{"id":227216,"date":"1987-12-10T00:00:00","date_gmt":"1987-12-09T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/food-corporation-of-india-vs-surendra-devendra-mohendra-on-10-december-1987"},"modified":"2017-02-24T05:14:25","modified_gmt":"2017-02-23T23:44:25","slug":"food-corporation-of-india-vs-surendra-devendra-mohendra-on-10-december-1987","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/food-corporation-of-india-vs-surendra-devendra-mohendra-on-10-december-1987","title":{"rendered":"Food Corporation Of India vs Surendra, Devendra & Mohendra … on 10 December, 1987"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Food Corporation Of India vs Surendra, Devendra & Mohendra … on 10 December, 1987<\/div>\n
Equivalent citations: 1988 AIR 734, \t\t 1988 SCR (2) 327<\/div>\n
Author: S Mukharji<\/div>\n
Bench: Mukharji, Sabyasachi (J)<\/div>\n
           PETITIONER:\nFOOD CORPORATION OF INDIA\n\n\tVs.\n\nRESPONDENT:\nSURENDRA, DEVENDRA & MOHENDRA TRANSPORT CO.\n\nDATE OF JUDGMENT10\/12\/1987\n\nBENCH:\nMUKHARJI, SABYASACHI (J)\nBENCH:\nMUKHARJI, SABYASACHI (J)\nRANGNATHAN, S.\n\nCITATION:\n 1988 AIR  734\t\t  1988 SCR  (2) 327\n 1988 SCC  (1) 547\t  JT 1988 (1)\t 57\n 1988 SCALE  (1)21\n CITATOR INFO :\n R\t    1990 SC1340\t (14,16,17)\n\n\nACT:\n     Arbitration  Act,\t 1940  Challenge  to  award  of\t the\narbitration under section 30, 33-of.\n\n\n\nHEADNOTE:\n%\n     The respondent  was appointed  a transport and handling\nContractor  by\tthe  appellant\tsubject\t to  the  terms\t and\nconditions mentioned  in three successive written agreements\nentered into  by both  the  parties.  After  disputes  arose\nbetween the  parties, an arbitrator was appointed as per the\narbitration clause  to adjudicate  upon\t the  disputes.\t The\narbitrator made\t and published an award which was a speaking\none. He\t did not  allow the  appellant's claim for demurrage\nand wharfage  charges paid  to\tthe  Railways  amounting  to\nRs.15,63,863.02 by reason of the alleged wrongful conduct of\nthe respondent\tbut awarded  only  25%\tof  the\t claim.\t The\narbitrator also\t did not  allow the  appellant's  claim\t for\nshortage in transit but reduced the claim by 40% and allowed\nonly 60%  of it\t amounting to  Rs.52,971.99. The  arbitrator\nawarded to  the respondent Rs.12,64,175.97 and pendente lite\ninterest at 6% per annum.\n     The appellant  filed objections in the High Court under\nsections 30  and 33 of the Arbitration Act, 1940 ('The Act')\nfor setting  aside the\taward. The High Court (Single Judge)\nset aside  the award.  The respondent filed an appeal to the\nDivision Bench\tof the\tHigh Court  which allowed  the same,\nsetting aside  the judgment  of the learned single judge and\nupholding the  award. Being aggrieved by the decision of the\nHigh Court,  the appellant appealed to This Court for relief\nby special leave under Article 136 of the Constitution.\n     Disposing of the appeal, this Court,\n^\n     HELD: While  issuing notice  on the  application  under\nArticle 136  of the Constitution, it was indicated that only\nthree questions\t would be  adjudicated upon  in this appeal,\nviz, Rs.13,94,982.46  being the amount allowed on account of\ndemurrage and  wharfage\t charges  mentioned  in\t the  award,\nsecondly, the sum of Rs.2,35,769.46 and lastly, the question\nof interest. [332G]\n330\n     So far  as the  second question  was concerned, counsel\nfor the\t appellant did\tnot make  any submission  before the\nCourt. The  Court also\tcould not find any substance in this\naspect. Therefore,  it was  not necessary  to deal with this\naspect of the matter. [332H; 333A]\n      So  far as the amount of Rs.13,94,982.46 on account of\ndemurrage and  wharfage was concerned, which was allowed, it\nappeared that  the total demurrage and wharfage charges paid\nby the\tCorporation to the Railways in respect of the wagons\ncleared by  the\t claimant  firm,  respondent  herein,  after\nobtaining such waiver as the Railways were persuaded to make\nwere Rs.15,63,863.21.  There was no dispute about the actual\npayment of the charges. The appellant's case was that it was\nentitled to  recover the  entire amount\t it had\t to  pay  on\naccount of  the demurrage  and\twharfage  charges  from\t the\nrespondent under clause 9(a) of the agreement. [333B-C]\n     Under clause 9(a) according to the appellant, the Agent\nwas liable  to make good any compensation\/demurrage\/wharfage\nas per\tRailway rates in force during the period of contract\nand other  charges or expenses that might be incurred by the\nCorporation on\taccount of  delay  in  loading\/unloading  of\ntrucks\/carts and  unloading\/loading  of\t wagons\t unless\t the\ndelay  was  for\t reasons  beyond  the  Agent's\tcontrol.  