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TMI Blog2009 (9) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 5241 of 2002 - - - Dated:- 9-9-2009 - R. M. Lodha And Tarun Chatterjee, JJ. JUDGMENT Steel Authority of India Ltd. (SAIL) has preferred this appeal by special leave aggrieved by the judgment of High Court of Punjab and Haryana passed on May 15, 2001 whereby the learned Single Judge dismissed Revision Petition preferred by the present appellant against the judgment dated September 1,1999 passed by District Judge, Chandigarh affirming the judgment and order dated May 9, 1994 passed by the Court of Sub-Judge, 1st Class, Chandigarh dismissing the objections preferred by the present appellant under Sections 30/33 of the Indian Arbitration Act, 1940 and the award dated September 7, 1993 given by the sole arbitrator was made rule of the Court. 2. Brief narration of facts is necessary before we embark upon the contentions raised on behalf of the appellant. On April 18, 1988, SAIL formulated a scheme entitled Full Requirement Supply Scheme (for short, the Scheme ). The said scheme is said to have been designed for meeting the full requirements of HR Coils/Skolps to the customers. Those who wanted to avail the said material as per the scheme were required to register th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... biased in favour of the claimant; that he committed a jurisdictional error in adjudication of claims for the period from July to September, 1988 and granting claim in this regard when there was no pre-existing dispute; that the arbitrator entertained claim in respect of future disputes i.e. disputes not existing at the time of reference; that he went into constitutional questions such as discrimination, etc. which he had no jurisdiction to decide; that he ignored the terms of contract and returned the findings contrary to the express terms thereof; that the arbitrator failed to call for material documents and gave the award which is perverse and based on no evidence and that he committed jurisdictional error by ignoring the express term of the contract, particularly Clause 7.2 and the provisions of the Contract Act. 11. The Sub-Judge, Ist Class, Chandigarh, after hearing the parties overruled the objections raised by SAIL and made the award rule of the Court on May 9, 1994. The Sub-Judge, Ist Class, Chandigarh directed that claimant shall be entitled to interest @ 12% per annum from the date of the judgment until realization. 12. SAIL challenged the judgment and order dated Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her arbitrator in place of the outgoing arbitrator in the manner aforesaid. iii) It is further a term of his contract that no person other than the Chief Executive of the Central Marketing Organisation, Steel Authority of India Ltd. or his nominee as aforesaid, shall act as Arbitrator and that, if for any reason that is not possible, the Chief Executive of the Central Marketing Organisation, Steel Authority of India Ltd. shall have the right to nominate/appoint another person as second Arbitrator and if the second Arbitrator also fails to arbitrate for any reason, what so ever the matter is not to be referred to Arbitration to all. iv) The arbitrator may from time to time, with the consent of all the parties to the contract enlarge the time for making the award. v) Upon every and any such reference, the assessment of costs incidental to the reference and award respectively shall be in the discretion of the Arbitrator. vi) Subject as aforesaid, the Arbitration Act, 1940 and the Rules thereunder and any statutory modifications thereof, for the time being proceedings under this clause. vii) If the value of the claim in a reference exceeds Rs.1 lakh, the Arbitrator shall give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Contract, the arbitrator considered the matter thus: 19.14. I have given my careful consideration to the arguments of the counsels for the parties. I find that the compensation was to be paid by the Respondent within a period of three months from the date of completion of the transaction. In case the order is not executed within 12 months from the expiry of the grace period, the same was treated as closed after payment of compensation as due. It is proved on record that no supply was made for July- September 1988 quarter against the duly registered indent demand placed by the claimant and within 15 days of the beginning of the quarter itself i.e. 15.7.1988, the Respondent intimated that the material will not be supplied to the claimant. The case, therefore, cannot fall within the ambit of the relevant terms contained in the compensation Clause reproduced above whereby, in case the order is not executed within 12 months after the expiry of the grace period the same was to be treated as closed and that too after payment of applicable compensation. Neither, it is a case of delayed supply (for July September 1988 quarter s booked). 19.15. In the instant case even otherwise, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eave the matter to rest without going into the question of unconscionability. 