State Trading Corporation of India Ltd. v. Borax Morarji Ltd & Anr

Delhi High Court · 07 Dec 2009 · 2009:DHC:5219

Valmiki J. Mehta

CS(OS) 2630A/2000

2009:DHC:5219

civil appeal_dismissed Significant

AI Summary

The Delhi High Court upheld the arbitral award dismissing the respondent's objections, holding the petitioner entitled to recover price differentials despite payment delays and rejecting demurrage claims and limitation objections.

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CS(OS) 2630A/2000 Page 1 HIGH COURT OF DELHI CS(OS) NO. 2630A/2000
07th December, 2009 STATE TRADING CORPORATION OF INDIA LTD. ...Petitioner
Through: Ms. Sumati Anand, Advocate

VERSUS

BORAX MORARJI LTD & ANR ....Respondent
Through: Mr. Jayant Bhushan, Sr. Advocate with
Ms. Mallika Joshi, Mr. Rajat Bhardwaj and Mr. Rajan Narain, Advocates.

CORAM:

HON’BLE MR. JUSTICE VALMIKI J.MEHTA

JUDGMENT

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in the Digest? % JUDGMENT (ORAL) VALMIKI J.MEHTA, J I.A No. 3340/2003 in CS(OS) No. 2630A/2000

1. This application contains the objections of the respondent/applicant under Sections 30 and 33 of the Arbitration Act, 1940 to the Award 20.9.2000 passed by the sole arbitrator Justice H.L.Anand (Retired).

2. The facts of the case are that the petitioner on behalf of the applicant imported Crude Sodium Borate and Crude Calcium Borate as the petitioner was appointed as a sole canalising agency by the government with respect to the subject goods. The petitioner acted as an agent for and on behalf of the 2009:DHC:5219 CS(OS) 2630A/2000 Page 2 applicant at charges payable being 5% price as commission and 2% price towards actual expenses. Two basic disputes arose between the parties. The first dispute was that according to the applicant, the petitioner delayed in making payment of the amount in foreign exchange to the foreign supplier and because to this delay of approximately about one month, the applicant was caused a loss because the US Dollar became costlier as against the Indian Rupee. The applicant has therefore contended that in spite of a clause in the contract that the applicant will pay the price differential when the payment of the foreign exchange is made by the petitioner, in the facts of the present case, it was contended that the petitioner was not entitled to this price differential on account of the foreign exchange fluctuation. The second issue which was urged by the applicant/claimant before the Arbitrator was that the petitioner has wrongly paid demurrage charges to the shipper and consequently, this payment, which was made by the petitioner was not justified. An additional argument urged for the purpose of determining this issue was that the petitioner recovered the amount of demurrage charges from a Bank Guarantee which was furnished by the applicant to the petitioner for a period different than the period for which the petitioner was entitled to the price differential.

3. The Arbitrator has framed as many as 14 issues and in fact while dealing with the co-related issues, the Arbitrator also has wherever necessary framed necessary sub-issues for arriving at a decision. CS(OS) 2630A/2000 Page 3

4. Before I advert to the contentions and the arguments raised by the respective counsel for the parties, I may note that while hearing objections under Sections 30 and 33 of the Arbitration Act, 1940, this court does not sit as a court of appeal over the findings of the Arbitrator. Merely because, two views are possible and the Arbitrator has taken one of the plausible view, cannot mean that this Court will interfere with the Award merely because it is of another view. Putting it differently, unless the view taken by the Arbitrator is so perverse and so unreasonable that it can be said that the Arbitrator has misconducted himself and the proceedings, this court will not interfere with the Award of the Arbitrator. In view of the aforesaid parameters of law, I have considered the respective arguments of the counsel for the parties.

5. So far as the first issue as to the disentitlement of the petitioner to the price differential as contended by the applicant, and which price differential the petitioner had recovered, the Arbitrator has dealt with this aspect conjointly under the issues 3 to 5 as framed by him and which read as under:

“3. Whether the Respondent has made timely payment to their foreign suppliers for the said 1200 MT of Crude Sodium Borate? 4. Whether the Claimant is responsible for any act or omission that may have resulted in a delay in payment by the Respondent to its foreign suppliers for the said 1200 MT of Crude Sodium Borate. 5. Whether the Respondent is entitled to recover the sum of Rs.12,63000/- or any other sum, from the Claimant, together with interest, thereon?”

