TaxTMI 
TaxTMI 
2019 (1) TMI 1371
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....disputes between the parties. The disputes were referred to Joint Arbitrators nominated by each of the parties. In view of disagreement between the Joint Arbitrators, the matter was referred to the Umpire. Learned Umpire published an award dated 23 June, 1999 for Rs. 1169.63 lacs along with interest at the rate of 15 per cent per annum in favour of GMB. Neycer filed an application under Secs. 30 and 33 of the Arbitration Act, 1940 being GA No. 4026 of 2000 for setting aside the said award of the Learned Umpire. The said application was disposed of by the learned Single Judge by a judgment and order dated 14 October, 2015. The learned Judge in effect held that the claim that GMB referred to arbitration was for a sum of Rs. 2 crores and any award in excess of that sum cannot be sustained. Being aggrieved by and dissatisfied with the said judgment and order of the learned Single Judge, GMB has preferred an appeal being APO No. 34 of 2016. Neycer has also preferred an appeal being APOT 42 of 2016 contending that the Award should have been set aside in its entirety. Both the appeals are taken up for hearing and disposal together. Contention of GMB:- (2) Appearing for GMB, Mr. R....
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....run of the contract caused by breach of Neycer's obligations under the Agreement. Hence, the learned Single Judge erred in setting aside the portion of the arbitral award in excess of Rs. 2 crores. We will refer to the relevant correspondence between the parties later in this judgment. (6) Mr. Deb relied on two decisions. The first is a decision of this Court in the case of Juggilal Kamlapat-vs.-N. V. Internationale Crediet-En- Handels Vereeninging 'Rotterdam' (alias Rotterdam Trading Co Ltd.), AIR 1955 Cal 65. The other decision that Mr. Deb relied on was that of the Apex Court in the case of State of Orissa-vs.-Asis Ranjan Mohanty, (1999) 9 SCC 249. We will revert back to these judgments later. Contention of Neycer:- (7) Mr. Gautam Chakraborty, learned Sr. Counsel appearing for Neycer referred to the same correspondence exchanged between the parties prior to reference of disputes to arbitration as were referred to by Mr. Deb. He submitted that it would appear from the said correspondence that GMB had raised a claim only on account of time overrun. The word 'overrun' has been used in nine different letters written on behalf of GMB. Nothing more than Rs. 2 crores was claimed ....
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.... to run the show of the factory until you depute a senior technician of general supervisory level to stay at our factory until the optimum level of production is achieved. In order to avoid delay we would be thankful if you inform us whom you are intending to send so that we may discuss with Mr. R. M. Mehra, one of our Board Members to assess the suitability of the person. Since Mr. Mehra was president of your company for many years, it will be very easy for him to judge the suitability and acceptability of such a person as because it is implied that the person you intend to send will be of your company only having all technical knowledge and competency for general supervision. As informed to you, we have already come to the stage of trial production and your quick action on the matter will be of great help to us to come out with our production in the market as because the delay is causing a lot of overrun in the form of interest, depreciation and overheads. During our meeting with Mr. Kale, the Managing Director of NCRL on 03.12.88 and 05.12.88 it was decided then also that a senior technician as described above will be deputed immediately but was not deputed wit....
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....O FOR CLAIM OF DAMAGE CAUSED TO US..............." (15) This was followed by a letter dated 7 September, 1989 written by Neycer to GMB making counter allegations. It was inter alia stated in the said letter that GMB was entirely responsible for the delay in arrangement of general supervisor. Further, regarding use of brand name GMB would not be entitled to use Neycer's brand name in view of the numerous breaches made by GMB and obstructions caused in implementation of the contract. In conclusion, it was stated that the best course of action would be to have a meeting to discuss and settle all matters amicably. (16) In response, GMB wrote a letter to Neycer reiterating that the time overrun and other damages had been caused by Neycer's breach of obligations under the Collaboration Agreement. It was also stated in the said letter that Neycer had failed to perform its obligations under the Collaboration Agreement and therefore, GMB would definitely have a claim against Neycer for time overrun apart from the damages which had been caused to GMB by not providing any sales assistance. It was further stated in the said letter as follows:- "WHILE OUR CLAIM FOR DAMAGES AND OV....
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.... STATIONARY WE WILL USE IT UNTIL OUR NEW STATIONARY RE PRINTED, AND WHATEVER WARES HAVE BEEN MANUFACTURED SO FAR (WHICH ARE NOT VERY MUCH IN QUANTITY) WE WILL SALE THEM WITH YOUR BRAND NAME UNLESS YOU WANT TO STOP SENDING THE SAME TO MARKET. IN WHICH CASE, THE AMOUNT OF THE SAME WILL HAVE TO BE BORNE BY YOU. NOW THE MATTER BOILS DOWN TO OUR CLAIM FOR OVERRUN AMOUNT ONLY FOR WHICH WE WILL DECIDE ABOUR THE NAME OF ARBITRATOR AND LET YOU KNOW IN DUE COURSE......." (19) This was followed by a letter dated 19 October 1989 written by GMB to Neycer intimating that GMB had appointed Mr. O. P. Jhunjhunwala, Advocate, as its nominee arbitrator for adjudication of its claim "for over Rs. 2 crore in respect of all our losses sustained and is being sustained by us due to various breaches committed and still being committed by you under the said agreement." (20) On 24 October, 1989 GMB wrote a letter to Neycer, the material portion whereof is reproduced hereunder:- "..................In spite of assurances and discussions held with your Mr. Kale, erstwhile Managing Director, no support or any action was taken by the new management of your company in spite of our repeated ....
