M.L. Singhal, J.@mdashThis revision petition is directed against the order of learned District Judge, Chandigarh dated 3.2.2000, affirming that of Subordinate Judge 1st Class, Chandigarh dated 12.9.1992, whereby the latter had allowed the application of the Food Corporation of India (herein after to be referred as FCI) under Sections 14(2) read with Section 17 of the Arbitration Act and made award delivered in its favour by the arbitrator and against M/s Bodh Raj Daulat Ram and Ors. (herein after to be referred as "the firm") rule of the Court, except for the modification that where the latter had allowed interest at the rate of 18% per annum on the awarded amount from the date of filing of the application under Sections 14(2) read with Section 17 of the Arbitration Act, 1940 till the date of realisation of the decretal amount, learned District Judge brought down the rate of interest to 14% per annum.
2. FCI called tenders for the conversion of gram-whole lying at Dabwali into gram dal. The work for conversion of 600MT gram-whole at Ex. Dabwali and 553MT Ex-E1-lenabad at the rate of minus Rs. 12/- per quintal was awarded to the firm on the basis of two tenders submitted by them. The tenders after submission were converted into agreements bearing No. D.22(58)/Gramdal/APO/79-80 and D.22(58)/Gramdal/APO/79-80/Vol.II and their acceptance was conveyed to the firm vide telegram dated 31.12.1979/1.1.1980 and dated 2/4.1.1980 respectively.
3. As per the FCI, the firm committed default in fulfilling their contractual obligation. So, their contract was cancelled by the FCI at their risk and costs. The FCI suffered losses due to the breach of the contractual obligation by the firm. The matter was referred to arbitration as per the arbitration agreement between the parties. Sh. R.N. Misra, Additional Legal Adviser to the Government of India (Ministry of Law and Justice) New Delhi was appointed as sole arbitrator by the Managing Director, FCI vide letter dated 17.1.1985 under the terms and conditions agreed to by the parties with reference to the contracts mentioned above and the differences between them relating to the said tenders were referred to for arbitration. Arbitrator gave his awards on 25.9.1986. The firm was directed to pay a total sum of Rs. 4,42,752/- to the FCI subject to set off of Rs. 14,100/- if with-held by the FCI in connection with A/Ts in dispute. The claim of the FCI for interest at the rate of 18% from 2,1.1980 till payment was rejected. As regards the claim of the firm for refund of the earnest money under Clause 4 of the tender documents forming part of the contracts was rejected without prejudice to any rights and remedies of the FCI under the contract and the law. Arbitrator informed the FCI that the award had been made and signed by him on 25.9.1986. The FCI filed application u/s 14(2) read with Section 17 of the Arbitration Act. 1940 praying that the arbitrator be directed to file in Court his proceedings and the award and it (award) be made rule of the Court. In compliance with the order of the Court, Arbitration filed arbitration proceedings and the award in Court.
4. The firm filed objections under Sections 30 and 33 of the Arbitration Act and prayed for setting aside of the award and cancellation of the arbitration agreements. The firm raised the following objections to the award being made rule of the Court before the Court:
1. There was no valid contract between the parties and as such question of arbitration clause being operative between the parties does not arise. Therefore, the reference to the arbitrator and consequential award by him is null and void and non-est in the eye of law.
2. The condition precedent for the formation of contact of deposit of security by the objectors was not fulfilled. Therefore no agreement came into existence and as such question of breach of contract in the circumstances of the case does not arise. The only remedy in the circumstances of the case available to the FCI was to forfeit the earnest money of the objectors and nothing more.
3. Admittedly the acceptance so far as 553 MTs by the FCI is concerned was conveyed by telegram dated 2/4.1.1980 and the reference as regards the said alleged contract was made for the first time on 27.1.1983 which is clearly after the period of limitation. The objectors categorically raised this objection before the arbitrator who has failed to consider and decide the time barred nature of the claim.
4. Arbitrator was to make a speaking award as per conditions laid down by the FCI. In the present case however, the arbitrator failed to frame issues in the case and also failed to give finding on the request of the objectors with regard to various documents asked for by the objectors.
5. That the arbitrator has failed to give a finding on the profit admittedly made by the FCI by giving fresh tender to M/s Nav Bharat Dal Mills.