It\nappeared that  the appellant had periodically served notices\nupon the respondent of firm calling upon it to pay demurrage\nand wharfage  charges with  liberty prefer  objections. Such\nobjections as the respondent-firm preferred were disposed of\nby the\tDistrict Manager.  This procedure continued till the\nend of\tNovember, 1975. Then the respondent-firm went to the\nCivil Court  and obtained  discontinuance of all proceedings\nfor the\t recovery of  demurrage and  wharfage  charges.\t The\narbitrator noted  that as  a result  of the  hearings by the\nCorporation upto  November, 1975,  relief  to  the  tune  of\nRs.1,21,884.55 was  granted to\tthe respondent-firm  and the\nrecovery of Rs.45,996.20 was made from the respondent-firm's\nbills.\tThe   Corporation,  therefore,\tclaimed\t before\t the\narbitrator  recovery  of  the  remaining  or  the  claim  of\nRs.13,94,982.46. Counsel for the appellant drew this Court's\nattention to  clauses 9(a)  and (b)  of\t the  agreement\t and\nsubmitted that\tthe adjudication  made by  the\tManager\t was\nfinal and there was no dispute thereafter. According to him,\nno further deduction was possible from what had been granted\nby the Manager for determination on account of demurrage and\nwharfage charges,  nor was  it\tarbitrable  because  it\t was\nfinal. [334B-E]\n     It appears\t on the\t facts as recorded by the arbitrator\nin his\taward that  there was  adjudication  really  by\t the\nManager of the claims upto\n331\nNovember, 1975.\t Thereafter, there  could be no adjudication\nas  a\tresult\tof   injunction\t obtained  from\t the  Court.\nTherefore,  it\t appeared  that\t  there\t was   in  fact\t  no\nadjudication of\t all the disputes. The remaining points were\narbitrable because  of\tthe  amplitude\tof  the\t arbitration\nclause. It  was not  brought to the notice of the Court that\nthere was  an adjudication  by the  Manager of the claim for\nthe period beyond November, 1975, as mentioned hereinbefore.\nTherefore, the\tarbitrator was not in error in proceeding in\nthe manner  he did. There was no other aspect of law on this\naspect of the matter to which the attention of the Court was\ndrawn.\tThe   submission  on  this  aspect  was,  therefore,\nnegatived and the challenge to the award on this aspect must\nfail. [337C-D; 338B]\n     So far  as the  grant of  interest pendente lite in the\naward  was   concerned,\t reliance   was\t placed\t on  various\ndecisions  of\tthis  Court.  In  deference  to\t the  latest\npronouncement of  this Court,  which is\t a pronouncement  of\nthree  learned\tJudges,\t in  Executive\tEngineer  Irrigation\nGalimala &  Ors. v. Abaadute Jena, (J.T.<\/a> 1987 4 S.C. 8), the\nCourt held  that the grant of pendente lite interest in this\ncase was  was not  justified. Though  the award in this case\nwas a  speaking award,\tit was\tnot made clear on what basis\nthe interest  was awarded.  The arbitrator  was in  error in\ngranting the  interest in  the manner  he did  . It was true\nthat in\t specific terms there was no denial on this right to\ngrant interest,\t but there  was\t denial\t as  to\t get  it  in\naccordance with law.[338C-D; 340E-F]\n     In awarding  the interest\tthe arbitrator\tcommitted an\nerror of law. With this modification, the judgment and order\nof the High Court were affirmed. [340F-G]\n     Wadsworth v.  Smith, L.R.\tVol. VI\t Q.B. 332;  State of\nOrissa and others, v. Construction India, J.T. [1987] 4 S.C.\n588;  Executive\t Engineer  Irrigation  Galimala\t &  Ors.  v.\nAbaaduta Jena,\tJ.T.<\/a> 1987 4 S.C. 8, Firm Madan lal Roshanlal\nMahajan v.  Hukumchand Mills  Ltd., Indore,<\/a>  [1987] 1 S.C.R.\n105; State  of Madhya  Pradesh v.  M\/s. Saith  & Skelton (P)\nLtd.,<\/a> [1972]  3 S.C.R.\t233; M\/s. Ashok Construction Company\nv. Union of India,<\/a> [1971] 3 S.C.C. 66 and M\/s. Alopi Parshad\nJUDGMENT:\n<\/pre>\n
referred to.\n<\/p>\n
&
\n     CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 4096 of
\n1987.\n<\/p>\n
     From the  Judgment and  order  dated  2.6.1987  of\t the
\nCalcutta High Court in Appeal NQ. 344 of 1980.\n<\/p>\n
332<\/span><\/p>\n
     A.K. Sen,\tS.k.  Gambhir  and  Vivek  Gambhir  for\t the
\nAppellant.\n<\/p>\n
     Dr. Shankar Ghosh and Rathin Das for the Respondent.
