@JUDGMENTTAG-ORDER
Rajiv Sahai Endlaw, J.@mdashThis petition, under Section 34 of the Arbitration and Conciliation Act, 1996, seeks setting aside of the arbitral award dated 6th August, 2014 of the sole Arbitrator (who as per the Arbitration Agreement between the parties providing for the arbitration of the Indian Council of Arbitration (ICA), New Delhi was to be appointed/nominated by the Senior Regional Manager/Zonal Manager of the petitioner out of the persons on the panel of arbitrators maintained by ICA) allowing the claim of the petitioner in the sum of Rs. 45,68,756/- against the respondents to the extent of Rs. 2,04,724/- only. This petition came up before this Court first on 22nd December, 2014 when the counsel for the petitioner was heard on the aspect of admission/entertaining this petition and order reserved. Finding, that the arbitral award was "published" on 6th August, 2014 and that the present petition had been filed for the first time only on 19th November, 2014 i.e. after 90 days of the ''publication of the award'' and that this petition is not accompanied with any application under the proviso to Section 34(3) of the Arbitration Act, it was also enquired from the counsel for the petitioner as to how the petition was within time. Though the petitioner in the petition has pleaded that the arbitral award was received by it on 22nd August, 2014 and wherefrom the filing is within the prescribed time but the petitioner along with the petition had not filed any document to show the award having been received on 22nd August, 2014. The counsel for the petitioner was thus also given an opportunity to on or before 9th January, 2015 file documents to show that the arbitral award was received by the petitioner on 22nd August, 2014. The petitioner however has not filed any documents in this regard. The inference is that the date of 22nd August, 2014 of receipt of the award is a figment of the imagination of the petitioner and the petition when filed on 19th November, 2014 was barred by time.
2. However, though at the time of hearing no ground on merits for entertaining this petition appeared to have been made out but on further consideration and for the reasons given below, I am of the view that a case for issuance of notice of this petition to the respondents is made out. In this circumstance, it is not deemed appropriate to render any final opinion on the aspect of presentation of this petition within time also and it is considered appropriate to leave the same also to be adjudicated at the after notice stage; more so since the petition, though not filed within three months, has been filed within further period of thirty days therefrom.
3. The arbitral award emanates from the claims of the petitioner against the respondent with respect to the agreement dated 10th October, 1994 whereunder the respondent No. 1 M/s. Guru Arjan Dev Rice Mills, a partnership of respondents No. 2 to 4 viz. Sh. Parambir Singh, Sh. Harpreet Singh and Sh. Harcharan Singh, had agreed to store and mill paddy into rice for the petitioner. The petitioner filed a statement of claim before the arbitral Tribunal, claiming a sum of Rs. 45,68,756/- from the respondents along with interest at 18% per annum from 1st June, 1995 pleading that the respondents had committed breach of contract by not milling the entire quantity of paddy stored by the petitioner with the respondents, compelling the petitioner to sell/dispose of un-milled paddy to mitigate its loss and the petitioner in accordance with the contract was entitled to one and a half times the economic cost of equivalent paddy/rice and which amounted to Rs. 45,68,756/-aforesaid.
4. The arbitral Tribunal in the award which is sought to be set aside in this petition has found/observed:
"(i) that though the arbitral Tribunal was constituted on 5th August, 2003 but the arbitration proceedings remained suspended owing to "litigations pending in the Hon''ble High Courts and the Hon''ble Supreme Court of India" and were revived only vide order dated 9th November, 2009 in I.A. No. 175/1999 of the High Court of Delhi;
(ii) that the respondents No. 1 and 2 had failed to appear despite service by publication in the newspaper and had been proceeded against ex parte;
(iii) that it was inter alia the plea of the respondents No. 3 and 4 i.e. Parambir Singh and Harpreet Singh that the respondent No. 2 Harcharan Singh was the working partner of the respondent No. 1 firm and it was the respondent No. 2 only who had signed the agreement on behalf of the respondent No. 1; that the respondent No. 1 firm stood dissolved on the death of respondent No. 2;
(iv) that it was the case of the respondents No. 3&4 that the paddy and rice were in the joint custody of the petitioner and the respondents and the petitioner had lodged FIR No. 115/1996 under Sections 406/408/420 of IPC with respect to the shortfall in paddy and the respondents No. 3&4 had been acquitted in the said case vide judgment dated 29th September, 2007 of the Court of Judicial Magistrate, First Class, Tarantaran and in which judgment it was inter alia held that in the agreement between the petitioner and the respondent No. 1, there was a stipulation to the effect that the paddy shall remain under the joint custody of the petitioner and the respondents and the petitioner had been unable to disprove the same; that though the petitioner had preferred an appeal against the judgment of acquittal of the respondents but the said appeal was also dismissed by the Court of the Additional Sessions Judge, Tarantaran inter alia on the ground that no action had been taken by the petitioner against its staff responsible for joint custody and that no physical verification had been carried out by the petitioner and that the petitioner could not prove that there was any misappropriation."
