained in the<\/p>\n
    said letter dated 31st January, 1992.  It resulted into further correspondence<\/p>\n
    between   the   parties.     In   our   view,   therefore,   the   Arbitrator     was   perfectly<\/p>\n
    justified in holding that the delivery schedule set out in the letter dated   31st<\/p>\n
    January,   1992   did   not   bind   on   the   respondent   and   on   the   contrary<\/p>\n
    negotiations   went   on   between   the   parties   and   ultimately   on   12th  October,<\/p>\n
    1992 an amended order was agreed to between the parties.   It has been<\/p>\n
    rightly held by the Arbitrator that liabilities of the parties  in regard to supplies<\/p>\n
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\n                                                   -14-<\/span><\/p>\n
    of PPD came to be governed exclusively by the amended order dated 12th<\/p>\n
    October, 1992.  The amended order dated 12th October, 1992 made certain<\/p>\n
    amendments in the “Subject Supply  Order”.   It is required to be noted that<\/p>\n
    the   subject   order   referred   to   the   amended   repeat   orders   dated   12th  June,<\/p>\n
    1989, 26th February, 1990 as amended by the amendment repeat order dated<\/p>\n
    26th July, 1990 did not make any reference to the appellant’
\n                                                               s letter dated 31st<\/p>\n
    January, 1992.     Considering the said documents on record, the Arbitrator<\/p>\n
    found that no delivery schedule was set out in the amended order dated  12th<\/p>\n
    October,1992 and, therefore, ultimately it was required to consider whether<\/p>\n
    the supply was made within reasonable time from the date of the amended<\/p>\n
    order dated 12th October, 1992 and the Respondent ultimately completed the<\/p>\n
    delivery of supplies by February, 1993.   On the aforesaid basis it was found<\/p>\n
    that   there   was   no   unreasonable   delay   on   the   part   of   the   respondent   in<\/p>\n
    supplying the material and that the appellant, therefore, was not entitled to<\/p>\n
    deduct any amount towards liquidated damages from the price payable to the<\/p>\n
    respondent  for the supplies made to the appellant.  In our view, considering<\/p>\n
    the aforesaid factual aspect of the matter and considering the fact that after<\/p>\n
    voluminous  correspondence ensued  between the  parties,    it  can  never be<\/p>\n
    said   that   the   Arbitrator   has   exceeded     his   jurisdiction   or   has   misdirected<\/p>\n
    himself   in   coming   to   the   conclusion   that   the   appellant   was   not   entitled   to<\/p>\n
    withhold any amount towards liquidated damages from the price payable to<\/p>\n
    the respondent.  It is required to be noted that in a petition under Section 30<\/p>\n
                                                                ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                                   -15-<\/span><\/p>\n
    of the Act, the Court is not sitting in appeal over the Award of the Arbitrator.\n<\/p>\n
    The   Court   while   examining   the   objections   taken   to   an   award   filed   by   the<\/p>\n
    Arbitrator is not required to examine the correctness of the claim on merits<\/p>\n
    with reference to the materials produced before the Arbitrator.  This Court can<\/p>\n
    interfere with the Award, if the Arbitrator has exceeded his jurisdiction or has<\/p>\n
    committed an error apparent on the face of record in interpreting  the contract<\/p>\n
    and that  the award is contrary to the terms of the contract.\n<\/p>\n
    10.          The   learned   Arbitrator   after   considering   the   documents   and<\/p>\n
    clauses contained in the contract between the parties has held that there was<\/p>\n
    no   delay   on   the   part   of   the     respondent     in   supplying   the   material   and,<\/p>\n
    therefore,   appellant   was   not   entitled   to   withhold   the   amount   towards<\/p>\n
    liquidated damages. It is not in dispute that there was no time specified in the<\/p>\n
    amended order dated  12th October, 1992 for supply of material in question as<\/p>\n
