AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2009 (9) TMI 720
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....cheme 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 the requirements with SAIL. The scheme further stipulated that those who wanted material over and above what was likely to be available from indigenous sources and were willing to accept imported HR Coils were required to register the requirements separately. The scheme was in operation in respect of two quarters, namely, (i) July to September, 1988 and (ii) October to December, 1988. 3. The case of the respondent is that pursuant to the terms of said scheme, they submitted an application for 1500 metric tones of imported material for the first quarter(July to September, 1988). It is also their case that they furnished the financial cover in terms of the said scheme. 4. On September 15, 1988, SAIL informed their inability to arrange for the import against the indent for reasons beyond its control. 5. The respondent, thereafter, indented for supply of 1500 metric tonnes of imported material for the ....
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....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 May 9, 1994 passed by the Sub-Judge, Ist Class, Chandigarh by filing an appeal before the District Judge, Chandigarh who by its decision dated September 1, 1999 dismissed the appeal. 13. SAIL preferred revision petition before the High Court of Punjab & Haryana against the aforesaid decisions. It is pertinent to notice here that before the High Court on behalf of SAIL, two contentions were raised, namely, (i) that the arbitrator had committed error of jurisdiction when he entered a time barred claim and (ii) that the Arbitrator had awarded damages to the claimant under category 'A', 'AA' and 'C' by exercising his power beyond Clause 7.2 of the agreement. It was thus submitted that the arbitrator committed misconduct by going beyond the terms of the contract (7.2) and violating the provisions of the Contract Act. 14. The High Court was not persuaded by the two submissions made on behalf of th....
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....e 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 reasoned award. viii) The value of Arbitration shall be the place where the contract was concluded or at Calcutta, being the headquarters of the Central Marketing Organization, as it may be fixed by the Arbitrator at his discretion and the place so fixed by the Arbitrator shall be final and binding upon the parties to the contract. ix) In this clause, the expression, the Chief Executive of the Central Marketing Organisation, Steel Authority of India Ltd. means the Chief Executive of the Central Marketing Organization (by whatever name he may be designated at the relevant time) for the time being and includes, if there be no Chief Executive, or the Chief Executive is on leave or he is absent from duty or is not available for any reason whatsoever, the officer looking after the duties of the Chief Executive of the Central Marketing Organisation whether in addition to his other "f....
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....n 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, in this Clause is to be brought into play the cut off date would be 30th October, 1989 (i.e. July-September 1988 + one month grace period (October 1988) + 12 months i.e. upto 30th October, 1989 i.e. to say that after 30th October, 1989 in the event of non-supply, the order was to be treated as closed, but that too after the payment of applicable compensation i.e. 3%, as limited under Clause 7.2. In the instant case what has happened that on 15th July, 1988 itself the Respondent regretted inability to supply the material (vide C- 5, C-7 and C-9) despite confirmed and duly registered demand (C-3) by the claimant. No reference of any compensation Clause (7.2) was made nor any cheque for the amount of compensation at the given rate was sent nor the account of claimant was credited with the amount as per Clause 7.2. Obviously the case is a case of deliberate act of non-supply as 'rea....
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....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 unless he has given reasons for the award disclosing an error apparent on the fact of it. In the present case the arbitrator has reached the conclusion by interacting the contract. The conclusion cannot be termed as conscious disregard of the law or the provisions of the contract. The findings of the arbitrator that clause 7.2 of the scheme is not applicable on the facts and circumstances of the case is not perverse but based on reasoning. Similarly there is no error apparent on the face of record which would vitiate the award. In Sudarsan Trading Co. vs. Government of Kerala And Anr., AIR 1989 SC 890 (ibid) it was held 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, the award cannot be examined by the court and that the court has no jurisdiction to substitute its ....
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....e 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 ignored. The authority of law in Chuni Lal V. Mehta (ibid) would have been applicable only if it was held that clause 7.2 of the Contract was applicable. In Hindustan Tea Co. vs. M/s K. Shashikant & Co. AIR 1987 SC 81, it was held 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 would be not ground for settling aside the award. On the same analogy, even if the contention of the objector 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. In the similar way the contention that the provisions of Sale of Goods Act were not followed is also devoid of any merit because the arbitrator gave due weight to the respective contention of the parties and reached the conclusion ....