6. That the award is a non-speaking award and the arbitration has failed to discuss as to how and on what basis damages are being awarded by the arbitrator. Arbitrator failed to adhere to the terms mentioned in the alleged invitation and the terms of reference dated 26/29.11.1982 of the Managing Director, FCI who appointed the arbitrator.
7. Arbitrator mis-conducted himself and the proceedings.
8. The award is further liable to be set aside on the grounds that there were two contracts in respect whereof the disputes had been referred to the arbitrator. Arbitrator, however, conducted only one proceedings in respect to two disputes and gave only one award.
9. The award is further liable to be set aside as the same has not been made on an adequate stamp paper. Award has been made on a stamp paper of Rs. 80/- whereas stamp paper of Rs. 112.50 should have been used in respect of each agreement.
10. Award is vague, indefinite and uncertain.
11. There is error apparent on the face of the record in respect of the facts and law and therefore also the award deserves to be set aside. The arbitrator did not decide the claim of the objectors that the claim of the FCI in respect of contract for milling of 553 MT of gramdal was barred by limitation, especially when its reference was made only vide corrigendum dated 26/27.1.1983. Three years'' period had already lapsed by that time from the date of breach of the contract.
12. That the arbitrator has not decided the question of limitation in respect of the claim arising out of tender for 553 MT of gram-whole for conversion into gram-dal which was accepted vide telegram dated 2/4.1.1980. The claim of the FCI was clearly time barred in respect of this agreement as the dispute was referred on 26/27.1.1980 vide the so-called corrigendum being beyond a period of 3 years.
13. That proceedings were held without extension of time and therefore the arbitrator misconducted himself.
14. That the conduct of the arbitrator was biased, mala fide and pre-determined. This fact is also proved from the proceedings dated 15.7.1986 whereby the arbitrator asked the FCI to purchase stamp papers for making the award.
15. That the arbitrator had no jurisdiction or locus standi to enter upon the reference, and to make the impugned award.
16. That the application u/s 14 and 17 of the Arbitration Act filed by the FCI is barred by time and therefore, the award cannot be made the rule of the Court.
5. These objections were contested by the FCI. It controverted all the material allegations levelled by the firm in their objections. It was denied that no tender/contract had come into existence between the parties. There was a valid contract between the parties which came into existence as soon as the offer was made by one party and accepted by the other party. Reference and the consequential award were defended as perfectly legal and binding on the firm. Contract came into existence with the acceptance of the offer and deposit of security was not a condition precedent but a mere formality to be fulfilled by the objectors and consequently the objectors were liable for the non-fulfilment of the contractual obligation. It was denied that reference was barred by time. It was stated that reference was within time. The matter was referred to arbitration on 26/29.11.1982. By way of corrigendum dated 26/27.1.1983 clarification was issued and clerical mistake was rectified. Arbitrator gave award permissible under the provisions of law. It was not obligatory on the part of arbitrator to frame issues. It was stated that the averments of the objectors with regard to documents were vague, indefinite and without particulars. Award had been given in accordance with the terms and conditions of the contract. It was denied that the arbitrator had failed to adhere to the terms mentioned in the invitation and the terms of the reference dated 26/29.11.1982 of the Managing Director, FCI who had appointed the arbitrator. It was asserted that the award had been given in terms of the aforesaid reference. It was denied that the arbitrator had mis-conducted himself for the proceedings. It was stated that the stamp duty had been duly paid on the arbitration award. Award was made and signed at Delhi, where the maximum stamp paper for drawing of an award was to the tune of Rs. 75/- only and so the award was properly stamped. It was stated that in any case if it is found that it was under stamped, deficiency could be got made up. It was denied that the award was vague and uncertain. It was denied that there was an error apparent on the face of the record with respect to facts and law. Reference was made within time and the award had been given by the arbitrator after considering the claims/counter claims of the parties. It was stated that the objector themselves admitted in sub-para 6 of para-9 that reference was made by the Managing Director, FCI to the arbitrator on 26/29.11.1982 and the corrigendum to the arbitrator was issued by way of clarification in order to remove the clerical error, which inadvertently crept in and that the arbitrator gave the award after considering all the aspects of the matter. It was stated that time had been extended for giving the award by the parties with their mutual consent and the arbitrator had given the award within the period extended by the parties with their mutual consent. It was stated that arbitration proceedings have been held at the cost of the FCI and all sorts of expense in the conduct of arbitration proceedings were incurred by the FCI. Mere direction for the purchase of stamp was nothing but a ministerial act. It was stated that arbitrator had never disclosed his mind with regard to the controversy between the parties. Arbitrator had jurisdiction and locus standi to enter upon the reference and make the award. It was denied that the application under Sections 14 and 17 of the Arbitration Act was barred by time. It was asserted that this application has been filed well within time. Notice with regard to the making and signing of the award was received in the office of FCI on 29.9.1986 and application for making award the rule of the Court was filed by the FCI on 25.10.1986. It was thus well within limitation.