\n     The Judgment of the Court was delivered by
\n     SABYASACHI MUKHARJI, J. Special leave granted.
\n     The respondent  was appointed  a transport and handling
\ncontractor  by\tthe  appellant\tsubject\t to  the  terms\t and
\nconditions  mentioned  in  three  successive  agreements  in
\nwriting entered\t into by  both the  parties. After  disputes
\narose between  the parties, as per the terrns of arbitration
\nclause an  arbitrator was  appointed to\t adjudicate upon the
\ndisputes. Both\tthe respondent and the appellant filed their
\nrespective claims  and counter-claims before the arbitrator.
\nAfter considering  the documents  and evidence\tfiled before
\nthe arbitrator,\t he made  and published an award which was a
\nspeaking one.  The arbitrator  did not allow the appellant’s
\nclaim for  demurrage and  wharfage charges  paid to Railways
\namounting  to  Rs.15,63,863.02\tby  reason  of\tthe  alleged
\nwrongful conduct  of respondent\t but the  arbitrator awarded
\nonly 55% of the claim. The arbitrator also did not allow the
\nappellant’s claim  for shortage\t in transit  but reduced the
\nclaim by  40% and  allowed  only  60%  of  it  amounting  to
\nRs.52,971.99. By  the award  the arbitrator  awarded to\t the
\nrespondent Rs.12,64,175.97  and pendente lite interest at 6%
\nper annum.  The appellant filed objections in the High Court
\nof Calcutta under sections 30 and 33 of the Arbitration Act,
\n1940 (hereinafter  called ‘the\tAct’) for  setting aside the
\naward. On 18th September, 19.80, the learned single judge of
\nthe High  Court by  his judgment  and order  set  aside\t the
\naward. There was an appeal to the Division Bench of the High
\nCourt. On  2nd June,  1987 the\tDivision Bench\tof the\tHigh
\nCourt allowed  the respondent’s\t appeal by  its judgment and
\norder and set aside the judgment of the learned single judge
\nand upheld  the award. Being aggrieved thereby the appellant
\nhas come up before this Court by special leave under Article
\n136  of\t the  Constitution.  While  issuing  notice  on\t the
\napplication under  Article 136\tof the\tConstitution it\t was
\nindicated that only three questions will be adjudicated upon
\nin this\t appeal viz.  Rs.13,94,982.46 which  was the  amount
\nallowed\t on   account  of  demurrage  and  wharfage  charges
\nmentioned  in\tthe  award   and  secondly,   the   sum\t  of
\nRs.2,35,769.46 and lastly on the question of interest.\n<\/p>\n
     So\t far  as  the  second  question\t of  the  matter  is
\nconcerned Sree A.K. Sen, counsel appearing for the appellant
\nhas not made any sub
\n333<\/span>
\nmission before us. We also cannot find any substance in this
\naspect. Therefore,  it is  not necessary for us to deal with
\nthis aspect of the matter.\n<\/p>\n
     So far  as the amount of Rs. 13,94,982.46 on account of
\ndemurrage and  wharfage is concerned, which was allowed, the
\naward dealt  with the question as set out in the paper-book.