    ultimately   the   respondent   started   supplying   the   material   to   the   appellant<\/p>\n
    under the amended repeat order dated 12th October, 1992.  In our view, the<\/p>\n
    learned Arbitrator has not committed any error apparent on the face of record<\/p>\n
    on this aspect and, therefore, the contention of the appellant, therefore, in this<\/p>\n
    behalf is rejected.\n<\/p>\n
    11.          So far as the claim regarding   difference in the payment of sales<\/p>\n
    tax is concerned, it is to be noted that  the sales tax payable on the date of<\/p>\n
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\n                                                  -16-<\/span><\/p>\n
    delivery of the supplies was 10 per cent, since supplies were made after 1st<\/p>\n
    June,   1992.   The   Arbitrator   has   rightly   found   that   the   appellant   was   not<\/p>\n
    justified in reimbursing the claim towards the sales tax only to the extent of 4<\/p>\n
    per cent as at the time when the supply was made, the sales tax payable was<\/p>\n
    10   per   cent   as   per   Maharashtra   Sales   tax   Act.       The   appellant   was<\/p>\n
    accordingly   bound   to   reimburse   the   total   amount   paid   by   the   respondent<\/p>\n
    towards Sales Tax.  As the sales tax was to be borne by the purchaser and if<\/p>\n
    there is change in the quantum of sales tax in between, whatever amount<\/p>\n
    paid   by   the   respondent   towards   sales   tax,   the   entire   amount   towards   the<\/p>\n
    same was  reimbursed  and accordingly the Arbitrator has rightly awarded the<\/p>\n
    difference of 6 per cent of payment of sales tax.  It cannot be  said that the<\/p>\n
    Arbitrator has committed any error much less any error of law or any other<\/p>\n
    error apparent on the face of record while awarding the said amount.    The<\/p>\n
    learned counsel for the appellant has placed reliance on the decision of the<\/p>\n
    Supreme   Court   in   the   case   of  Associated   Engineering   Company    vs.<\/p>\n
    Government of Andhra Pradesh and<\/a> another6  wherein the Supreme Court has<\/p>\n
    held  in paragraph 24 as under:\n<\/p>\n
             “24.  The   arbitrator  cannot   act   arbitrarily,   irrationally,
\n             capriciously   or   independently   of   the   contract.       His   sole
\n             function   is  to  arbitrate   in  terms  of   the   contract.    He  has   no
\n             power apart from what the parties have given him under the
\n             contract.     If   he   has   travelled   outside     the   bounds   of   the<\/p>\n
    6   (1991) 4 SCC 93<\/p>\n
                                                               ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                                       -17-<\/span><\/p>\n
              contract,   he   has   acted   without   jurisdiction.       But   if   he   has<\/p>\n
              remained   inside   the   parameters   of   the   contract   and   has
\n              construed the provisions of the contract, his award cannot be
\n              interfered   with   unless   he   has   given   reasons   for   the   award<\/p>\n
              disclosing an error apparent on the face of it”.\n<\/p><\/blockquote>\n
    In the case of Saw Pipes (supra) the Supreme Court has held that   if an<\/p>\n
    award is contrary to substantive provisions of law or the provisions of the Act<\/p>\n
    of 1940 or against the terms of contract, it would be patently illegal and the<\/p>\n
    same would be subject to interference under Section 34 (2) (a) (v) of the Act<\/p>\n
    of 1940.   On the other hand, the learned counsel for the respondent has<\/p>\n
    referred to a decision rendered by a Division Bench of this Court to which<\/p>\n
    one of us (R.M.S. Khandeparkar, J.)   is a party in Appeal No. 1202  of 1997<\/p>\n
    (Oil and Natural Gas Corporation Ltd. vs. Dai Ichi Karkaria Ltd.   The Division<\/p>\n
    Bench<\/a>   after   considering   various   judgments   of   the   Supreme   Court,<\/p>\n
    summarised the propositions as under:\n<\/p>\n
              “(i)   A Court while examining the objections taken to an award
\n              filed   by   an   Arbitrator   is   not   required   to   examine   the