6. On the pleadings of the parties, the following issues were framed by the learned trial Court:-
1. Whether award is liable to be set aside as alleged? OPO
2. Relief.
7. Vide order dated 12.9.1992, Subordinate Judge 1st Class, dismissed these objections and made award the rule of the Court. On the amount awarded he awarded future interest at the rate of 18% per annum form the date of filing the application under Sections 14(2) and 17 of the Arbitration Act up to the date of realisation of the decretal amount.
8. Aggrieved by the order dated 12.9.1992 of Sub Judge, 1st Class, Chandigarh the firm went in appeal. Appeal was dismissed by the learned District Judge, Chandigarh vide order dated 3.2.2000.
9. Aggrieved by the order of District Judge, Chandigarh dated 3.2.2000, the firm has come up in revision to this Court.
10. The learned counsel for the petitioner raised the following propositions for the consideration of this Court ''
1. Whether there is a concluded contract between the parties?
2. Whether the reference is barred by limitation?
3. Whether appearance of petitioners before the Arbitrator under protest amounts to acquiescence?
4. Whether the Arbitrator can ignore Preliminary Objections while making the award?
5. Whether the Arbitration could allow liquidated damages without proof of actual loss having been suffered?
6. Whether liquidated damages can be levied without any show cause notice?
7. Whether the Ld. Arbitrator could allow liquidated damages more than that claimed in writing?
8. Whether the award contains reasons or mere conclusions?
9. Whether the Arbitrator could adjudicate on claims or on disputes?
10. Whether one award could be made for two separate, independent and distinct contracts
11. Whether the award could be looked into even though it was under stamped?
12. Whether the Ld. Courts below could award interest for the period prior to the decree, particularly when the Ld. Arbitrator had rejected the claim.?
1. Whether there is concluded contract between the parties?
11. It was submitted by the learned counsel for the petitioners that respondents had issued a work order in favour of the petitioners for the works at Dabwali and Ellenabad. It was submitted that there could be a valid contract between the parties, if the petitioners had furnished security deposit within the time stipulated. There is stipulation in the work orders that the petitioners would furnish security deposit within 10 days. Petitioners did not furnish any security deposit for these works within the stipulated period of 10 days. It was submitted that the work orders lapsed due to non-furnishing of security deposit. In the absence of any concluded contract, arbitration clause could not be invoked, vesting the arbitrator with the jurisdiction to take upon the reference.
12. In support of this submission, he drew my attention to Food Corporation of India v. Brij Lal Bharat Bhushan, 2000(2) Recent Arbitration Judgments 357 (P&H) where it was held that arbitration agreement means the enforceable agreement and an agreement which is not enforceable "by law or which is not concluded agreement, such an agreement cannot be acted upon. Agreement has to be seen in substance and not in form. Of course, there was agreement between the Miller and the Corporation but if that agreement is not valid agreement for the purpose of arbitration agreement, such an agreement cannot be invoked for the purpose of Section 8 of the Indian Arbitration Act. The case of the Corporation is that since the Miller did not furnish bank guarantee, therefore, there was no enforceability so far as the arbitration agreement goes. There is merit in the contention of the learned counsel for the petitioner. The purpose of depositing money and taking bank guarantee is condition precedent and integral part of the agreement. The applicant Mill was supposed to comply with these terms and it is common case of the parties that the bank guarantee was furnished on 28.4.1980 much after the stipulated date i.e. 31.3.1980. In these circumstances, there was no concluded agreement or contract between the parties. Section 8 of the Indian Arbitration Act deals with the power of the Court to appoint Arbitrator or umpire in any of the following cases:
(a) Whether an arbitration agreement provides that the reference shall be to one or more arbitrator to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or
(b) xxx
(c) xxx
13. It was held that due to non furnishing of the bank guarantee, no enforceable arbitration agreement came into existence, which is condition precedent for invoking the provisions of Section 8 of the Indian Arbitration Act. The petition filed u/s 8 of the Indian Arbitration Act by M/s Brij Lal Bharat Bhushan asking the Managing Director of the Food Corporation of India to appoint arbitrator in terms of agreement was dismissed and the revision was allowed.
