{"id":79959,"date":"2001-12-19T00:00:00","date_gmt":"2001-12-18T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/priya-holdings-co-p-ltd-vs-auto-general-engineering-co-on-19-december-2001"},"modified":"2017-02-04T05:41:38","modified_gmt":"2017-02-04T00:11:38","slug":"priya-holdings-co-p-ltd-vs-auto-general-engineering-co-on-19-december-2001","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/priya-holdings-co-p-ltd-vs-auto-general-engineering-co-on-19-december-2001","title":{"rendered":"Priya Holdings Co. (P) Ltd. vs Auto General Engineering Co. on 19 December, 2001"},"content":{"rendered":"<div class=\"docsource_main\">Delhi High Court<\/div>\n<div class=\"doc_title\">Priya Holdings Co. (P) Ltd. vs Auto General Engineering Co. on 19 December, 2001<\/div>\n<div class=\"doc_citations\">Equivalent citations: 2002 IIIAD Delhi 848, 2002 (2) RAJ 367<\/div>\n<div class=\"doc_author\">Author: V Aggarwal.<\/div>\n<div class=\"doc_bench\">Bench: V Aggarwal<\/div>\n<\/p>\n<pre><\/pre>\n<p>JUDGMENT<\/p>\n<p>V.S. Aggarwal. J.<\/p>\n<p>1. In pursuance of the arbitrator having filed the<br \/>\naward and the proceedings notices had been issued to<br \/>\nthe parties. Objections have been preferred by the<br \/>\nobjector (Auto General Engineering co.) which are<br \/>\nbeing contested.\n<\/p>\n<p>2. The relevant facts are that on 29th September,<br \/>\n1983 an agreement was entered into between the<br \/>\nparties. The objector entered into an agreement for<br \/>\nsale with the applicant (Priya Holdings Pvt. Ltd.)<br \/>\nfor sale of the total recoveries of the ship CAPT<br \/>\nCOASTAS E. Material terms of the agreement were:-\n<\/p>\n<p>&#8220;That the material terms and conditions of<br \/>\nthe Agreement are set out hereinafter :-\n<\/p>\n<p>(i) Liability to pay customs duty was that of<br \/>\nthe objector;\n<\/p>\n<p>(ii) The objector was to give irrevocable<br \/>\nauthority to a sister concern of the<br \/>\npetitioner, namely, M\/s Hindustan Ship<br \/>\nBreakers (hereinafter referred to as<br \/>\n&#8216;Hindustan&#8217;), enabling it to take deliveries<br \/>\nof the scrap of ship breaking;\n<\/p>\n<p>(iii) The liability of payment of sales-tax<br \/>\nand other levies and charges, if nay, on the<br \/>\nscrap of the ship was exclusively of the<br \/>\npetitioner;\n<\/p>\n<p>(iv) The consideration for selling the entire<br \/>\nscrap and any other material whatsoever of<br \/>\nthe ship was Rs. 62,00,000\/-. of which<br \/>\nRs. 6,00,000\/- was paid on signing of the<br \/>\nAgreement, Rs. 46,00,000\/- (Rupees Forty six<br \/>\nlacs only) was payable on the starting of the<br \/>\ndismantling work; and the balance sum of<br \/>\nRs. 10,00,000\/- was payable within 90 days<br \/>\nfrom the start of dismantling work. For the<br \/>\nsaid sum of Rs. 10,00,000\/- the petitioner was<br \/>\nto establish an unconditional irremovable and<br \/>\nwithout Recourse Internal Letter of<br \/>\nCredit\/Letter of Guarantee to the benefit of<br \/>\nthe objector through a Schedule Bank.&#8221;\n<\/p>\n<p>3. Shri B K Gupta had signed the agreement on<br \/>\nbehalf of the applicant because Hindustan was sister<br \/>\nconcern of the applicant. In pursuance of the<br \/>\nagreement the following considerations had been paid:\n<\/p>\n<p>(i) Rs. 6,00,000\/- by cheque dated 29.9.1983<br \/>\ndrawn on Corporation Bank;\n<\/p>\n<p>(ii) Rs. 45,00,000\/- by Demand Draft dated<br \/>\n7.11.1983 drawn on Corporation Bank;\n<\/p>\n<p>(iii) Rs. 10,77,500\/- by Cheque dated<br \/>\n7.11.1983 drawn Corporation Bank.