\nIt appears  that the  total demurrage  and wharfage  charges
\npaid by\t the Corporation  to the Railways, in respect of the
\nwagons cleared\tby the\tclaimant  firm,\t respondent  herein,
\nafter obtaining\t such waiver  as the Railways were persuaded
\nto make was for Rs.15,63,863.21. The charges were alleged to
\nhave been paid under Credit Notes which were produced before
\nthe arbitrator.\t There\twas  no\t dispute  about\t the  actual
\npayment of the charges. The appellant’s case was that it was
\nentitled to  recover the  entire amount\t it had\t to  pay  on
\naccount of  the demurrage  and\twharfage  charges  from\t the
\nrespondent under clause 9(a) of the agreement.\n<\/p>\n
     Clauses 9,\t 9(a) and  9(b)\t of  the  agreement  are  as
\nfollows:\n<\/p>\n
\t  9. The  Agent shall commence to load and\/or unload
\n\t  all  the   wagons  and   trucks  as  well  as\t all
\n\t  streamers, flats,  barges and\t boats or  any other
\n\t  conveyance on\t the day  of these arrival and shall
\n\t  carry out the orders and directions of the Manager
\n\t  with\tall   possible\t despatch   and\t  shall\t  be
\n\t  responsible for  and make  good all  demurrage  or
\n\t  other waiting charges and expenses that may accrue
\n\t  and all  other charges  that may in the opinion of
\n\t  the Manager  be payable  because of or through any
\n\t  reasonable detention or delay.”\n<\/p><\/blockquote>\n
\t  “9(a)\t The   Agent  shall   be   responsible\t for
\n\t  unloading\/loading  the   wagons  within  the\tfree
\n\t  period  allowed  by  the  Railways  and  also\t for
\n\t  loading\/unloading for\t trucks\/carts or  any  other
\n\t  transport vehicles  expeditiously. The Agent shall
\n\t  be\t liable\t     to\t     make      good\t any
\n\t  compensation\/demurrage\/wharfage  as\tper  Railway
\n\t  rules in force during the period of contract other
\n\t  charges or  expenses that  may be  incurred by the
\n\t  Corporation\t on\taccount\t   of\t delay\t  in
\n\t  loading\/unloading\tof\ttruck\/carts\t and
\n\t  unloading\/loading of\tWagons unless  the delay  is
\n\t  for  reason\tbeyond\tthe   Agents’  control.\t The
\n\t  decision of  the manager  in this respect shall be
\n\t  final and binding on the Agent.”\n<\/p><\/blockquote>\n
\t  “9(b) The  Agent be  present himself\tor send\t his
\n\t  duly
\n334<\/span>
\n\t  authorised representative  to be  present  at\t all
\n\t  weighments A\twith which  the Agent  is  concerned
\n\t  under this  Agreement and  in\t case  he  fails  or
\n\t  chooses not  to do  so, no claim what soever shall
\n\t  lie against the Corporation in this regard.”<\/p><\/blockquote>\n
      Under  clause 9(a),  according to\t the appellant,\t the
\nAgent\t was\t     liable\tto     make\tgood\t any
\ncompensation\/demurrage\/wharfage\t as  per  Railway  rates  in
\nforce during  the  period  of  contract,  other\t charges  or
\nexpenses that  might  be  incurred  by\tthe  Corporation  on
\naccount of  delay in  loading\/unloading of  trucks\/carts and
\nunloading\/loading or wagons unless the delay was for reasons
\nbeyond the  Agent’s control.  It appears  that the appellant
\nand periodically  served notices  upon the  respondent\tfirm
\ncalling upon  it to  pay demurrage and wharfage charges with
\nliberty\t to   prefer  objections.  Such\t objections  as\t the
\nrespondent-firm preferred  were heard and disposed of by the
\nDistrict Manager.  This procedure  continued till the end of
\nNovember, 1975.\t Then the  respondent-firm went to the Civil
\nCourt and  obtained discontinuance  of all  proceedings\t for
\nrecovery of  demurrage and  wharfage charges. The arbitrator
\nnoted that  as a  result of  the hearings by the Corporation
\nupto November, 1975 relief to the tune of Rs.1,21,884.55 was
\ngranted to  the respondent-firm and recovery of Rs.46,996.20
\nwas made  from the respondent-firm’s bills. The Corporation,
\ntherefore,  claimed   before  the   arbitrator\trecovery  of
\nremaining of the claim of Rs.13,94,982.46.\n<\/p>\n
     The respondent  on the other hand claimed refund of the
\namount already deducted from the bills on the ground that it
\nwas not\t liable for  any part  of the demurrage and wharfage
\ncharges. The  claim of the respondent was that the demurrage
\nand wharfage  charges accrued  invariably  in  circumstances
\nbeyond its  control and accordingly under clause 9(a) of the
\nagreement it  could not be made liable for such charges. The
\narbitrator noted  that the  respondent-firm  had  impressive
\ndocumentary evidence in support of its case. It had produced
\nnumerous  letters   in\twhich  it  fully  explained  to\t the
\nauthorities concerned  the difficulties\t it was experiencing
\nin timely  clearance of goods from railway wagons and sheds.
\nIt was claimed that it had produced month-wise report of its
\nwork accounting\t for  nearly  all  cases  of  demurrage\t and
\nwharfage.  On  9th  of\tOctober,  1975\tthe  respondent\t had
\ninformed the  Corporation by  a\t letter\t Exhibit  128  which
\ninadvertently was  not marked  exhibit that  it was resuming
\nwork (there  had been  a  break\t in  his  contract)  on\t the
\ncondition that\tit would  not be required to clear more than
\n10 c.c.\t Or 4 box wagons, i.e. 200 m.t. approximately daily.
\nThis is\t a belated  and rather\tgrudging acceptance  of this
\ncondition by  the letter,  Exhibit 44  dated 3rd  of August,
\n1976.\n<\/p>\n
335<\/span><\/p>\n
     The Arbitrator  noted that from the letters and reports
\nit appeared  that timely  clearance was\t hampered, and often
\nmade impossible\t by arrival  of too  many wagons  at a time,
\ncongestion at  the sidings  and\t at  the  weighbridges\twith
\nconsequent detention  of lorries,  labour unrest and chronic
\nwant of\t space in  the Corporation’s  godowns and by others.