14. It was submitted that no security deposit was made by the petitioners within the stipulated period, as such no concluded contract came into existence. There could not have been any arbitration proceedings since the arbitration clause perishes with the main contract.
15. Learned counsel for the respondent on the other hand submitted that the arbitrator was not required to decide all the issues. He was not required to frame issues because the award of the arbitrator is not a judgment of Civil Court within the meaning of Order 20 of the Code of Civil Procedure. Relying upon Punjab Small Industries and Export Corporation v. Vilkhu and Sons, Engineers and Govt. Contractors, Chandigarh and Anr. 1 1987 90 P.L.R. 311, he submitted that arbitrator was not required to consider and where the arbitrator has considered the claims of both the parties, the civil Court cannot sit in appeal against that award. In this case, the arbitrator has considered the pleadings and evidence of the parties and after considering the pleadings and evidence of the parties has observed as under:
"I have considered the pleadings filed in the case, the oral and documentary evidence adduced and the arguments urged by the parties"
16. It was submitted that the Court could not sit in judgment over the award of the arbitrator because arbitrator is a judge appointed by the parties themselves with their mutual consent.
17. In this case, it is true that the firm did not furnish security deposit. Arbitrator has taken note of this submission of the firm. He has observed that the breach on the part of contractor is established by failure to deposit security and making financial arrangement by virtue of Clauses 11 and 12 of the contracts respectively and the contracts also having been cancelled on 6.2.1980 on account of the said breach. The corporation accepted the tender of the firm vide telegrams dated 31.12.1979/1.1.1980 and 2/4.1.1980. The firm was directed to fulfil other contractual obligations and on the non-fulfilment of their contractual obligation by the firm, FCI cancelled the contract and referred the matter under Clause 27 to the Arbitrator.
18. The learned counsel for the petitioners/firm submitted that the condition precedent for the formation of the contract of deposit of security by the arbitrator was not fulfilled. Therefore, no agreement came into existence and as such question of breach of contract in the circumstances of the case did not arise. The only remedy in the circumstances of the case available to the Food Corporation of India was to forfeit the earnest money of the firm and nothing more.
19. It was submitted by the learned counsel for the respondents that the security deposit was to be furnished by the firm. The firm could not take any advantage of the non-deposit of the security deposit by it. Food Corporation of India could well set its foot down and say that the breach of contract has taken place because of the non-deposit of security amount by the firm. This point was to be adjudicated by the arbitrator which he has not adjudicated. Arbitrator will adjudicate this point now.
2. Whether the reference is barred by limitation?
20. The second issue raised by the firm was that the reference qua the Ellenabad work was palpably barred by limitation. The firm was required to furnish security deposit within 10 days of the issue of work order in their favour. The work order for the Ellenabad work was issued in their favour on 4.1.1980 and hence the security deposit should have been furnished on or before 14.1.1980. The security deposit was not furnished by the stipulated date. The cause of action accrued in favour of the FCI on 15.1.1980. The reference to arbitration was made on 27.1.1983 i.e. beyond the limitation period of 3 years. The cause of action and cause for arbitration arise on the same date. It was submitted that the arbitration qua the Ellenabad work could have been invoked on or before 14.1.1983. Respondents issued a corrigendum to the original reference of Dabwali work and included the Ellenabad work in the original reference thereby making two separate, independent and distinct contracts a subject matter of a single reference.
21. In
"In the present case, as stated above, on 29.8.1979, the Contractor wrote a letter making certain claims. Thereafter, the supplementary agreement was executed on 20.32.1980. In that agreement, it is no where stated that the contractor''s alleged right of getting damages or losses suffered by him was kept alive. On the contrary, he has agreed to complete the work within the time stipulated in the second agreement by charging some higher rate. The contractor has not sought any reference within three years from the date the cause of action arose i.e. from 29.8.1979. Only in 1985 when the dispute arose with regard to the second agreement, the respondent gave a notice on 2.12.1985 to appoint a sole arbitrator. The sole arbitrator was appointed with a specific reservation regarding the tenability, maintainability and validity of reference as also on the ground that the claim was barred by limitation and it pertained to excepted matters in terms of the general conditions of contract. From these facts it is apparent that the claim before the arbitrator in November-December 1985 was apparently barred by the period of limitation. Letter dated 3.9.1983 written by appellant repudiating the respondent''s claim on account of damages or losses sustained by him would not give a fresh cause of action. On that date the cause of action for recovering the said amount was barred by the period of three years prescribed under Articles 137 of the Limitation Act, 1963. u/s 3 of the Limitation Act, it was the duty of the Arbitrator to reject the claim as it was on the face of it, barred by the period of limitation".