\n<\/p>\n<p>4. The case of the complainant was that<br \/>\nrespondent had prepared a number of invoices for sale<br \/>\nof the recoveries of the ship. It was necessary to<br \/>\nprepare such invoices because the sale of the<br \/>\nrecoveries was subject to payment of sales tax in the<br \/>\nState of Gujarat. The rate of the sales tax depending on<br \/>\nthe type of scrap sold. One of the invoices dated<br \/>\n29th December, 1983 was with respect to the crane in<br \/>\nquestion. It was described as one number mobile crane<br \/>\npowered by internal combustion engine. The price of<br \/>\nthe crane was appearing from the invoice to be<br \/>\nRs. 9,70,720\/-. The sales tax was 7% &#8220;C&#8221; Tax was 3%<br \/>\nand surcharge 1% bringing the total to Rs. 10,77,500\/-.<br \/>\nThe claimant is alleged to have paid the said amount<br \/>\nvide cheque of 7th November, 1983. The claimants<br \/>\nassertions was that it did not get the possession of<br \/>\nthe crane because it was detained by the custom<br \/>\nauthorities. The respondent had declared the value of<br \/>\nthe crane to be only Rs. 50,000\/-. The crane was<br \/>\nstated to have still not been cleared. The applicant<br \/>\nclaimed Rs. 10,77,500\/- as the price of the crane with<br \/>\ninterest.\n<\/p>\n<p>5. As is apparent from the award, claim and the<br \/>\npleadings the respondents plea was that single<br \/>\nindivisible consideration for sale of Rs. 62 lakhs,<br \/>\npricing of parts of recoveries separately was<br \/>\ncommercially not feasible and physically impossible.<br \/>\nOnly one invoice was issued which was the one annexed<br \/>\nin the counter statement. All other invoices in the<br \/>\nstatement of claim of he claimant were alleged to be<br \/>\nfalse. It was pleaded that payment of sales tax is<br \/>\nthe germane in the context of the dispute. Regarding<br \/>\nthe sum of Rs. 10,77,500\/- purported to have been paid<br \/>\nby cheque respondents assertion was that on payment of<br \/>\nRs. 6 lakh on 29th September, 1983 and further sum of<br \/>\nRs. 45 lakhs on 7th November, 1983 there was a balance<br \/>\nof Rs. 11 lakhs. The claimant offered to pay the<br \/>\nbalance amount of Rs. 11 lakhs much prior to the<br \/>\nstipulated dated provided a discount of Rs. 22,500\/- was<br \/>\ngiven. It was accepted and therefore the payment of<br \/>\nRs. 10,77,500\/- was made.\n<\/p>\n<p>6. The learned arbitrator had gone into the<br \/>\nmaterial on the record and concluded that claimant is<br \/>\nentitled to recover from the objector a sum of<br \/>\nRs. 10,77,500\/-. Keeping in view the decision of the<br \/>\nSupreme Court in the  case of  <a href=\"\/doc\/1121664\/\">Executive Engineer<br \/>\nIrrigation v. Abaaduta Jena<\/a> 1987(2) SCALE 675 ***<br \/>\nthe interest as such had not been awarded.\n<\/p>\n<p>7. Objections as such have been filed alleging<br \/>\nthat the applicant at all time knew that the dispute<br \/>\nraised by the custom authorities was that crane was<br \/>\nnot required for operation of the ship as per<br \/>\nconditions laid down in various Import Trade Control<br \/>\nRegulations and Circulars. The applicant knew that<br \/>\nthere was no question of mis declaration of the true<br \/>\nvalue of the ship. It was further alleged that the<br \/>\napplicant did not produce Shri Vijay Prakash Garg who<br \/>\nwas the Assistant Branch Manager of the objector. He<br \/>\nwas not produced and adverse inferences could well<br \/>\nhave been drawn. Even Shri B K Gupta of Hindustan was<br \/>\nnot examined. It is reiterated in the form of<br \/>\nobjections that it was a single indivisible contract<br \/>\nand consideration was Rs. 62 lakhs. Ship CAPT COSTAS<br \/>\nE given, the arbitrator is alleged to have ignored the<br \/>\nmaterial evidence i.e. the letter of the applicant<br \/>\ndated 8th June, 1984 being the