\n              correctness   of   the   claim   on   merits   with   reference   to   the
\n              materials produced before the Arbitrator. The Court cannot sit
\n              in appeal over the views of the Arbitrator by re-examining and<\/p>\n
              re-assessing the material;7<\/p>\n<\/blockquote>\n
              (ii)     The Arbitrator is constituted by the parties to be a final
\n              arbiter   of   the   disputes   between   them   and   the   award   is   not
\n              open to challenge on the ground merely that the Arbitrator has
\n              reached a wrong conclusion or that he has failed to appreciate
\n              facts;8<\/p>\n<\/blockquote>\n
              (iii)     If there is no legal proposition either in the award or in
\n    7 Puri Construction Pvt. Ltd. v. Union of India, AIR<\/a> 1989 SC 777 (pages 13 and 14 at pages 782 and 783.\n<\/p><\/blockquote>\n
    8 Hindustan Tea Co. v. K. Shashikant & Co., AIR<\/a> 1987 SC 81 (para 2 at page 82)<\/p>\n
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\n                                                         -18-<\/span><\/p>\n
               any document annexed to the award which is erroneous and<\/p>\n
               which   constitutes   the   basis   of   the   award   and   the   alleged
\n               mistakes or errors are only mistakes of fact, the award is not
\n               amenable to correct by the Court;9<\/p>\n
               (iv)    Even assuming that there is an error of construction of
\n               an agreement, or an error in law in arriving at a conclusion,
\n               such an error is not an error which is amenable to correction in<\/p>\n
               a reasoned  award.  In order to set aside an award, there must
\n               be a wrong proposition of law laid down in the award which
\n               constitutes the basis of the award;10<\/p>\n
               (v)          The   reasonableness   of   the   reasons   furnished   by
\n               the Arbitrator in making his award cannot be challenged.  The<\/p>\n
               fact that on the same evidence, a Court might have arrived at
\n               a conclusion different from the one arrived at by the Arbitrator
\n               is by itself no ground for setting aside the award;11<\/p>\n
               (vi)        The application of the error apparent on the face of
\n               the   record   test   does   not   empower   the   Court   exercising
\n               jurisdiction under Section 30 to substitute the scrutiny by the<\/p>\n
               Arbitrator by an evaluation of the Court of the merits of the
\n               documents   and   the   materials   on   record.     If   the   view   of   the<\/p>\n
               Arbitrator is a possible view, the reasons in the award cannot
\n               be examined.  Issues relating to a default in the performance
\n               of contractual obligations; of whether time was of the essence
\n               and of the assessment of the quantum of damages are issues<\/p>\n
               of fact and it is not open to the Court to interdict an award on
\n               such factual issues;12<\/p>\n
               (vii)         If the Arbitral Tribunal has   committed an error of
\n               fact or law in reaching its conclusion on a disputed question<\/p>\n
               submitted for adjudication, the Court would have no jurisdiction
\n               to   interfere     with   the   Award.     This   would   depend   upon   the
\n               reference made to the Arbitrator.   In a general reference for
\n               deciding a contractual dispute, the Court could interfere if the
\n               award   is   based   on   an   erroneous   legal   proposition.     In   a
\n               reasoned award, the Court can interfere if on the face of the
\n               award, there is an erroneous proposition of law or application.\n<\/p>\n
    9    Jawaharlal Wadhwa v. Haripada Chakroberty, AIR<\/a> 1989 SC 606 (para 6 at page 610)
\n    10   U.P. Hotels v. U.P. State Electricity Board, AIR<\/a> 1989 SC 268 (paras 17 and 19 at pages 274 and 275).
\n    11   Delhi Municipal Corporation vs. M\/s. Jagan Nath Ashok Kumar, AIR<\/a> 1987 SC 2316.