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....Ld Umpire accepted personnel recruitment & dealer's network & dealer's network & guidance for marketing policy] "E" [Damage for loss of profit due to delay of 1 year in achieving optimum production which the Company proposed to obtain by Nov. 1990] 187.22 Lakhs 396.96 Lakhs 346.45 Lakhs Award paseed by Ld Umpire for Rs. 346.45 Lakhs accepted. "F" [Claim for Payment of interest on a/c of delay in commissioning plant] 70.81 Lakhs 770.82 Lakhs 456.99 Lakhs Learned Single Judge did not give any finding as according to the Learned Single Judge the claim of GMB was already satisfied (24) In the award the learned Umpire observed that there can be no doubt that when the terms of reference are clear and specific, the Arbitrator has no jurisdiction to act beyond the terms of reference. As regards the scope of the reference, i.e., whether it was restricted to GMB's claim on account of cost overrun or whether it encompassed all the claims made by GMB, in the statement of claim as amended, after analysing the pre-reference correspondence exchanged between the parties which we have adverted to above, the learne....
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....learned Umpire. His Lordship held as follows:- "I have considered the submissions of the learned Sr. Counsels and the relevant documents as well as the Award. The message sent by GMB appointing Mr. O. P. Jhunjhunwala as its nominee arbitrator for adjudication of claim for over Rs. 2 crores in respect of all the losses sustained and was being sustained by it due to various breaches including those committed and still being committed by Neycer under the agreement. The letter is absolutely clear and specific. There is no scope to put any meaning other than the one that appears from a plain reading of the letter itself. The effort to interpret the words 'all the losses sustained by GMB' as embracing all the claims and disputes as pleaded in the claim petition is a rather laboured one. Consequently, it is an error on the face of the Award and an impermissible one. When this message had been sent in October, 1989, the statement of claim was not filed. Therefore, there was absolutely no scope to refer to all the disputes subsequently raised as being covered by the disputes referred to in the earlier letter. .......................... Reading these communications....
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.... 39,14,910+123.61 lacs) has already been allowed under Schedules A and D respectively. 'Therefore, the remaining portion of the total permissible claim of Rs. 2,00,00,000 minus Rs. 1,62,75,910 i.e., Rs. 37,24,090/- is allowed under Schedule E'. Thereafter, the learned Judge went on to hold:- 'After finding the total amount of damages that can be awarded in favour of the claimant has been satisfied, the other claims need not be gone into.' (28) Before we proceed further, it may be helpful to recount the law laid down by the Apex Court in relation to an application under Secs. 30 and 33 of the Arbitration Act, 1940. The said Sections are set out hereunder:- "S.30. Grounds for setting aside award._An award shall not be set aside except on one or more of the following grounds, namely: (a)That an arbitrator or umpire has misconducted himself or the proceedings; (b) That an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35; (c) That an award has been improperly procured or is otherwise invalid. S. 33. Arbitration agreement or award t....
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....rbitrator." In Associated Engineering Co.-vs.-Government of Andhra Pradesh & Anr., AIR 1992 SC 232, the Apex Court observed that an Arbitrator's function is to arbitrate in terms of the contract. He cannot act arbitrarily, irrationally, capriciously or independently of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract he has acted without jurisdiction. But if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it. If the Arbitrator commits an error in the construction of the award, that is an error within its jurisdiction. In the facts of that case, however it was held that the Umpire had out-stepped the confines of the contract and had decided the matter strikingly outside his jurisdiction. In Paradip Port Trust & Ors.-vs.-Unique Builders, (2001) 2 SCC 680, the Apex Court observed that from several decisions of the Apex Court and the provisions contained in the Arbitration Act, 1940, it is clear that general....
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....As aforesaid, the way we read the pre-reference correspondence exchanged between the parties is different from the way in which the learned Judge read the same. Our reading is the same as that of the learned Umpire. Further, the way in which the learned Umpire construed the correspondence between the parties, cannot be said to be perverse or arbitrary or unreasonable. It is surely a plausible manner of reading the correspondence between the parties as a whole. It is trite law that so long as the meaning given by an Arbitrator/Umpire to a document or a series of documents is a plausible one, the Court will not interfere and substitute such meaning with its own understanding of such documents even if the Court differs from the Arbitrator or Umpire. The Court in exercise of an application under Secs. 30 and 33 of the Arbitration Act, 1940 does not act as an Appellate Court. (31) Although a point was taken by Neycer in the pleadings filed by it before the Arbitral Tribunal that GMB's claim in excess of Rs. 2 crores is not within the scope of the reference, Neycer resisted the entire claim raised by GMB on merits by adducing evidence before the Arbitral Tribunal. Having contested all....
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....each of contract and consequently damages. The jurisdiction of the Arbitrator was therefore attracted and the Arbitrator was competent to assess the damages. The claim for a definite sum of money is not a condition precedent to the exercise of jurisdiction of the Arbitrator. Indeed, on a general submission the Arbitrator could determine and assess even prospective damages arising after the date of the submission. (35) In State of Orissa-vs.-Asis Ranjan Mohanty (supra), it was held that if subsequent claims raised by the claimant pertain to the disputes which were in existence at the time when the arbitration clause was invoked and were within the scope of arbitration clause and reference, the same can be raised. Additional claims raised by the claimant subsequently could be considered by the Arbitrator. (36) These two decisions support the view we have taken regarding arbitrability of all the disputes and claims raised by GMB in the arbitration proceeding. (37) In view of the aforesaid, we find no reason to interfere with the award of the Learned Umpire. Mr. Chakraborty, Learned Sr. Counsel, appearing for Neycer argued in his appeal that even the sum of Rs. 2 crores should....