\nThe arbitrator\tnoted that  there  was\tinsistent  complaint
\nabout this  want of space in the Corporation’s godown, which
\nled to\tthe goods  being left  in railways  sheds  for\tdays
\ntogether incurring  unusually heavy  wharfage  charges.\t The
\nCorporation sometimes  prepared over ambitious programmes of
\nwork for  the contractors,  as if  unaware. Of\tthe existing
\nsituation. The\tarbitrator  noted  that\t the  appellant\t had
\nexamined several  witnesses from  the sidings.\tBut they did
\nnot according  to the  Arbitrator, prove anything beyond the
\nprocedure of  work generally  adopted at  the  sidings.\t The
\narbitrator further  noted about\t the foregoing\texplanations
\nthat the  very often the objection of the railway shed staff
\nto the\tclaimant regarding not clearing of the wagons timely
\nfrom the  railway shed\tbecause of  non-space there owing to
\nheavy stock  kept therein  remaining uncleared,\t and further
\nthat the  claimant under  the direction\t and  order  of\t the
\nrespondent being  given limited\t programme because  of\tnon-
\nspace in the receiving depots\/ godowns were causes of delay.
\nThe arbitrator\tnoted that  it would  be fair  to  make\t the
\nclaimant firm  liable for  only 25%  of\t the  demurrage\t and
\nwharfage charges  sought to be recovered by the Corporation,
\nleaving the  remaining 75%  to be  borne by  the Corporation
\nitself. Therefore,  out of  Rs.13,94,982.46 the Corporation,
\naccording   to\t  the\tarbitrator,   could   recover\tonly
\nRs.3,48,745.61. The  appellant felt  aggrieved\tthereby\t and
\nchallenges this\t grant of  25%. So far as respondent’s claim
\nfor refund of Rs.46.996.20 already recovered, the arbitrator
\nfelt  that   there  was\t no  ground  for  interference.\t The
\narbitrator noted  that after  hearing  the  claimant  firm’s
\nobjections the\tdeductions had\tbeen made. The claimant firm
\nhad been  granted relief  in respect  of Rs.1,21,884.55. The
\narbitrator had\tnot been  able to  ascertain  precisely\t the
\ntotal claim  of the appellant till the end of November, 1975
\nbut he\tnoted that  the sum  of Rs.46,996.20 represented not
\nmuch more  than 25%  of\t the  total  claim.  Therefore,\t the
\narbitrator noted  that the  claimant, namely, the respondent
\nwas not\t entitled to any refund and that the appellant could
\nrecover only  Rs.3,48,745.61 on\t account  of  demurrage\t and
\nwharfage charges. As mentioned hereinbefore that is the main
\ncontention  in\t this  challenge   before  this\t Court.\t The
\nappellant claimed  that it  should have been entitled to the
\nbenefit of Rs.13,94,982.46 and not to 25% of the same.\n<\/p>\n
     Sree Sen,\tcounsel for the appellant drew out attention
\nto clauses
\n336<\/span>
\n9(a) and  (b) as set out hereinbefore and submitted that the
\nrespondent was\tonly entitled to the amount as determined by
\nthe Manager which was described as final. Sree Sen submitted
\nthat according\tto clause  9(a) aforesaid  the\tadjudication
\nmade by\t the manager  was final\t and there  was\t no  dispute
\nthereafter and\ttherefore, there  could be  no determination
\nbeyond 25%.  He drew  our attention  to that  part of the 13
\nclause 9(a)  to the  following effect  “the decision  of the
\nmanager in  this respect  shall be  final and binding on the
\nAgent.” So  according to  Sree Sen  apart from what had been
\ngranted by  the Manager\t for  determination  on\t account  of
\ndemurrage and  wharfage charges,  no further  deduction\t was
\npossible nor was it arbitrable because it was final. He drew
\nour attention  to certain observation in Wadsworth v. Smith,
\nL.R. Vol.  . Vl\t Q.B. 332.  There by a written agreement the
\nplaintiff therein had agreed to build four houses on land of
\ndefendant and  the defendant to grant plaintiff a lease when
\nthe houses  were completed;  the architects of the defendant
\nfor the time being were to certify as to the progress of the
\nwork, and  if there  should  be\t any  unnecessary  delay  or
\nunsatisfactory conduct\ton the\tpart of\t the plaintiff\twith
\nregard to  the erection\t of the\t buildings, on any matter or
\nthing  connected  therewith  “the  fact\t of  such  delay  or
\nunsatisfactory conduct\tto be  ascertained  and\t decided  in
\nwriting by  the architects,  against  whose  decision  there
\nshall be  no appeal”, then it should be lawful for defendant
\nto employ  other persons  to execute  the works, and to sell
\nthe buildings  and lease  the land  to other  persons. On an
\napplication to\tmake the  agreement a  rule of\tcourt  under
\nsection 17 of the Common Law Procedure Act, 1854 of England,
\nit was\theld by\t Cockburn, C.J.,  Blackburn and\t Mellor, JJ.