17. The Sub-Judge, Ist Class, Chandigarh while dealing with the objections of the appellant with regard to Clause 7.2 considered the matter thus: 51. If the above observations of the arbitrator are read carefully it would become clear that he never out stepped the confines of the contract, he has remained inside the parameters of the contract and has construed the clause 7.2 thereof. If he has committed any error in the construction of the contract, that is an error within his jurisdiction. Therefore, the authority of law in Associated Engineering Co. vs. Government of Andhra Pradesh (ibid) is of no help to the objector. In that case the error had arisen not by misreading or mis-construing or by mis-understanding the contract but by acting contrary of what was agreed. In that case the arbitrator had traveled outside the permissible territory not by construction of the contract but by merely looking at the same. It was held by Hon ble Supreme Court that if the arbitrator remained inside the parameters of the contract and has construed the provisions of the contract, his award be interfered with unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sums specified and claim instead a sum of money which was not ascertained at the date of breach. Learned counsel further argued that the arbitrator proceeded contrary to the settled principle of law that damages for breach of contract by seller by failure to deliver goods are confined to the difference between the contract price of the goods and the market price of the goods if the same are available in the market. Learned counsel pointed out that in the present case the claimant has specifically admitted that the goods were available in the market. It was, therefore, the duty of the claimant to purchase the said goods from the market and the SAIL could have only been made liable for the difference if any between the contractual price and market price. 53. To my mind, in view of my above finding, there is no substance in the contention of the objector that the arbitrator ignored the provisions of Section 74 of the Contract Act. Once the arbitrator held that clause 7.2 of the Contract was not applicable on the facts and circumstances, there can be no question of any liquidated damages. Resultantly it cannot be said that provisions of Section 74 of the Contract Act have been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the scheme are not applicable to the facts and circumstances of the present case, cannot be said to be perverse. These are manifestly based on sound reasoning which cannot be said to be perverse. Surely there is no error apparent on the face of the record. 19. In AIR 1989 SC 890 Sudarsan Trading Co vs. Government of Kerala, it inter-alia ruled that if on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, then the award cannot be examined by the Court, and the Court has got no jurisdiction to substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. It was further ruled ibid that by purporting to construe the contract, the Court cannot take upon itself the burden of saying that this was contrary to the contract. So the learned trial Court was justified in holding that the arbitrator had not exceeded his jurisdiction, nor he had traveled outside the bounds of the contract while interpreting clause 7.2 of the scheme. 20. Surely the quantum of damages is closely interrelated wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of this case, there was no question of any liquidated damages and resultantly it cannot be said that the provisions of Section 74 of the Contract Act had been ignored. According to the learned trial Court, the authority of Chuni Lal V. Mehta case (ibid) would have been applicable only if it was held that clause 7.2 of the contract was applicable. It is further observed by it that in AIR 1987 SC 81 Hindustan Tea Co. vs. M/s K. Shashikant Co., it was ruled that where a reasoned award is challenged on the ground that the arbitrator acted contrary to the provisions of Section 70 of the Contract Act, it could be no ground for setting aside the award. Therefore, on the same analogy, the learned trial Court was not unjustified in concluding that even if the contention of the Appellant is accepted, the present award cannot be set aside merely on the ground that the arbitrator acted contrary to the provisions of Section 74 of the Contract Act. 19. Learned single Judge of the High Court while dealing with the second contention (concerning clause 7.2) put forth before him on behalf of SAIL recorded finding thus: Thus, a reading of the above clause which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing Co., Ltd. AIR 1962 SC 1314 and Fateh Chand vs. Balkishan Dass AIR 1963 SC 1405. He also relied upon decisions of this Court in Oil Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. (2003) 5 SCC 705 and Tarapore Co. vs. State of M.P. (1994) 3 SCC 521. 21. In Chunilal V. Mehta Sons, the Constitution Bench considered Section 74 of the Contract Act and held that right to claim liquidated damages is enforceable under Section 74 of the Contract Act and where such a right is found to exist, no question of ascertaining damages really arises. It was held that where parties have deliberately specified the amount of liquidated damages there can be no presumption that they, at the same time, intended to allow the party who has suffered by the breach to give a go-by to the sum specified and claim instead a sum of money which was not ascertained or ascertainable at the date of the breach. While construing Clause 14 therein, the Court held that by providing for compensation in express terms, the right to claim damages under the general law is necessarily excluded. 22. Section 74 of the Indian Contract Act fell for consideration before the Constitution Bench again in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. 