notice issued to the<br \/>\nobjector claiming Rs. 16,99,500\/- which clearly stated<br \/>\nin great details particulars of the disputes between<br \/>\nthe parties. From the said document it is patent that<br \/>\nthe claim of the applicant\/claimants could not<br \/>\nsucceed. Furthermore it is asserted that the<br \/>\narbitrator was in error in concluding that the<br \/>\nobjector could have raised the objections regarding<br \/>\nthe invoice being forged in the High Court. It has<br \/>\nbeen pointed that the said invoice in controversy has<br \/>\nnot been produced and that the arbitrator was totally<br \/>\nin error in concluding that Rs. 10,77,500\/- was due.<br \/>\nIn the reply filed the contentions of the objector<br \/>\nhave been controverter.\n<\/p>\n<p>8. The short question as already referred to<br \/>\nabove is as to whether the award is liable to be set<br \/>\naside in terms that the findings of the arbitrator are<br \/>\nerroneous. The principle of law in this regard are<br \/>\nnot much in controversy. Reference can well be made<br \/>\nto some of the precedents on the subject. A Division<br \/>\nBench of this court had considered this question in<br \/>\nthe case of  <a href=\"\/doc\/701009\/\">Delhi Development Authority v.<br \/>\nAlkaram, New Delhi AIR<\/a> 1982 Delhi 364. It was<br \/>\nreiterated that the arbitrator is the final Judge of<br \/>\nfact. The court is bound by the findings of fact and<br \/>\ncannot review the same unless they are totally not<br \/>\nsupported by evidence or there was no evidence in<br \/>\nsupport of the findings. It is not open to the court<br \/>\nto examine the adequacy of evidence which led the<br \/>\narbitrator to record his findings. The error must be<br \/>\napparent on the face of the record.\n<\/p>\n<p>9. In the case of  <a href=\"\/doc\/1015491\/\">Associated Engineering Co.<br \/>\nv. Govt. of Andhra Pradesh  Supreme<br \/>\nCourt<\/a> was also concerned with the question as to what<br \/>\nwould be an error apparent on the face of the record.\n<\/p>\n<p>10. The Supreme Court in this regard after<br \/>\nscanning through various precedents on the subject<br \/>\nalso held that :\n<\/p>\n<p> &#8220;If the arbitrator commits an error in the<br \/>\nconstruction of the contract, that is an<br \/>\nerror within his jurisdiction. But if he<br \/>\nwanders outside the contract and deals with<br \/>\nmatters not allotted to him, he commits a<br \/>\njurisdictional error. Such error going to<br \/>\nhis jurisdiction can be established by<br \/>\nlooking into material outside the award.<br \/>\nExtrinsic evidence is admissible in such<br \/>\ncases because the dispute is not something<br \/>\nwhich arises under or in relation to the<br \/>\ncontract or dependent on the construction of<br \/>\nthe contract or to be determined within the<br \/>\naward. The dispute as to jurisdiction is a<br \/>\nmatter which is outside the award or outside<br \/>\nwhatever may be said about it in the award.<br \/>\nThe ambiguity of the award can, in such<br \/>\ncases, be resolved by admitting extrinsic<br \/>\nevidence. The rationale of this rule is that<br \/>\nthe nature of the dispute is something which<br \/>\nhas to be determined outside and independent<br \/>\nof what appears in the award. Such<br \/>\njurisdictional error needs to be proved by<br \/>\nevidence extrinsic to the award.&#8221;\n<\/p>\n<p>11. Yet in another decision rendered in the  case<br \/>\nof  <a href=\"\/doc\/433889\/\">Steel Authority of India Ltd. v. J C Budharaja.<br \/>\nGovernment and Mining Contractor<\/a> .