\n    12   Arosan Enterprises Ltd. v. Union of India, AIR<\/a> 1999 SC 3804 (para 36 page 3819 and para 38 page 3820).\n<\/p>\n
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\n                                                      -19-<\/span><\/p>\n
             However,   if   a   specific   question   of   law   is   submitted   to   the<\/p>\n
             Arbitrator an erroneous decision therein would not render the
\n             award bad unless the Arbitrator has proceeded illegally;13<\/p>\n
             (viii)      The Court exercising jurisdiction under Section 30
\n             of the Arbitration Act, 1940 is not entitled to probe the mental
\n             process   of   the   Arbitrator   and   where   no   reasons   have   been
\n             furnished   as   to   what   impelled   the   Arbitrator   to   arrive   at   his<\/p>\n
             conclusion,   the   reasonableness   of   the   reasons   and   the
\n             appraisal   of   evidence   are   matters   which   lie   in   a   realm   of
\n             arbitration.   The Court does not take upon itself the  task  of
\n             being a judge on the evidence before the Arbitrator.  The error<\/p>\n
             apparent   test   does   not   empower   the   Court   to   invalidate   an
\n             award   merely   because   by   a   process   of   interference   and<\/p>\n
             argument,   it   may   be   demonstrated   that     the   Arbitrator   has
\n             committed some mistake in arriving at a conclusion;14<\/p>\n
             (ix)          An   award   may   be   remitted   or   set   aside   on   the
\n             ground   that   the   Arbitrator   making   it   had   exceeded   his
\n             jurisdiction and evidence of matters not appearing on the face
\n             of award will be admitted in order to establish whether or not<\/p>\n
             the jurisdiction  has been exceeded, because the nature of the
\n             dispute   is   something   which   has   to   be   decided   outside   the<\/p>\n
             award.    The  Arbitrator  having  acted  beyond jurisdiction is  a
\n             ground which is different from an error apparent on the face of
\n             the  award.    However,  a  distinction  in   such  a  case  must  be
\n             drawn between an error  within the jurisdiction  and an error in<\/p>\n
             excess   of   jurisdiction.     While   the   Court   may   examine   the
\n             claims   to   find   out   whether   they   were   within   the   disputes
\n             referred to the Arbitrator, it is not open for the Court to find out
\n             whether   in   arriving   at   the   decision,   an   Arbitrator   has   acted
\n             correctly or incorrectly.   Hence, whether a particular amount<\/p>\n
             was liable to be paid or damages liable to be sustained was a
\n             decision within the competence of the Arbitrator;15<\/p>\n
             (x)          An   Arbitrator   cannot   act   arbitrarily,   irrationally,
\n             capriciously or independently of the contract.  His sole function
\n             is to arbitrate in terms of the contract. An Arbitrator who travels
\n             outside  the   bounds of  the contract,  acts  without jurisdiction.
\n             However, so long as he remains within the parameters of the<\/p>\n
    13 ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 (para 54 page 736)
\n    14 Sudarshan Trading Co. v. Govt. of Kerala, AIR 1989 SC 890 (para 29 page 901)
\n    15 Sudarshan Trading (supra) Para 31 page 902.\n<\/p>\n
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\n                                                       -20-<\/span><\/p>\n
              contract   and   construes   the   provisions   of   the   contract,   the<\/p>\n
              award   cannot   be   interfered   with   unless   he   has   given   the
\n              reasons for the award disclosing an error apparent on the face
\n              of it;16<\/p>\n
              (xi)          The authority of the Arbitrator is derived from the
\n              contract   and   he   commits   a   misconduct   if   by   his   award,   he
\n              decides   a   matter   excluded   by   the   agreement.   A   conscious<\/p>\n
              disregard of the law or of the provisions of the contract from
\n              which   the   Arbitrator   has   derived   his   authority   vitiates   the
\n              award.  An error in the construction of the contract is an error
\n              within   jurisdiction   but   an     Arbitrator   who   travels   outside   the<\/p>\n
              contract commits a jurisdictional error.17″\n<\/p>\n
    After going through the award of the Arbitrator and after going through the<\/p>\n
    material   on   record,   in   our   view,   it   cannot   be   said   that   the   Arbitrator   has<\/p>\n
    committed any error apparent on the face of record or that he has travelled<\/p>\n
    beyond the agreement between the parties in coming to the conclusion that<\/p>\n
    the appellant was not entitled to withhold any amount by way of liquidated<\/p>\n
    damages as ultimately the material was supplied within the reasonable time<\/p>\n
    and that the appellant was required to pay the difference in sales tax.  The<\/p>\n
    Arbitrator   reached   the   said   conclusion   after   interpreting   the   agreement<\/p>\n
    entered into between the parties and it cannot be said that he has travelled<\/p>\n
    beyond the contract.\n<\/p>\n
    12.           So far as the award of the Arbitrator granting interest is concerned,<\/p>\n
    in our view, the award of the Arbitrator   in this regard is not sustainable. In
\n    16 Associated Engineering Co. v. Govt. of A.P. (1991) 4 SCC 93 (para 24 page 103).