22. It was submitted that the arbitrator has clearly disregarded the law laid down by the Hon''bie Supreme Court and adjudicated on a claim which was palpably and apparently barred by limitation and as such the award was liable to be set aside. It was submitted that qua the Ellenabad work, reference was barred by limitation. Arbitrator was appointed for Dabwali work only. It was only through a corrigendum issued on 27.1.1983 that the Ellenabad work was also referred to the arbitrator and arbitrator could thus not arbitrate so far as the Ellenabad work was concerned. This point was not adjudicated by the arbitrator. He thus, committed jurisdictional error. He was required to adjudicate this point. It is only after adjudicating this point that he could say whether he had jurisdiction to enter upon reference qua Ellenabad work.
3. Whether appearance of petitioners before the Arbitrator under protest amounts to acquiescence?
23. The petitioners appeared before the arbitrator under protest. In reply filed by the petitioners before the arbitrator, there is submission by them under protest and without prejudice that all appearances and participation are specifically and will be always under protest." It was submitted that when the petitioners stated at the out-set that their appearances and participations before the arbitrator would always be under protest, it cannot be said that they submitted to the jurisdiction of the Arbitrator. By participating in the proceedings before the arbitrator, petitioners cannot be said to have waived off their objections. Russel on Arbitration 20th Ed. page 267 states as under:
"Excess of Authority:
In cases where an arbitrator enters into the consideration of matters which are not referred to him, or which he has no jurisdiction to try, "the question is not one of waiver or estoppel, but of authority" and a party continuing to attend the reference after objection taken and protest made does not give the arbitrator authority to make an award.
"If a party to a reference objects that the arbitrators are entering upon the consideration of a matter not referred to them, and protests against it, and the arbitrators nevertheless go into the question and receive evidence on it, and the party, still under protest, continues to attend before the arbitrators and cross examines the witnesses on the point objected to he does not thereby waive his objection, nor is he estopped from saying that the arbitrators have exceeded their authority by awarding on the matter.
24. It was submitted and rightly that there can be no manner of doubt that participation in the proceedings before the arbitrator under protest and without prejudice does not amount to waiver.
4. Whether the Arbitrator can ignore Preliminary Objections while making the award?
25. While filing reply to claims of FCI, the petitioners had preferred preliminary objections numbering-8 which touched upon the very jurisdiction of the arbitrator. It was contended by the firm before the arbitrator that there was no concluded contract and the reference was barred by limitation etc. Arbitrator was required to deal with these objections and decide them. It was only when he had over-ruled these objections that he could proceed to adjudicate on merits.
26. A perusal of the award would show that none of these objections were dealt with. Non consideration of preliminary objections would vitiate the award. In Premier Fabricators v. Heavy Engineering Corp. Ltd. the Hon''ble Supreme Court held in para 29 and 30 as under:
"29. In view of the admitted position that the umpire in the present case has not considered the arbitrability of items 2 to 5 of the claims in the non-speaking award, it cannot be construed that by implication he had considered the arbitrability of the claims. The preliminary objection raised by the parties was to the arbitrability of items 2 to 5 of the claims and whether they are within the scope of contract. Before proceeding to adjudicate the claims 2 to 5 on merits, the umpire was required to give his finding on the issue of arbitrability of claims 2 to 5 and reasons in support thereof......."
"30.... But in view of the facts in this case, we think that since the preliminary issue raised by the parties was not decided by the umpire which is condition precedent to proceed with the adjudication of claims on merits, he committed misconduct in giving the award. We, therefore, direct that the matter will go back to the Umpire for reconsideration of the same afresh in the light of what we have stated herein before. If for any reason, the Umpire is not available, the parties may choose a new Umpire and if the parties fail to do so, the Court may appoint a new Umpire who will decide the matter afresh, clearly expressing his view on the arbitrability of claims 2 to 5 while deciding the matter.
