TaxTMI 
TaxTMI 
2011 (3) TMI 1759
X X X X Extracts X X X X
X X X X Extracts X X X X
....996; and (iii) Consignment Stockist Agreement dated 12.07.1997 effective from 01.04.1997 for a period of five years. Under the Consignment Stockist Agreement, Appellant had been appointed as Consignment Stock Agent in Punjab, Haryana, Himachal Pradesh, Uttar Pradesh, Rajasthan, Union Territory of Delhi and Jammu and Kashmir to sell directly or indirectly to persons or firms located in those Territories. Consignment Stock Agent was required to send the account sale accompanied by Demand Draft for the sale amount after deducting 20% commission and admissible expenses. If it fails to remit the amount, it has to pay interest at 20% per annum. Consignment Stockist Agreement dated 12.07.1997 contains Arbitration clause that is if any dispute arises between the parties, by the Managing Director of the 1st Respondent's Company or his nominee. 1st Respondent has been consigning its Leather Chemicals to the Appellant for sale as per the agreement. Inspite of supply of goods to the Appellant which in turn has been sold by the Appellant, the amounts due and payable to the 1st Respondent has not been paid. There were also cer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mant is entitled to Rs. 95,02,333.54 towards overdue interest for delayed payments. Third Claim : As per Ex.C3, Appellant is bound to return the unsold Value of goods or pay their value to the 1st Respondent. As unsold goodsper Ex.C13, the remittance price of the stocks as on 31.8.1999 is Rs. 15,02,301.15. Therefore, 1st Respondent-Claimant is entitled to Rs. 15,02,301.15 towards the value of unsold stocks. Thus 2nd Respondent-Arbitrator has passed the Award for a total sum of Rs. 2,85,01,745.00. On the amount awarded, Appellant was directed to pay interest at the rate of 18% p.a. from the date of claim i.e. 21.12.1999 till the date of payment. 5. Challenging the Award, Appellant filed O.P.No.197 of 2001 under Sec.34 of Arbitration and Conciliation Act, 1996. Award was challenged mainly on two grounds:- (i)Lack of opportunity to participate in the hearing particularly, no notice of hearing on 24.6.2000 was given; (ii)Only Consignment Stockist Agreement dated 12.7.19997 effective from 01.4.1997 contains Arbitration clause and while so, the 2nd Respondent-Arbitrator went beyond the scope of reference and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mr.B.T.Seshadri, learned counsel for Appellant has submitted that as per Sec.34(2)(a)(iii) of Arbitration Act, lack of proper notice of appointment of Arbitrator or of arbitral proceedings or some other inability to present the case would vitiate the Award. Learned counsel for Appellant would contend that no notice was given for the adjourned hearing on 24.06.2000 and in the absence of parties while adjourning the case, Arbitrator has to give notice for the adjourned date and non-issuance of notice for the hearing on 24.06.2000 would have effect of vitiating the Award. 10. Drawing our attention to the proceedings of 2nd Respondent-Arbitrator, learned counsel for Appellant would further contend that admittedly, Appellant did not attend the hearing on 03.06.2000 and 2nd Respondent-Arbitrator ought to have given notice of next hearing date 24.06.2000 and because of non-issuance of notice, Appellant was "unable to present his case" and the Award is liable to be set aside for "lack of proper opportunity". 11. For setting aside the Award, Sec.34(2)(a)(iii) of Arbitration Act covers three inter-related as well as separate grounds:- (1)lack of proper notic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a party's submissions or evidence is needlessly long, repetitive, focuses on irrelevant issues or is sought to be made over an extended period of time? What if a party ignores procedural deadlines imposed by the tribunal but maintains he still has points to put before it in support of his case? Inevitably each situation has to be dealt with in it own context but the following general considerations should be taken into account.' "23. For constituting a reasonable opportunity, the following conditions are required to be observed: 1)Each party must have notice that the hearing is to take place. 2)Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses. 3)Each party must have the opportunity to be present throughout the hearing. 4)Each party must have the opportunity to present evidence and argument in support of his own case. 5)Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument. 6)The hearing must, unless the contrary is expressly agreed, be the occasion on which th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....subject-matter to be dealt with, and so forth". Since then, this Court has consistently applied the principle of prejudice in several cases. The above ruling and various other rulings taking the same view have been exhaustively referred to in State Bank of Patiala v. S.K.Sharma. In that case, the principle of 'prejudice' has been further elaborated. The same principles has been reiterated again in Rajendra Singh v. State of M.P." 14. Dealing with the question of "reasonable opportunity" and that "principles of natural justice" must not be stretched too far, in CDJ 2003 SC 809 [Sohan Lal Gupta (dead) through L.Rs. and others v. Smt. Asha Devi Gupta and others], the Supreme Court held that "parties should not only prove that he was not given proper notice, but also to show that he was seriously prejudiced thereby." 15. Grievance of Appellant is that he has not been given proper opportunity to present his case before the 2nd Respondent-Arbitrator and adduce evidence in support of his case. The copy of Minutes/Proceedings of the 2nd Respondent-Arbitrator was produced before us. By perusal of the same, the various sittings/gist of pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Pointing out that Appellant was already set exparte and that he has to take steps to set aside the exparte order by appearing before the Arbitral Tribunal and then seek adjournment of the case, Arbitrator adjourned the matter to 03.06.2000. Notice was also sent to the Appellant regarding adjournment of the matter to 03.06.2000. Only thereafter enquiry was conducted and Award was passed on 24.07.2000. Proceedings of the 2nd Respondent-Arbitrator clearly shows that Appellant was well aware of the proceedings on 20.05.2000. In fact, notice was also sent to the Appellant regarding adjournment of the matter to 03.06.2000. As pointed out by the learned single Judge, Appellant should have taken steps to find out the outcome result on the basis of the letter dated 19.05.2000. Having not taken any steps, Appellant cannot contend that no notice was given for the hearing held on 03.06.2000 and 24.06.2000. Award cannot be challenged on the ground that "no sufficient opportunity was given to the Appellant". 