\nthat  assuming\t the  agreement\t  to  be  “an  agreement  or
\nsubmission to  arbitration” within  the section,  the clause
\nthat there  was to  be no appeal against the decision of the
\narchitects amounted  to “words\tpurporting that\t the parties
\nintended that  it should  not be  made a rule of court.” The
\nquestion  was\traised\twhether\t the  agreement\t was  not  a
\nsubmission to arbitration. Cockburn, C.J. Observed that this
\nclause was  certainly more like a submission to arbitration’
\nit was\ton the confines of the two classes’ but on the whole
\nit  seems   to\tHis  Lordship  to  savour  more\t of  a\tmere
\narchitect’s  certificate  than\tof  a  judicial\t proceeding.
\nMoreover, even\tif this were a submission within section 17,
\nthe Chief  Justice thought  that it could not be made a rule
\nof court,  because it  was clear  that the  parties intended
\nthat the  matter should\t be left  to  the  decision  of\t the
\narchitects without  appeal; but\t to make  it a rule of court
\nwould be  to submit  the decision to the jurisdiction of the
\nCourt. Blackburn,  J. agreed.  His  Lordship  observed\tthat
\nwhere by  an agreement\tthe right  of one  of the parties to
\nhave or\t to do\ta particular thing was made to depend on the
\ndetermination of a third person, that
\n337<\/span>
\nwas  not   a  submission   to  arbitration,   nor  was\t the
\ndetermination an  award; but  where there  was an  agreement
\nthat any  dispute about\t a particular thin shall be enquired
\ninto and  determined by a person named, that might amount to
\na submission to arbitration, and the determination though in
\nthe form  of a\tcertificate, be\t an award. Hannen, J. was of
\nthe view  that this  is not  an agreement  or submission  to
\narbitration; the  clause in  question appeared to be no more
\nthan  an  extension  of\t the  ordinary\tclause\tin  building
\ncontracts, that\t the certificate  of the architect should be
\nconclusive as to work done and the mode of doing it.\n<\/p>\n
     If we proceed on this basis then the logical conclusion
\nof this\t would be  that where  there is\t a decision  by\t the
\nmanager as  in the instant case that would be final. Where a
\ndispute has  been adjudicated  by the manager in this aspect
\nthere was  nothing for\tthe arbitrator to decide. It appears
\nto us  on the  facts as\t recorded by  the arbitrator  in his
\naward that  there was  adjudication really by the Manager of
\nthe claims upto November, 1975. Thereafter there could be no
\nadjudication as\t a result  of injunction  obtained from\t the
\ncourt. Therefore, it appears to us that there was really, in
\nfact, no  adjudication of  all the  disputes. The  remaining
\npoints were  arbitrable because\t of  the  amplitude  of\t the
\narbitration clause.  The relevant arbitration clause in this
\ncase contained, inter alia, as follows: .\n<\/p>\n
\t  “In the  event of  any question or dispute arising
\n\t  under this  Agreement regarding  the\tconstruction
\n\t  thereof or  any clause herein or in respect of any
\n\t  act, matter  or thing\t relating to  this agreement
\n\t  the same shall be referred to the Sole Arbitration
\n\t  of any  person appointed  by the Managing Director
\n\t  of the  Food Corporation  of India  …………..
\n\t  The Award  of such  Arbitrator shall\tbe final and
\n\t  binding on the parties to this Agreement …..”<\/p><\/blockquote>\n
     The  point\t  there\t having\t been  decision\t before\t the
\nManager, that  disallowance of\tthe  claim  beyond  25%\t was
\nbeyond the  jurisdiction of  arbitration  was  not  agitated
\nbefore the  High Court.\t Prabir Kumar  Majumdar, J. speaking
\nfor the\t Division  Bench  of  the  High\t Court\tof  Calcutta
\nobserved at page 24 of the paper book as follows:\n<\/p>\n
\t  “It has  not been  brought to\t our notice  whether
\n\t  there has  been any  such decision by the Manager.
\n\t  Further, taking  all the  relevant materials\tinto
\n\t  consideration, the  learned arbitrator  has made a
\n\t  finding in respect of the appellant’s
\n338<\/span>
\n\t  claim and respondent’s counter-claim in respect of
\n\t  demur rage and wharfage charges.”<\/p><\/blockquote>\n
      It  has not  been brought to our notice that there has
\nbeen any  such decision\t by the Manager beyond the claim for
\nthe period  of November,  1975\tas  mentioned  hereinbefore.