11. Before turning to the question about the compensation which may be awarded to the plaintiff, it is necessary to consider whether Section 74 applies to stipulations for forfeiture of amounts deposited or paid under the contract. It was urged that the section deals in terms with the right to receive from the party who has broken the contract reasonable compensation and not the right to forfeit what has already been received by the party aggrieved. There is however, no warrant for the assumption made by some of the High Courts in India, that Section 74 applies only to cases where the, aggrieved party is seeking to receive some amount on breach of contract and not to cases where upon breach of contract an amount received under the contract is sought to be forfeited. In our judgment the expression the contract contains any other stipulation by way of penalty comprehensively applies to every covenant involving a penalty whether it is for payment on breach of contract of money or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Engineering Co. vs. Govt. of A.P. (1991)4 SCC 93 and Managing Director, J K Handicrafts, Jammu vs. Good Luck Carpets (1990) 4 SCC 740 and held that where an arbitrator travels beyond a contract, the award would be without jurisdiction and the same would amount to misconduct and such award would become amenable for being set aside by a Court. 25. In Sudarsan Trading Co., this Court held that an error by the arbitrator relatable to interpretation of the contract is not amenable to correction by courts. 26. It is not necessary to multiply the references. Suffice it to say that the legal position that emerges from the decisions of this Court can be summarised thus: (i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a Court. (ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award. (iii) If a specific question of law is submitted to the arbitrator and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mages will not be applicable at all. 29. Insofar as booking of July-September, 1988 quarter by the respondent is concerned, it is an admitted position that the appellant (SAIL) declined the supply of materials i.e. 1500MT of 2mm thickness HR coils on the ground of reasons beyond control . The arbitrator in the award observed that SAIL has admitted that the demand was validly registered by the claimant; that material was available in abundance specially from domestic source and that supplies were made to others ignoring the claim of the present respondent. The arbitrator held that the intimation of the SAIL to the present respondent that the material will not be supplied to the claimant cannot fall within the ambit of Clause 7.2. 30. Although it has been strenuously urged on behalf of the appellant that stipulations contained in Clause 7.2 are comprehensive enough to include all types of breaches, on a careful consideration thereof, we are unable to accept the submission made on behalf of the appellant. Can it be said that SAIL intended to provide for liquidated damages in the contract even in a situation where they were unable to make supply of materials for the reasons beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usal on the part of SAIL to supply materials in July-September, 1988 quarter does not fall within the ambit of relevant terms contained in the compensation Clause (7.2), by no stretch of imagination can be said to be an absurd view. The arbitrator s view about nonapplicability of Clause 7.2 for refusal to supply materials in July-September, 1988 quarter and delayed supply of materials for October-December, 1988 quarter is founded on diverse grounds elaborately discussed in the award. Whether this is or is not a totally correct view is really immaterial but such view is a possible view that flows from reasonable construction of Clause 7.2. The view of the arbitrator being possible view on construction of Clause 7.2, and having not been found absurd or perverse or unreasonable by any of the three Courts, namely , Sub-Judge, District Judge and the High Court, we are afraid, no case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution. 32. Once the arbitrator has construed clause 7.2 in a particular manner, and such construction is not absurd and appears to be plausible, it is not open to the courts to interfere with the award of the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later on appointed Shri K.P. Bhaumik as Shri K. Janardhana submitted his resignation. Learned senior counsel submitted that the claim submitted on November 3, 1989, pertained to the first quarter and for the first time, after the arbitration proceedings had made substantial headway, the claimant preferred an application designated as quantification of claims thereby trebling the original claim of Rs. 64 lacs to Rs.175 lacs and introducing the claim in respect of first quarter (July-September, 1988). He, thus, strenuously urged that arbitrator had no jurisdiction to address the fresh claims made on September 12, 1991. 35. We are not persuaded by the aforenoted submission of the learned senior counsel for the appellant for more than one reason. For one, the aforesaid argument was not at all canvassed before the High Court. A perusal of the judgment of the High Court would show that only two contentions were raised there, namely; (i) that arbitrator committed error of jurisdiction when he entered a time barred claim and (ii) that the arbitrator awarded damages to the claimant under category A , AA and C by exercising his power beyond Clause 7.2 of the agreement. We are afraid t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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