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.... 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 with the interpretation of clause 7.2 of the scheme. But as demonstrated above, the arbitrator concluded, and not perversely or unreasonably, that clause 7.2 of the scheme was not applicable to the facts of the case in hand. Therefore, it proceeded to examine the question of damages in paras 52 and 53 of the impugned judgment. 21. The contention of the learned counsel for the appellant is that not only has the arbitrator ignored the provisions of clause 7.2 of the contract, but he had also ignored the provisions of section 74 of the Contract Act wherein it has been stipulated that if a sum named in the contract is the amount to be paid in case of breach, or if the contract conditions or any other stipulation by way of penalty, the party complaining of the breach is only entitled to receive from the party who has broken the contract, a reasonable compensat....
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....rely 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 relied upon by the learned counsel for the petitioner, makes it abundantly clear that this clause has only covered one exigency regarding the delivery or non-delivery or late delivery of the goods. This clause gives power to the Arbitrator to award compensation starting from 0.25% to the upper limit of 2.01%. This clause never debars the Arbitrator from entertaining the contract and consequential losses which had been suffered by the respondent on account of non-delivery or late delivery of the goods. If on account of the act of the petitioner, the respondent-firm had suffered huge losses to itself for the benefit of its customers, certainly it has a right to recover the same. Be that as it may, I am not to look at the merits of the case but I have to examine whether the Arbitrator had exceeded beyond the realm of arbitration clause or clauses of the c....
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....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 of Fateh Chand. The Constitution Bench held thus: "8.................................................................. The Section is clearly an attempt to eliminate the sometime elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrorem is a penalty and the Court refuses to enforce it, awarding to the aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming a....
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....pplies 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 delivery of property in future, or for forfeiture of right to money or other property already delivered. Duty not to enforce the penalty clause but only to award reasonable compensation is statutorily imposed upon courts by Section 74. In all cases, therefore, where there is a stipulation in the nature of penalty for forfeiture of an amount deposited pursuant to the terms of contract which expressly provides for forfeiture, the court has jurisdiction to award such sum only as it considers reasonable, but not exceeding the amount specified in the contract as liable to forfeiture......" 23. In Oil and Natural Gas Corporation Ltd., while dealing with the aspects of liquidated damages, this Court considered the aforesaid Constitution Bench decisions in Chuni....
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.... 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 he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face. (iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal. (v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof. (vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award. (vii) It....
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.... 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 control or they declined to supply the materials on one ground or the other. The answer has to be plainly in the negative. It is well known that intention of the parties to an instrument has to be gathered from the terms thereof and that the contract must be construed having regard to the terms and conditions as well as nature thereof. Clause 7.2 that provides for compensation to the respondent for failure to supply or delayed supply of the materials by SAIL was never intended to cover refusal to deliver the materials of the supplies on the part of the SAIL. Refusal to supply materials by SAIL resulting in breach is neither contemplated nor covered in Clause 7.2. There is no impediment nor we know of any obstacle for the parties t....
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....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 arbitrator. Legal position is no more res integra that the arbitrator having been made the final arbiter of resolution of disputes between the parties, the award is not open to challenge on the ground that arbitrator has reached at a wrong conclusion. The courts do not interfere with the conclusion of the arbitrator even with regard to construction of a contract, if it is a possible view of the matter. The words "no award shall be set aside" in Section 30 mandate the courts not to set aside the award on the ground other than those specified in Section 30. In a case such as this, where the arbitrator has given elaborate reasons that compensation clause 7.2 is not attracted for the breaches for which the compensation has been claimed b....
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....e 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 the appellant cannot be permitted to raise a contention before this Court in an appeal by special leave which was not raised before the High Court. This contention is not even indirectly or remotely connected with the plea of limitation that was canvassed before the High Court. For another, even otherwise, we find no merit in the submission of the learned senior counsel that fresh claim was made by the respondent on September 12,1991. In the claim petition filed by the respondent, in paragraph 18, it has been stated that in view of non availability of certain details which are in possession of the respondent and otherwise, the claimant reserves its right to add, amend and/or modify the statement of claims. Consequent upon the r....