. CS(OS) 2630A/2000 Page 4

6. In deciding these issues, the Arbitrator has arrived at positive finding of facts which include the finding that the disputed price differential was in fact paid by the petitioner to the foreign supplier. The Arbitrator has further noted that there is no specified period for dispatch/payment of monies/foreign currency by the petitioner to the foreign supplier. The Arbitrator has further noted that it cannot be said in the facts and circumstances of the present case, that there was any negligence whatsoever by the petitioner in remitting the price differential to the foreign supplier. The Arbitrator has also noted that as per the applicable Rules of the Reserve Bank of India and the Banking Channels, it is not as if that the petitioner can be said to have committed any legal default. The Arbitrator has extensively dealt with all these issues, right from para 14 to para 30 of the Award and in which paras the Arbitrator has gone in great detail and has given his extensive reasonings. Some of important conclusions of the Arbitrator are contained in para 29 of the Award and which reads as under.

“29. Ordinarily, therefore, Claimant could not be burdened with the additional costs, and Respondent would have been held responsible for its acts and omissions or that of its Banking Institutions. It is nevertheless not possible to ignore that, while the Respondent has a moral obligation to the Claimant, it is difficult to hold that the Claimant was not bound to pay the revised price. Clause (2) of the contract provides that, whether the price set out in the allocation order is “provisional” or not, Claimant was bound to pay the revised price, and there is no restriction in this Clause as to the reason for which the price may be revised, so long as it is germane to the price paid by the Respondent to the foreign supplier. There is also no escape from the conclusion that Clause (2) was intended to cover fluctuations in Foreign Currency, and that this was possibly the reason why the price quoted could not be “final”. That it has nothing to do with other factors is made clear by Clause (3) of the contract, which provides that Claimant

CS(OS) 2630A/2000 Page 5 would be bound to pay all other levies, including “Custom Duty” etc. If, therefore, Clause (2) was intended to make a provision for fluctuations in currency, it is difficult to countenance an argument that this should be confined to ordinary or routine fluctuations, and not a fluctuation based on an extra-ordinary events of devaluation of the Rupee. In any event, Claimant entered into the arrangement and agreed to avail of the facility, knowing fully well the rather archaic and Ruleoriented system that obtained in Government, as well as, the other instrumentality of the State, and Claimant having, therefore, bound itself to pay the revised price, that may be fixed by the Respondent, evenafter the goods had been delivered, it is difficult for the Claimant to escape liability. It is not a case of agency because Respondent had no authority to pledge the credit of the Claimant, and there is a provision for authorization as part of the mechanics to import the goods, on the basis of the import license, which was in the name of the Claimant. One may, therefore, sympathise with the Claimant that the Claimant may be required to pay a price, which according to the Claimant’s perception, is higher and that for the increase Claimant was in no way responsible, and which could have been avoided by the Respondent or its Bankers. The Claimant had bound itself to pay the revised price, without any demur and the reason for the revision would not be justicible in a Court except to the extent that it must have its genesis in the payment eventually made to the foreign supplier, a condition which is eminently satisfied.” (Emphasis added)

7. I, therefore, do not find any perversity or any unreasonableness at all in the aforesaid findings in the conclusion of the Arbitrator who was fully entitled to interpret the contractual provisions in any one plausible way. Once it is held that there was no legal period for remitting of the amount by the petitioner to the foreign supplier and it is further noted that it cannot be held that the petitioner was guilty of negligence, I find that the Arbitrator was wholly justified in dismissing the claim of the claimant/applicant for claim of the price differential which the petitioner had made to the foreign suppliers. Objections to this part of the Award are accordingly dismissed. CS(OS) 2630A/2000 Page 6

8. The second issue which has been very strongly canvassed by the counsel for the applicant was that since the Bank Guarantee which was invoked and encashed by the petitioner for its claim towards demurrage charges paid to the foreign shipper was not with respect to the subject transaction but was for a different period, consequently, the petitioner was not entitled to retain the amounts under the Bank Guarantees invoked and encashed with respect to the petitioner’s claim of demurrage paid to the shippers. In this regard, I may note that the Arbitrator has specifically given two conclusions while dealing with this issue in paragraphs 31 to 38 of the Award. In these paras, the Arbitrator has dealt with together issues nos. 6 to 9 and 12 as framed by him and which issues are as under:- “6. Whether any demurrage is payable to the Respondent on the consignments in issue in Claim No.1?

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7. Whether any despatch monies are payable to the Claimant on the consignment in issue in Claim No.1?