27. In Union of India v. Jai Society Wood Works, 1998(2) Arbitration Law Reporter 248 (Delhi) where also the arbitrator had made the award without deciding the preliminary issue as to whether there was a concluded contract in existence. The Delhi High Court set aside the award and the matter was remitted to the Arbitrator to first decide the preliminary issue before adjudicating upon the merits of the dispute.
28. In Union of India v. Delhi Footwear, (Suit No. 130-A of 1996, decided on 31.10.1995 and Arihant Industries v. Union of India (Suit No. 336-A of 1986) decided on 12.11.1997, arbitrator had not decided the preliminary objection as to whether there was a concluded contract in existence and hence matter was remitted back.
29. It was submitted that the arbitrator could not proceed to adjudicate on the merits of the claims unless he had decided the preliminary objections. If be had proceeded to adjudicate on the merits of the claims, without deciding the preliminary objections, the award would be liable to be set aside on the ground of mis-conduct. It was submitted and rightly that in this case also, the award was liable to be set aside as the arbitrator has not decided the preliminary objections.
5. Whether the Arbitrator could allow liquidated damages without proof of actual loss having been suffered?
30. It was submitted that the arbitrator could not allow liquidated damages without proof of the actual loss having been suffered. Even if some amount is stated in the contract as liquidated damages as being a genuine pre-estimate of the losses suffered, the party claiming damages has to prove the loss suffered. In this case no evidence whatever of any loss suffered was placed before the arbitrator by the Food Corporation of India. When the works of the firm was terminated, risk and cost tenders were invited. The rates received were Rs. 68,912/- less than the rates tendered by the firm. Thus, the FCI saved Rs. 68,912/- in the risk and cost tenders and therefore there was no question of suffering any loss.
31. In Bhai Panna Singh and Ors. v. Bhai Arjun Singh and Ors. A.I.R 1929 P C 179 it was held as under:
"The effect of Section 74 is to disentitle the plaintiffs to recover simpliciter the sum fixed in the contract whether penalty or liquidated damages. The plaintiffs must prove the damages they have suffered".
32. In Maula Bux v. Union of India, AIR 1970 SC 1955 it was held in para 8 on page 1959 as under:
"Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre-estimate may be taken into consideration as the measure of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him."
33. In Electronic Enterprises v. Union of India, AIR 2000 Delhi 55, it was held in para 4 as follows:
"Having once accepted the goods contemplated by the Acceptance of Tender (A/t), I fail to appreciate any justification for the Respondent withholding the payment of their price. I have perused the counter statement filed on behalf of Respondents. It does not contain any claim on account of damages incurred by them as a consequence of the alleged late supply of goods. The party preferring a claim for damages, must first prove that these damages have actually been suffered by it. Even in those cases where damages have been liquidated under the contract, the burden of proving that these liquidated damages reflect a realistic pre-estimate of the damages that have actually been suffered, lies on the party claiming damages. In this case, it is obvious that no damages have accrued to the respondents since none have been claimed."
34. It was submitted that a party claiming damages even if it be liquidated damages stipulated in the contract, has to prove the loss suffered. It was submitted that in this case no evidence whatever of any loss suffered was placed on the record and in fact FCI saved an amount of Rs. 68,912/- on risk and cost tenders and hence there was no question of suffering any loss. Arbitrator was required to adjudicate this point.
6. Whether liquidated damages can be levied without any show cause notice?
35. The FCI never levied any damages on the firm before approaching the arbitrator. No show cause notice was ever served on the firm in this case. No rule of "audi altrem partem" was observed by the FCI. ft was submitted that the arbitrator fell in error in not considering this basic issue that the FCI should have served show cause notice on the firm stating therein the amount of liquidated damages, recoverable from it. Arbitrator was required to adjudicate this point.
7. Whether the Ld. Arbitrator could allow liquidated damages more than that claimed in writing?
36. It was submitted that the FCI has itself quantified the liquidated damages on the direction of the arbitrator at Rs. 76,800/- so far as Dabwali work was concerned and at Rs. 70,784/- so far as Ellenabad work was concerned, It was strange that the arbitrator awarded Rs. 2,30,400/- on Dabwali work and Rs. 2,12,352/- on Ellenabad work as liquidated damages. Arbitrator thus mis-conducted himself. His mis-conduct is apparent on the face of the record. Award suffers from non-application of mind and as such is liable to be set aside. Arbitrator was required to adjudicate this point.