\n    17 Associated Engineering Co. v. Govt. of A.P. (1991) 4 SCC 93 (paras 25 and 27 page 103).\n<\/p>\n
                                                                     ::: Downloaded on – 09\/06\/2013 13:32:20 :::<\/span>
\n                                                     -21-<\/span><\/p>\n
    this connection, it is relevant to mention clause  27 of the supply order dated<\/p>\n
    26th February, 1990, which provides as under:\n<\/p>\n
             “It is agreed  term of the contract\/supply order that the sum of
\n             money   or   monies   so   withheld   or   retained   under   the   lien<\/p>\n
             referred to above, by the Commission will be kept withheld or
\n             retained as such by the Commission till the claim arising out of
\n             or   under   the   contract   is   determined   by   the   Arbitrator   (if   the
\n             contract   is   governed   by   the   arbitration   clause)   or   by   the<\/p>\n
             competent court, as the case may be, and that the contractor
\n             will have  no claim for interest    or damages whatsoever on<\/p>\n
             any account  in respect of  such withholding or retention under
\n             the   lien   referred   to   supra   and   duly   notified   as   such   to   the
\n             Contractor. For the purpose of this clause, where Contractor is<\/p>\n
             a partnership firm or a limited Company, the Commission shall
\n             be entitled to withhold and also have a lien to retain towards
\n             such claimed amount or amounts in whole or in part from any
\n             such   sum   payable   to   any   partner   or   director   of   a   limited<\/p>\n
             company,   as   the   case   may   be,   whether   in   his   individual
\n             capacity or otherwise”.\n<\/p><\/blockquote>\n
    In view of the above, it is amply clear that the respondent was not entitled to<\/p>\n
    claim   any   interest.       In   that   view   of   the   matter   and   especially   when   the<\/p>\n
    agreement nowhere provides that the Arbitrator  will be entitled to adjudicate<\/p>\n
    the claim of interest, the award of the Arbitrator suffers from patent illegality<\/p>\n
    in so far as the award of payment of interest is concerned.   The Supreme<\/p>\n
    Court in the case of Oil and Natural Gas Corporation Ltd.  vs.  Saw Pipes Ltd.18<\/a><\/p>\n
    which was a matter arising  under the Act of 1996 has held  as under:\n<\/p>\n
              “It   is   to   be   reiterated   that   it   is   the   primary   duty   of   the
\n              arbitrators to enforce a promise which the parties  have made
\n    18 (2003) 5 SCC 705<\/p>\n
                                                                  ::: Downloaded on – 09\/06\/2013 13:32:21 :::<\/span>
\n                                                   -22-<\/span><\/p>\n
              and   to   uphold   the   sanctity   of   the   contract   which   forms   the<\/p>\n
              basis of the civilized society and also the jurisdiction of the
\n              arbitrators.     Hence,   this   part   of   the   award   passed   by   the
\n              Arbitral Tribunal granting interest on the amount deducted by<\/p>\n
              the   appellant   from   the   bills     payable   to   the   respondent   is
\n              against the terms of the contract and is, therefore, violative of
\n              Section 28 (3) of the Act.”\n<\/p>\n
    13.          The   appellant   has   also   relied   upon   a   decision   of     the   learned<\/p>\n
    single Judge of this Court in the case of Oil and Natural Gas Commission  vs.<\/p>\n
    McDermott   International   Inc19<\/a>    wherein   the   learned   single   Judge   has<\/p>\n
    considered the payment of interest under the Act of 1940. The learned single<\/p>\n
    Judge has held in paragraph 50 of the said judgement which considered the<\/p>\n
    question about award of pre-reference interest that as per the terms of the<\/p>\n
    contract   in that case the interest could be awarded only with regard to the<\/p>\n
    undisputed   amount,   and   for   the   disputed   amount   no   interest   could   be<\/p>\n
    granted.  The respondent on the other hand has relied upon the decision of<\/p>\n
    the Supreme Court in the case of Board of Trustees for the Port of Calcutta<\/p>\n
    (supra). The said decision is under the Act of 1940.  The Supreme Court in<\/p>\n
    the said case has considered the question of payment of interest in regard to<\/p>\n