\n<\/p>\n<p>The same principle of law was reiterated and was  held:\n<\/p>\n<p>&#8220;Further, the Arbitration Act does not give<br \/>\nany power to the arbitrator to act<br \/>\narbitrarily or capriciously. His existence<br \/>\ndepends upon the agreement and his function<br \/>\nis to act within the limits of the said<br \/>\nagreement. In continental Construction Col<br \/>\nLtd. v. State of MP this court considered<br \/>\nthe clauses of the contract which stipulated<br \/>\nthat the contractor had to compete charges<br \/>\nat the rates stipulated in the contract<br \/>\nDespite this, the arbitrator partly allowed<br \/>\nthe contractor&#8217;s claim. That was set aside<br \/>\nby the court and the appeal filed against<br \/>\nthat was dismissed by this court by holding<br \/>\nthat it was jot open to the contractor to<br \/>\nclaim extra costs towards raise in prices of<br \/>\nmaterial and labour and that the arbitrator<br \/>\nmisconducted himself in not deciding the<br \/>\nspecific objection regarding the legality of<br \/>\nthe extra claim. In that case the court<br \/>\nreferred to the various decisions and<br \/>\nsuccinctly observed: (SCC p. 88, para 5)<\/p>\n<p>&#8220;If no specific question of law is referred,<br \/>\nthe decision of the arbitrator on that<br \/>\nquestion is not final however much it may be<br \/>\nwithin his jurisdiction and indeed essential<br \/>\nfor him to decide the question incidentally.<br \/>\nThe arbitrator is not a conciliator and<br \/>\ncannot ignore the law or misapply it in order<br \/>\nto do what he thinks is just and reasonable.<br \/>\nThe arbitrator is a tribunal selected by the<br \/>\nparties to decided their disputes according to<br \/>\nlaws and so is bound to flow and apply the<br \/>\nlaw, and if he does not he can be set right<br \/>\nby the court provided his error appears on<br \/>\nthe face of the award.&#8221;\n<\/p>\n<p>12. Similar was the findings recorded by the<br \/>\nSupreme Court in the case of  <a href=\"\/doc\/899181\/\">Arosan Enterprises Ltd.<br \/>\nv. Union of India and Anr.<\/a>  wherein<br \/>\nin paragraphs 36 and 37 the principle of law as to<br \/>\nwhen the court would be justified in interfering the<br \/>\naward was re-stated:\n<\/p>\n<p>36. Be if noted that by reason of a long<br \/>\ncatena of cases, it is now a well settled<br \/>\nprinciple of law that reappraisal of evidence<br \/>\nby the Court is not permissible and as a<br \/>\nmatter of fact exercise of power by the Court<br \/>\nto reappraise the evidence is unknown to a<br \/>\nproceeding under Section 30 of the<br \/>\nArbitration Act. In the event of there being<br \/>\nno reasons in the award, question of<br \/>\ninterference of the Court would not arise at<br \/>\nall. In the event, however, there are<br \/>\nreasons, the interference would still be not<br \/>\navailable within the jurisdiction of the<br \/>\nCourt unless of course, there exist a total<br \/>\nperversity in the award or the judgment is<br \/>\nbased on a wrong proposition of law: In the<br \/>\nevent however two views are possible on a<br \/>\nquestion of law as well, the Court would not<br \/>\nbe justified in interfering with the award.\n<\/p>\n<p>37. The common phraseology &#8220;error apparent<br \/>\non the face of the record&#8221; does not itself,<br \/>\nhowever, mean and imply closer scrutiny of<br \/>\nthe merits of the documents and materials on<br \/>\nrecord. The court as a matter of fact,<br \/>\ncannot substitute its evaluation and come to<br \/>\nthe conclusion that the arbitrator had acted<br \/>\ncontrary to the bargain between the parties.<br \/>\nIf the view of the arbitrator is possible<br \/>\nview the award or the reasoning contained<br \/>\ntherein cannot be examined. &#8230;.