5. The Arbitral Tribunal framed the following issues in the arbitration proceedings:
"1. Whether the statement of claim has been signed by legally authorized person? OPC 2. Whether the claim is barred by limitation? OPD 3. Whether the Respondent No. 3&4 are liable to pay the claim amount, if any to the claimant? OPC 4. To what amount the claimant is entitled to recover from the respondent, if any, and from whom? OPC 5. Whether the claimant is entitled to recover any interest from the respondent, if so, on what amount and at what rate? OPC 6. Relief."
and recorded that the petitioner had examined only one witness in support of its case and the respondents No. 3 and 4 had examined themselves in support of their defence and both parties had cross-examined witnesses of each other;
6. The Arbitral Tribunal decided Issues No. 1 to 3 in favour of the petitioner and against the respondents.
7. The Arbitral Tribunal held:
"A. that the defence of the respondents No. 3 and 4 that owing to their being non-active/sleeping partners and non-signatory to the agreement of the respondent No. 1 with the petitioner, they were not liable, was not sustainable;
B. that the respondent No. 2 was alive till the raising of the dispute and filing of the statement of claim and the respondents No. 3 and 4 could not avoid liability if any by pleading dissolution of the firm;
C. that similarly the defence of the respondents No. 3 and 4 that they were not liable owing to the judgment of their acquittal in the prosecution aforesaid had no merit as a judgment passed under the criminal law was not applicable to civil proceedings;
D. Qua Issue No. 4, it was held:
(i) that the respondents No. 3&4 had not denied the receipt of the quantity of paddy claimed by the petitioner;
(ii) that it was thus the obligation of the respondents to prove the return of rice corresponding to receipt of paddy;
(iii) that the respondents had however not proved as to how much rice had been returned in lieu of paddy;
(iv) that the petitioner had however not supported its balance sheet with cogent documentary proof;
(v) that however the balance sheet of the petitioner could not be brushed aside, being the ''public exchequer'';
(vi) that as per the register produced by the respondents No. 3&4, there was a debit balance of Rs. 16,22,783/- as due and payable as on 31st March, 1997;
(vii) that accordingly the said amount could be taken as payment due and payable by the respondents jointly and severally to the petitioner;
(viii) however a perusal of the balance sheet filed by the petitioner revealed that the petitioner had to pay a sum of Rs. 6,21,469/-, Rs. 1,12,245/- and a sum of Rs. 6,30,355/- on account of milling charges of paddy;
(ix) that giving adjustment of the said total sum of Rs. 14,18,059/- from the amount of Rs. 16,22,783/-, the petitioner was entitled to recover the sum of Rs. 2,04,724/- only from the respondents jointly and severally.
E. that the petitioner was also entitled to simple interest at 10% per annum on the said amount from 1st April, 1997 till the date of recovery.
8. Accordingly, the award in favour of the petitioner for recovery of Rs. 2,04,724/- with interest at 10% per annum from 1st April, 1997 till date of payment for a period of three months and with interest at 12% per annum from the said three months till the date of recovery was awarded.
9. Though the petitioner in the petition has challenged the arbitral award by pleading the same to be contrary to substantive law applicable to the substance of the dispute and which, in my opinion is not a ground for setting aside of the award within the meaning of Section 34(2) of the Arbitration Act, as held by me recently in
10. The claim of the petitioner against the respondents was for compensation in terms of the agreement i.e. equal to one and half times of the equivalent un-milled paddy. The arbitral Tribunal, inspite of holding that the respondents had admitted the receipt of the quantity of paddy which the petitioner claims to have delivered and not discharged the onus of showing return of equivalent rice, has instead of adjudicating whether the petitioner in accordance with the contract is entitled to compensation for such un-milled quantity of paddy and which was the dispute submitted for arbitration, has gone on to decide the entitlement of the respondents to the milling charges and on which aspect prima facie there were no pleadings, Issues or arguments. The arbitral award is thus found to have prima facie dealt with a dispute not contemplated by and not falling within the terms of submission to the arbitration and contains a decision on matters beyond the scope of submission to arbitration.
11. The arbitral award also does not give any reason for not awarding to the petitioner the compensation for unmilled paddy in accordance with the formula therefor agreed between the parties and on which basis the petitioner had claimed. Section 31(3) of the Arbitration Act requires the arbitral award to state the reasons upon which it is based. There is nothing to show that the parties had agreed that no reason be given. In my prima facie opinion, the requirement to give reasons on which the award is based includes a requirement to give reasons for rejecting the basis on which the claim is premised. I am further of the prima facie opinion that failure to give such reasons would amount to "arbitral procedure" being "not in accordance with the agreement of the parties" or being "not in accordance with" Part I of the Arbitration Act within the meaning of Section 34(2)(a)(v).
12. I am also of the prima facie opinion that the Court will rarely be in a position to give a conclusive finding of the award being induced by fraud or corruption. The reason therefor is that without hearing the Arbitral Tribunal, and which is not a party to a proceeding under Section 34, no conclusive findings of award being induced by corruption can be given. However where, from a reading of the arbitral record an attempt to favour one of the parties is apparent, the Court would be entitled to invoke Section 34(2)(b)(ii) for setting aside of the award. In the present case, from the Arbitral Tribunal even from the amount which was due according to the respondents themselves to the petitioner, deducting amounts for which the respondents had not made any claim or pleaded set off, such an attempt is prima facie evident.
13. Resultantly, issue notice to the respondents by all modes including dasti, returnable on 25th March, 2015. The arbitral records be also requisitioned for the said date. It is however made clear that issuance of this notice would not amount to stay of the arbitral award to the extent it allows the claims of the petitioner and the petitioner would remain entitled to, without prejudice to the pendency of this petition, recover the amount awarded to it and qua which the counsel for the petitioner on enquiry stated that no objections have been filed by the respondents.