8- Whether the award contains reasons or mere conclusions?
37. The arbitration clause in the contract stipulated that the arbitrator was required to give reasons for the award. Arbitrator was required to indicate the trend of his thought process in the award. Arbitrator has failed to give any reason in the award, why is he awarding so much.
38. It was held in College of Vocational Studies v. S.S. Jaitely A.I.R 1987 Delhi 134 by the Delhi High Court as under:
"A reading of the finding against some of the claims in the instant case, show that the arbitrator has merely given his conclusions and verdict without giving any reasons. Reasons are the links on the material, documentary, or oral evidence, adduced before the arbitrator, on which certain inferences are drawn and conclusions are made. There must be some rational nexus between the two indicated in the award. The arbitrator may not set out every process of reasoning or may not deal with every point raised but must, when he is called upon to give reasons, to tell the "reasons" why he came to a particular conclusion."
39. It was submitted that the award does not fulfil this criteria at all. Arbitrator has merely stated as under:
"The amounts claimed by the PCI on the basis of 2% per month or part thereof on the value of the stores in dispute is regarded as a genuine pre-estimate of the damages recoverable from the party in breach".
Arbitrator was required to give reasons in support of the award.
9. Whether the Arbitrator could adjudicate on claims or on disputes?
40. The definition of dispute entails assertion of right by one party and repudiation by the other. The party claiming any damages has to first assert its right before claiming the amount in any adjudication process. The amount claimed in arbitration was never claimed from the firm by the FCI. It was submitted that no dispute thus came into existence which could be a subject matter of arbitration.
41. In
"There should be a dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of existence of dispute. Dispute entails a positive element and assertion in denying, not merely inaction to accede to a claim or a request".
42. So far as this proposition of law is concerned, there is no dispute. In this case, however, dispute had arisen between the parties when the firm had entered into agreements dated 31.12.1979/1.1.1980 and 2/4.1.1980 for the conversion of gram-whole into gram dal and there took breach of these agreements. FCI claimed liquidated damages in respect of these two contracts namely for Dabwali work and Ellenabad work under Clause 20 of the agreements, Arbitrator could adjudicate as disputes had arisen.
10. Whether one award could be made for two separate, independent and distinct contracts.
43. It was submitted that the petitioners have been awarded the works at Dabwali and Ellenabad vide separate work orders. The tenders were invited separately for two works. Since there were two work orders, there were two separate arbitration clauses. If arbitration was to take place, there should have been two references and two separate awards.
44. It I.G.H. Ariff and Ors. v. Bengal Silk and Anr. AIR 1949 Cal 350 it was held that:
"Where there are separate suits, separate arbitration agreements and separate orders of reference by Court, it is irregular for the arbitrator to make one single consolidated award and the award is bad".
45. In
"There cannot be more than one award in one reference unless otherwise agreed between the parties".
It was submitted that in the present case the award is a consolidated one for two separate and independent contracts and as such it does not conform to the stipulations of law and hence is liable to be set aside on this short ground.
Arbitrator was required to adjudicate this point.
11. Whether the award could be looked into even though it was under stamped?
46. It was submitted by the learned counsel that in the present case award was made and published on a stamp paper worth Rs. 75/-. According to Schedule 1A of Indian Stamp Act as applicable to the State of Punjab, Haryana and Chandigarh, the appropriate value of the stamp paper should have been Rs. 113.00. Thus in the present case the award was not on the appropriate stamp paper.
12. Whether the Ld. Courts below could award interest for period prior to the decree, particularly when the Ld. Arbitrator had rejected the claim. ?
47. It was submitted by the learned counsel for the petitioners that in the present case the courts below have exceeded the jurisdiction in awarding interest for the period for which they did not have the authority to do so. Thus the award is liable to be set aside to that extent.
48. In my opinion, the award should be set aside and the matter remitted to the arbitrator for adjudication afresh. This revision petition is allowed and the award is accordingly set aside and the matter is remitted to the arbitrator for making adjudication afresh in the light of the observations herein before made. Arbitrator is directed to adjudicate upon all the preliminary objections raised against the arbitrability of certain claims and his jurisdiction etc. It is after adjudication upon the preliminary objections raised by the firm that the arbitrator Sh. R.N. Misra will proceed to adjudicate upon the claim/claims put in by the FCI against the firm. If Sh. R.N. Misra be not available, the Managing Director, FCI will appoint some other arbitrator in his place.