\n<\/p>\n<p>13. More recently the Supreme Court in the case<br \/>\nof  <a href=\"\/doc\/164262\/\">Sikkim Subba Associates v. State of Sikkim<\/a>  also held that if there are two views<br \/>\npossible or plausible views then it is legitimate that<br \/>\nthe arbitrator to accept one or the other and also for<br \/>\nthe court not to interfere. The Supreme Court held:\n<\/p>\n<p> &#8220;If there are two equally possible or<br \/>\nplausible views or interpretations, it was<br \/>\nconsidered to be legitimate for the<br \/>\narbitrator to accept one or the other of the<br \/>\navailable interpretations. It would be<br \/>\ndifficult for the courts to either<br \/>\nexhaustively define the word &#8220;misconduct&#8221; or<br \/>\nlikewise enumerate the line of cases in which<br \/>\nalone interference either could or could not<br \/>\nbe made. Courts of law have a duty and<br \/>\nobligation in order to maintain purity of<br \/>\nstandards and preserve full faith and credit<br \/>\nas well as to inspire confidence in alternate<br \/>\ndispute redressal method of arbitration, when<br \/>\non the face of the award it is shown to be<br \/>\nbased upon a proposition of law which is<br \/>\nunsound or findings recorded which are absurd<br \/>\nor so unreasonable and irrational that no<br \/>\nreasonable or right-thinking person or<br \/>\nauthority could have reasonably come to such<br \/>\na conclusion on the basis of the materials on<br \/>\nrecord or the governing position of law to<br \/>\ninterfere. So far as the case before us is<br \/>\nconcerned, the reference to the arbitrator is<br \/>\nfound to be  a general reference to adjudicate<br \/>\nupon the disputes relating to the alleged<br \/>\ntermination of the agreement by the State and<br \/>\nnot a specific reference on any particular<br \/>\nquestion and consequently, if it is shown or<br \/>\nsubstantiated to be erroneous on the face of<br \/>\nit, the award must be set aside.&#8217;<\/p>\n<p>14. The principle therefore can conveniently be<br \/>\nstated to be that regarding findings of fact the<br \/>\narbitrator is the final authority. The court will not<br \/>\nre-appraise the evidence or come to a different<br \/>\nconclusion. If the order is without jurisdiction or<br \/>\nit travels beyond the contract on basis of which the<br \/>\narbitrator has been appointed in that case only the<br \/>\ncourt would be justified in interference. If there<br \/>\nare erroneous decision not based on any evidence or no<br \/>\nreasonable person can come to such a finding the court<br \/>\ncan indeed interfere and it can well be stated in that<br \/>\nevent to be a legal misconduct.\n<\/p>\n<p>15. In the present case the arbitrator has looked<br \/>\ninto the evidence and the reasons that prompted the<br \/>\narbitrator to give the award in question were that the<br \/>\nprice of the crane as appearing from the invoice<br \/>\nannexed to the statement of claim was Rs. 9,77,500\/-<br \/>\nbesides sales tax and C tax. The arbitrator found<br \/>\nthat the objector had not dispute this sum. It was<br \/>\nfurther found that invoice of 29th December, 1993 was<br \/>\na genuine document and that the affidavit that was<br \/>\nfiled on behalf of the objector in this court in OMP<br \/>\n106\/84 and is 6129\/84 there was no allegation that the<br \/>\nsaid invoice was fabricated or a forged document. The<br \/>\narbitrator found that now the same could not be<br \/>\nassailed. The arbitrator had further recorded that<br \/>\nthe applicant had raised a loan on hypothecation of<br \/>\nthe crane expecting that it would be delivered shortly<br \/>\nand therefore the invoice was a genuine document and<br \/>\nlastly that objector had received on 7th November,<br \/>\n1983 Rs. 10,77,500\/- as the price of the crane.