\nTherefore, in  our opinion,  the arbitrator was not in error
\nin proceeding  in the  manner as  he did. There was no other
\naspect of  law on  this aspect\tof the\tmatter to  which our
\nattention was  drawn. The  submission  on  this\t aspect\t is,
\ntherefore, negatived.  The challenge  to the  award on\tthis
\naspect must, therefore, fail.\n<\/p>\n
     So far  as the  grant of  interest pendente lite in the
\naward is concerned, reliance was placed on various decisions
\nof this\t Court. Reliance  was placed  on State of Orissa and
\nothers v.  Construction India,\t(J.T.<\/a> 1987 4 S.C. 588) where
\nthe  award   of\t interest   from  the  commencement  of\t the
\nproceedings before  the Arbitrator  to the date of the award
\nwas disallowed\tin consonance  with the\t views expressed  by
\nthis Court  in the  case of  Executive\tEngineer  Irrigation
\nGalimala & Ors. v. Abaaduta Jena,) J.T.<\/a> 1987 4 S.C. 8).\n<\/p>\n
      Our  attention was  drawn by Dr. Ghosh counsel for the
\nrespondent firstly,  to the  decision in  the case  of\tFirm
\nMadanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore,<\/a>
\n[1967] 1  S.C.R. 105.  There the respondent had filed a suit
\nagainst the appellant claiming two sums as losses in respect
\nof two\titems and  interest on\tthe same.  The disputes were
\nreferred to  an arbitrator,  before whom  the respondent did
\nnot press for interest prior to the institution of the suit,
\nbut pressed  its claim\tfor the\t two sums and interests from
\nthe date  of the  institution of  the  suit  till  recovery.
\nBachawat, J.  speaking for  the three learned Judges of this
\nCourt held  that though\t in terms, section 34 of the Code of
\nCivil Procedure\t did not  apply to  arbitrations, it  was an
\nimplied\t term\tof  the\t reference  in\tthe  suit  that\t the
\narbitrator would  decide the  dispute according\t to law\t and
\nwould give such relief with regard to pendente lite interest
\nas the\tCourt could  give if  it decided  the dispute.\tThis
\npower of  the arbitrator,  it was  held,  was  not  fettered
\neither by  the arbitration  agreement or  by the Arbitration
\nAct, 1940.\n<\/p>\n
     Our attention  was also  drawn to\tthe decision  in the
\ncase of\t State of Madhya Pradesh v. M\/s. Saith & Skelton (P)
\nLtd.,<\/a> [1972] 3 S.C.R. 233. There disputes had arisen between
\nthe appellant  and the\trespondent  with  reference  to\t the
\nperformance of\ta contract  which provided  for arbitration.
\nSteps were taken to appoint arbitrators and an umpire.\n<\/p>\n
339<\/span><\/p>\n
The appellant  filed a\tpetition  in  the  District  Judge’s
\nCourt, having jurisdiction over the matter for Setting aside
\nthe nominations.  When the  matter came\t up to this Court in
\nappeal, this  Court appointed a sole arbitrator with consent
\nof the\tparties. Thereafter  in the  presence of counsel for
\nboth the  parties, this\t Court gave directions in the appeal
\nthat the  arbitration records be sent to the sole arbitrator
\nand later  extended the\t time for  making the award and gave
\ndirections regarding  the venue.  The  arbitrator  gave\t his
\naward, directing  the  payment\tof  a  certain\tsum  by\t the
\nappellant to  the respondent with simple interest at 9% from
\nthe date  anterior to  the reference  and filed the award in
\nthe Court  the next  day. One  of the  question\t that  arose
\nbefore\tthis  Court  was  whether  the\tarbitrator  had\t any
\njurisdiction to\t award the  interest from a date anterior to
\nthe date  of award  or reference.  This Court  held that the
\nclaim for  the payment\tof interest had been referred to the
\narbitrator. The\t contract did  not provide  that no interest
\nwas  payable   on  the\tamount\tthat  might  be\t found\tdue.
\nTherefore, the\trespondent was\tentitled under section 61(2)
\nof the\tSale of\t Goods Act, 1930, to claim interest from the
\ndate  on  which\t the  price  became  due  and  payable.\t The
\narbitrator had\tfound that the price had become payable from
\na date\tanterior to  the date  of the  award. Therefore, the
\naward of  interest from the anterior date was justified. The
\nCourt further held that the award of interest at 9% was also
\nnot  exorbitant\t  because  the\tparties\t themselves  claimed
\ninterest at 12%.\n<\/p>\n
     Our attention was also drawn to M\/s. Ashok Construction
\nCompany v.  Union of<\/a> lndia, [1971] 3 S.C.C. 66 where a bench
\nof three  learned Judges  at page 68 of the report held that
\nthe terms  of the  arbitration agreement did not exclude the
\njurisdiction of\t the arbitrator\t to entertain  a  claim\t for
\ninterest, on  the amount  due under the contract and on this
\nground this Court upheld the grant of interest.\n<\/p>\n
     Our  attention   was  drawn   by  Dr.   Ghosh  to\t the
\nobservations in\t the case of M\/s. Alopi Parshad & Sons, Ltd.