17. Section 25 of Arbitration and Conciliation Act, 1996 carries the provisions as to the effect of a party's default. An Arbitrator is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d], the Calcutta High Court summarised the principles which govern the matter as follows:- "If a party to an arbitration agreement fails to appear at one of the sittings, the arbitrator cannot or, at least, ought not to, proceed exparte against him at that sitting. Where the non-appearance was accidental or casual, the arbitrator ought ordinarily to proceed in the ordinary way, fixing another date of hearing and awaiting the future behaviour of the defaulting party. If, on the other hand, it appears that the defaulting party had absented himself with a view to preventing justice or defeating the object of the reference, the arbitrator should issue a notice that he intends at specified time and place to proceed with the reference and that if the party concerned does not attend, he will proceed in his absence. But, if after making such a peremptory appointment and issuing such a notice, the arbitrator does not in fact proceed ex parte on the day fixed, but fixes another subsequent date, he cannot proceed ex parte on such subsequent date, unless he issues a similar notice in respect of that date as well. If he issues a similar notice and the part....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to the proceedings to co-operate to resolve the disputes at the earliest point of time. Considering the conduct of the Appellant, it cannot be said that 2nd Respondent-Arbitrator committed a misconduct in the matter of passing the Award. Referring to number of decisions, the learned single Judge rightly held that the Award cannot be assailed on the ground of "want of sufficient opportunities" and we do not find any reason warranting interference. 23. Contention regarding excess of jurisdiction [S.34(2)(a)(iv) of Arbitration Act] - Appellant entered into three agreements with the 1st Respondent on 01.08.1995 viz., Stockist Agreement [Ex.C1] to be commenced with effect from 1st April, 1995 and on 20.03.1996 [Ex.C2]-Consignment Stockist Agreement for a period of three years and yet another Agreement viz., Consignment Stockist Agreement dated 12.07.1997 [Ex.C3] with effect from 1st April, 1997 for a period of five years. As regards, Agreement No.1 [Ex.C1], admittedly, there was no clause for Arbitration. So far as, Agreement Nos.2 and 3 [Exs.C2 and C3] are concerned, Arbitration clauses have been incorporated. The said Arbitration cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 18,70,701.01 was in respect of the Consignment Stockist Agreement dated 01.08.1995 which does not contain Arbitration clause and while so, 2nd Respondent-Arbitrator went beyond the scope of reference to Arbitration. It was further submitted that the claim which was referred to the 2nd Respondent-Arbitrator is only in respect of the Consignment Stockist Agreement dated 12.07.1997 and the claim arising out of the Stockist Agreement dated 01.08.1995 cannot be in connection with or arising out of the Consignment Stockist Agreement dated 12.07.1997 as the agreements dated 01.08.1995 and 12.07.1997 wholly operated on different field. In other words, the contention of the Appellant is that the Agreement dated 01.08.1995 is a Stockist Agreement and the other agreement dated 12.07.1997 is a Consignment Stock Agency Agreement, the finding of the learned single Judge is erroneous. 27. Merits of the above contention is to be considered in the light of Sec.16 (3) of Arbitration Act. Sec.16(3) reads as follows:- "Sec. 16 (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 12.07.1997 [Ex.C3] with effect from 1st April, 1997 for a period of five years. The said agreement was for the purpose of distribution of the products of 1st Respondent in the Union Territory of Delhi, Punjab, Haryana, Himachal Pradesh, Uttar Pradesh, Rajasthan and Jammu & Kashmir. 29. Contention of Appellant is that the agreements are different and one has no connection with the other. Further contention is that the agreement dated 01.08.1995 is the "Stockist Agreement" and the other agreement dated 12.07.1997 is the "Consignment Stockist Agency Agreement" and therefore, the Stockist Agreement dated 01.08.1995 cannot be said to be in connection with or arising out of the agreement dated 12.07.1997. Appellant mainly relies upon the letter written by the Arbitrator dated 19.12.1999. Case of the 1st Respondent is that in the claim statement, he had stated all the three agreements [Exs.C1 to C3] as disputed agreements and they have been annexed with the claim statement for ready reference, since they are arising out and in connection with the transactions of the same product in between the same parties and the Appellant did not object t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l the three agreements and calculated the sum at Rs. 1,74,97,110.10 being the value of the goods and the accrued interest was Rs. 95,02,333.54 are outstanding. In the statement attached with Ex.C25, 1st Respondent had demanded the claim over all the three agreements and the overdue interest over the outstanding of all the three claims were clubbed together and interest was calculated thereon. For the said notice, Appellant replied through Ex.C26 stating that all the claims arising out of the three agreements have been sorted out by the Meeting of both parties at Chennai on 09.6.1997 and the Minutes recorded on that date would be self-explanatory. Therefore, both parties have considered that the subject and performance of the three agreements are interconnected. Therefore, there cannot be any controversy regarding the fact that all the three agreements [Exs.C1 to C3] are arising out of and interconnected with each other. As per Clause-22 of Consignment Stockist Agreement dated 12.07.1997 "if any dispute arises between the parties ...... in connection with or arising out of the agreement shall be referred to the arbitration"....