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TMI Blog2019 (2) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow HTPL to lift goods from its godowns - Indeed, it is not the case of the Appellant that it only provided storage services to the Respondent by allowing the Respondent to store its goods in the warehouse of the Appellant (i.e. that it only acted as a warehouse for the Respondent). In fact, a series of correspondences amongst the Appellant, the Respondent and HTPL clearly reveals that the Appellant was also actively involved in the transaction in question entered into between the Respondent and HTPL, and as such was a beneficiary under their agreement. It is not open to the Appellant to argue that the agreement between the Respondent and HTPL was independent of the agreement dated 14.12.1993 between the Appellant and the Respondent and that the latter did not apply to such transaction - Moreover, as noticed in the Majority Award and also by the Courts, the oral evidence of the officers of the Appellant indicates that the Appellant did not make any effort to ensure that the letters of credits pertaining to the supplies made to HTPL were honoured, pointing towards gross negligence on the part of the Appellant. The view taken in the Majority Award, as confirmed by the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst a letter of credit (usance or standby), i.e. without advance payment, while maintaining that it was the total responsibility of the Appellant to ensure the bona fides of the letter of credit furnished and that the principal and interest were paid on the due date for the supplies made against the letter of credit. In case of a standby letter of credit, it was further specified that it was the Appellant s responsibility, in the event of nonpayment by the due date, to negotiate the standby letter of credit in a timely way and credit the sale proceeds to the Respondent. Interest was fixed at 18.25% per annum. 5. A further revision to the above terms was undertaken vide a meeting between the parties on 20.01.1994, the minutes of which indicate that the Appellant could thereafter extend credit to customers on its own terms and responsibility, and in case of credit being extended, payment to the Respondent was to be effected by the Appellant upon delivery of the copper rods to the customer. 6. The dispute in the instant matter pertains to supplies of the Respondent s copper rods made by the Appellant to Hindustan Transmission Products Ltd. (in short, HTPL ) after April 1995. Payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration from the customers, and to remit the same to the Respondent by deducting commission as agreed. Therefore, the direct agreement between the Respondent and its customer HTPL in the instant case would not be binding on the Appellant, and consequently could not have been subjected to the arbitration proceedings that led to the arbitral award dated 27.06.2001. 9. On the contrary, the case of the Respondent is that there is no such distinction within the nature of transactions undertaken by the Appellant on behalf of the Respondent. Moreover, it is submitted that though there was an agreement between the Respondent and HTPL, the terms of such agreement were communicated to the Appellant, upon whose acceptance of such terms the agreement dated 14.12.1993 stood modified to such extent. 10. Before proceeding further, we find it necessary to briefly revisit the existing position of law with respect to the scope of interference with an arbitral award in India, though we do not wish to burden this judgment by discussing the principles regarding the same in detail. Such interference may be undertaken in terms of Section 34 or Section 37 of the Arbitration and Conciliation Act, 1996 (for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, subsection (2A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. 12. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard, it was rightly observed in the Majority Award that the Appellant could not show under what separate agreement it was entitled to commission from such sales other than the agreement dated 14.12.1993, and for what services, if its only role in the transaction was to allow HTPL to lift goods from its godowns. 17. Indeed, it is not the case of the Appellant that it only provided storage services to the Respondent by allowing the Respondent to store its goods in the warehouse of the Appellant (i.e. that it only acted as a warehouse for the Respondent). In fact, a series of correspondences amongst the Appellant, the Respondent and HTPL clearly reveals that the Appellant was also actively involved in the transaction in question entered into between the Respondent and HTPL, and as such was a beneficiary under their agreement, as observed supra. The Appellant released the Respondent s goods to HTPL as per the directions of the Respondent without raising any objection, and thereafter engaged in correspondence in respect of the transaction. 18. It would be appropriate to refer to some such communications amongst the Appellant, the Respondent and HTPL for illustrative purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by the Courts is the Appellant s letter dated 24.01.1996 to the Respondent, informing it about the institution of a suit for damages by HTPL with respect to the quality of the goods supplied. This correspondence refers to HTPL as a customer introduced to the Appellant by the Respondent. Crucially, it was addressed in terms of the agreement dated 14.12.1993, which amounts to a clear admission that the sales made to HTPL were in terms of the said agreement. 22. In this view of the matter, it is not open to the Appellant to argue that the agreement between the Respondent and HTPL was independent of the agreement dated 14.12.1993 between the Appellant and the Respondent and that the latter did not apply to such transaction. 23. Moreover, as noticed in the Majority Award and also by the Courts, the oral evidence of the officers of the Appellant indicates that the Appellant did not make any effort to ensure that the letters of credits pertaining to the supplies made to HTPL were honoured, pointing towards gross negligence on the part of the Appellant. 24. Based upon the above discussion, in our opinion, the view taken in the Majority Award, as confirmed by the High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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