\nv. The\tUnion of  India,<\/a> [1960]\t 2 S.C.R.  793.\t This  Court
\nreiterated the\twell-settled principle\tthat  an  award\t was
\nliable to  be set  aside because of an error apparent on the
\nface of\t the award. An arbitration award may be set aside on
\nthe   ground of\t an error on the face of it when the reasons
\ngiven for  the C,  decision, either  in the  award or in any
\ndocument incorporated  with it,\t are based  upon  any  legal
\nproposition which is erroneous.\n<\/p>\n
     In a  recent decision, Chinnappa Reddy, J. speaking for
\na bench\t of  three  learned  Judges  in\t Executive  Engineer
\nIrrigation Galimala’s  case (supra)  at paragraph  15 of the
\njudgment considered the ques- ll
\n340<\/span>
\ntion of\t award of  interest by\tan arbitrator.\tThe  learned
\nJudge noted the decisions in Firm Madanlal Roshanlal Mahajan
\nv. Hukamchand  Hills Ltd. (supra) Ashok Construction Company
\nv. Union  of India,<\/a>  (supra. and the State of Madhya Pradesh
\nv.  M\/s.  Saith\t &  Skelton  Private  Limited,<\/a>\t(supra)\t and
\nexpressed the  view that  these\t were  cases  in  which\t the
\nreferences to arbitration were made by the court or in court
\nproceedings of\tthe disputes  in the  suit. It was held that
\nthe arbitrator\tmust be\t assumed in  these cases to have the
\nsame power  to award  interest as  the court. Therefore, the
\ngrant of pendente lite interest on the analogy of section 34
\nof the\tCivil Procedure\t Code was  permissible. In regard to
\ninterest prior\tto the\tsuit, it  was held  in most of these
\ncases that  since the Interest Act, 1839 was not applicable,
\ninterest could\tbe awarded  if there was an agreement to pay
\ninterest or  a usage  of trade having the force of law. This
\nCourt held  in the  last mentioned  case that  they are\t not
\nentitled to  claim interest  for the  period  prior  to\t the
\ncommencement of\t the arbitration  proceedings for the reason
\nthat the  Interest Act did not apply to their case and there
\nwas no\tagreement to  pay interest or any usage of trade. It
\nwas further  held that\tthe claimants  were not\t entitled to
\nclaim pendente\tlite interest  as the  arbitrator was  not a
\ncourt nor were the references to arbitration made in suits.\n<\/p>\n
     In deference  to the latest pronouncement of this Court
\nwhich is  a pronouncement  of three  learned Judges, we must
\nhold that  the grant  of pendente lite interest in this case
\nwas not\t justified. Though  the award  in  this\t case  is  a
\nspeaking award,\t it was\t not made  clear on  what basis\t the
\ninterest was  awarded.\tWe  are\t of  the  opinion  that\t the
\narbitrator was\tin error  in granting  the interest  in\t the
\nmanner he did. It is true that in specific term there was no
\ndenial of  this right to grant interest but there was denial
\nas to get it in accordance with law.\n<\/p>\n
     In the  aforesaid view  of the  matter so\tfar  as\t the
\ninterest of  the award\tis concerned  we are  of the opinion
\nthat in\t awarding the  interest the  arbitrator committed an
\nerror of  law. With this modification the judgment and order
\nof the\tHigh Court  are confirmed. The appeal is disposed of
\nin these terms without any order as to costs.\n<\/p>\n
S.L.\t\t\t\t\t Appeal disposed of.\n341<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Food Corporation Of India vs Surendra, Devendra & Mohendra … on 10 December, 1987 Equivalent citations: 1988 AIR 734, 1988 SCR (2) 327 Author: S Mukharji Bench: Mukharji, Sabyasachi (J) PETITIONER: FOOD CORPORATION OF INDIA Vs. RESPONDENT: SURENDRA, DEVENDRA & MOHENDRA TRANSPORT CO. DATE OF JUDGMENT10\/12\/1987 BENCH: MUKHARJI, SABYASACHI (J) BENCH: […]<\/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":[30],"tags":[],"class_list":["post-227216","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nFood Corporation Of India vs Surendra, Devendra & Mohendra ... on 10 December, 1987 - 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\/food-corporation-of-india-vs-surendra-devendra-mohendra-on-10-december-1987\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Food Corporation Of India vs Surendra, Devendra & Mohendra ... on 10 December, 1987 - 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