    the award of the interest by the Arbitrator post reference.   In paragraph 4 it<\/p>\n
    has been held  that after considering the clause  in the contract by which the<\/p>\n
    Commissioner   was   prohibited     from   entering   any   claim   of   interest,   the<\/p>\n
    Supreme Court has held that by the particular clause, the Commissioner was<\/p>\n
    19 2000 (3) Mh.L.J. 747<\/p>\n
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\n                                                     -23-<\/span><\/p>\n
    prohibited from entering any claim of interest but it does not mean that the<\/p>\n
    Arbitrator was also prohibited from awarding interest pending dispute.   It has<\/p>\n
    been   held   that   once   the   matter   goes   to   arbitration   the   discretion   of   the<\/p>\n
    arbitrator is not, in any manner, stifled by the term of the contract and the<\/p>\n
    arbitrator   would   be   entitled   to   consider   the   question   of   grant   of   interest<\/p>\n
    pendente   lite   and   award   interest   if   he   finds   the   claim   to   be   justified.   The<\/p>\n
    Supreme Court has accordingly considered  the payment of interest pendente<\/p>\n
    lite.  So far as the facts of the present case is concerned,  there is nothing on<\/p>\n
    record to show that the parties had agreed on the question of payment   of<\/p>\n
    interest for the period prior to the reference.  On the contrary, the agreement<\/p>\n
    speaks   otherwise.     Considering   the   factual   aspect   of   the   matter,   in   our<\/p>\n
    considered opinion, the arbitrator has exceeded his jurisdiction in awarding<\/p>\n
    the amount with interest which covers the payment prior to the making of the<\/p>\n
    reference.  As a matter of fact, even as per the clause which we have quoted<\/p>\n
    above, no amount of interest was payable at all.  Interpreting the said clause<\/p>\n
    and considering the factual aspect of the matter  and the provisions of the Act<\/p>\n
    of   1940,  in   our   view,   the   arbitrator   has   acted   beyond   his   jurisdiction   and,<\/p>\n
    therefore, part of the award in granting interest to the respondent is without<\/p>\n
    jurisdiction.   The order of the Arbitrator is therefore clearly without jurisdiction<\/p>\n
    and accordingly the order of the arbitrator is modified to the extent of setting<\/p>\n
    aside the same in so far as it relates to payment of interest upto the date of<\/p>\n
    the  award regarding pre-reference period as well as pending the reference.\n<\/p>\n
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\n                                                     -24-<\/span><\/p>\n
    However,   we     confirm   the     order   of   the   learned   single   Judge   in   granting<\/p>\n
    interest from the date of the Award.\n<\/p>\n
    14.            The   grant   of   interest   upto   the   date   of   award   is   accordingly   set<\/p>\n
    aside by modifying the order of the arbitrator.  The respondent will be entitled<\/p>\n
    to   get   interest   from   the   date   of   the   Award   at   the   rate   of   10   per   cent.\n<\/p>\n
    Accordingly,   this   appeal   is   partly   allowed   by   modifying   the   award   to   the<\/p>\n
    aforesaid extent.  The order of the learned single Judge is also set aside to<\/p>\n
    the aforesaid extent  and the order passed by this Court is accordingly made<\/p>\n
    a decree of the Court.\n<\/p>\n
                                                             R.M.S. KHANDEPARKAR, J.\n<\/p>\n
                                                               P.B. MAJMUDAR, J.\n<\/p>\n
                                                                  ::: Downloaded on – 09\/06\/2013 13:32:21 :::<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Bombay High Court In vs Companies Act on 30 June, 2008 Bench: R.M.S. Khandeparkar, P. B. Majmudar -1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 1229 OF 2001 IN ARBITRATION PETITION NO. 416 OF 2001 IN AWARD NO. 24 OF 2001. ig Oil and Natural Gas Corporation Limited, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[11,8],"tags":[],"class_list":["post-16703","post","type-post","status-publish","format-standard","hentry","category-bombay-high-court","category-high-court"],"yoast_head":"\nIn vs Companies Act on 30 June, 2008 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/in-vs-companies-act-on-30-june-2008\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"In vs Companies Act on 30 June, 2008 - 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