\n<\/p>\n<p>16. According to the learned counsel, Shri Garg<br \/>\nwas an employee of the objector was to be produced as<br \/>\na witness but the applicant later on did not produce<br \/>\nhim before the arbitrator and he went on to urge that<br \/>\nforgery has been committed in connivance with the said<br \/>\nShri Garg. When a person intends to examine a witness<br \/>\nand does not examine him there can be many reasons.<br \/>\nNecessarily it does not imply that adverse inference<br \/>\nshould be drawn against him. Shri Garg was an<br \/>\nemployee of the objector though it is being stated<br \/>\nthat he was instrumental in forging the invoice in<br \/>\nquestion but no action was taken against Shri Garg by<br \/>\nthe objector. When no action as such is being taken<br \/>\nagainst such a person indeed the obvious is clear that<br \/>\nsuch a contention cannot be accepted.\n<\/p>\n<p>17. In that event it had been urged that objector<br \/>\nwas allotted ship CAPT COSTAS E by Metal Scrap Trading<br \/>\nCorporation. The ship was not even within the shores<br \/>\nof India and because of the said fact the objector had<br \/>\nno physical means to verify the exact contents of the<br \/>\nship. He further contended that the petitioner had<br \/>\nnot produced before the High Court invoice in question<br \/>\nand therefore question of disputing the same to be a<br \/>\nforged one did not arise. The learned counsel further<br \/>\nhad a grievance that the arbitrator was in error in<br \/>\nrecording that Rs.  10,775 lakhs were paid by the<br \/>\npetitioner towards the value of the crane. So far as<br \/>\nthese contentions are concerned indeed the evidence is<br \/>\nnot to be re-appraised. Except for the argument that<br \/>\nthe invoice has not been produced before this court<br \/>\nand therefore the question of objecting to the<br \/>\nvalidity of the same other pleas required re-appraisal<br \/>\nof evidence. As already pointed out above the<br \/>\nre-appraisal of evidence will not be permissible<br \/>\nbecause in the present case as had been noticed above<br \/>\nfrom the resume of facts the arbitrator has considered<br \/>\nthe evidence and recorded a finding. Even if two<br \/>\nviews are possible this court will not interfere.<br \/>\nThere was invoices that were more than one and the<br \/>\nposition as set up by the arbitrator therefore could<br \/>\nhardly be described to be erroneous. There was not<br \/>\nevidence led by the objector that the invoices in<br \/>\nquestion on basis of which the amount was held to be<br \/>\ndue were forged. The invoices ran into series.<br \/>\nKeeping in view the same the findings are obvious that<br \/>\nthis court will not interfere in findings of the<br \/>\narbitrator.\n<\/p>\n<p>18. For these reasons the objections are<br \/>\ndismissed. The award is made a rule of the court and<br \/>\ndecree in terms of the award is passed. The applicant<br \/>\nwould be entitled to interest on the principle amount<br \/>\nfrom the date of the award till the final payment is<br \/>\nmade.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Delhi High Court Priya Holdings Co. (P) Ltd. vs Auto General Engineering Co. on 19 December, 2001 Equivalent citations: 2002 IIIAD Delhi 848, 2002 (2) RAJ 367 Author: V Aggarwal. Bench: V Aggarwal JUDGMENT V.S. Aggarwal. J. 1. In pursuance of the arbitrator having filed the award and the proceedings notices had been issued to [&hellip;]<\/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":[14,8],"tags":[],"class_list":["post-79959","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Priya Holdings Co. 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