8. Whether the Respondent is entitled to the demurrage of Rs.22,74,838.91 appropriated by it?

9. Whether the Respondent is entitled to appropriate any demurrage without reference to the Claimant?

12. Whether the Claimant is entitled to recover the sum of Rs.22,74,838.91 or any other sum, by way of demurrage on the consignments in issue in Claim No.1?” The Arbitrator in fact, has further reframed the above issues by framing four sub-issues and which are in paragraph 34 of the Award and which run as under:

“34. These contentions, arising out of the aforesaid issues, raise the

following questions.

(a) Whether the question as to the true computation of the demurrage liability of the Claimant, and the entitlement of the Claimant, on

CS(OS) 2630A/2000 Page 7 account of the despatch of the despatch moneys, can be made in proceedings to which the shippers are not parties? (b) If so, whether there is material on the record, which would enable me to make a fresh computation?

(c) If so, what is the extent of excess amount if any, appropriated by the Respondent, and paid to the shippers, to which the Claimant may be entitled?

(d) Whether, having regard to all the surrounding circumstances,

Claimant can be allowed to file supplementary Claim, regarding despatch moneys, at this late stage of the proceedings?” The two conclusions which have been arrived at by the Arbitrator in this regard are that firstly the claim of the claimant/applicant with respect to whether correct or excessive demurrage charges were paid by the petitioner to the shipper cannot be decided in the Arbitration proceedings in the absence of the shipper. This was for the reason that it is only the shipper who would have been able to demonstrate the calculations of the charges for demurrage. Since the shipper was not a party to the arbitration agreement such issues could not be automatically decided. Obviously, the shipper was not and could not have been made party to the arbitration proceedings as he was not a party to the Arbitration Agreement between the present parties. The second conclusion of the Arbitrator is that the applicant/claimant wholly failed to produce any material in order to enable the Arbitrator to make a computation for the demurrage charges and also did not file any details of the computation. A portion of para 36 of the Award in this regard is relevant and which reads as under:-

“36. In view of negative answer to question at (a) above, neither of these questions survive. In any event, Claimant has not produced any material, which may enable me to make a fresh computation, on any of the two counts, and for this reason also it is not possible to compute the excess amount, if any, that may have been appropriated by the Respondent, and paid to the

CS(OS) 2630A/2000 Page 8 shippers, and to which the Claimant may lay a claim. These questions are answered accordingly.”

9. I may note that before giving the aforesaid conclusion in paragraph 36, the Arbitrator in the later part of para 35 has held that the applicant cannot seek to reopen the entire process of computation and demurrage in the absence of the shipper.

10. The aforesaid conclusions of the Arbitrator that the issue with regard to the correctness and the incorrectness of the payment of the demurrage charges by the petitioner to the shipper cannot be decided in the absence of the shipper is a finding with which I concur. In any case, there is nothing so unreasonable in such a finding for the court to hold that the arbitrator has misconducted himself and/or the proceedings. Further, what is indeed damning against the applicant is that the applicant did not produce any material to justify the computation of the alleged excess amount paid by the petitioner towards demurrage charges to the shipper. This being the position, I am unable to agree with the arguments raised by the counsel for the applicant and consequently, objections with respect to the Award by which these claims with respect to the alleged excess payment of demurrage charges is not sustainable and is accordingly dismissed. I.A.No. 9512/2001 in CS(OS) No. 2630A/2000

11. These are objections which are filed by the petitioner to the aforesaid award of the Arbitrator. The petitioner challenges that portion of the Award whereby the Arbitrator has dismissed the claim of the petitioner for a sum of CS(OS) 2630A/2000 Page 9 Rs.12,63,000/- towards the further price differential claim. The Arbitrator has held that this claim as raised by the petitioner is barred by time. The relevant portion of the Award as para 41 and which reads as below:-

“41. The cause of action for the Counter Claim which relates to the recovery of 12,63,600, on account of price differential, following payment to the foreign suppliers, taking into account the devaluation of the Rupee, arose on the payment by the Respondent to the foreign supplier on July 8,1991. By its letter of September 20, 1991 Respondent called upon the Claimant to deposit the differential amount, which was rounded off at Rs. 12,63,600. By its letter of October 4, 1991 Respondent disclosed to the Claimant that the revised price was on account of devaluation. Claimant failed to pay the differential, and denied its liability soon after the disclosure. Subsequently Claimant denied the liability in its Petition, filed in the Bombay High Court. It was withdrawn on July 13,1992, pursuant to which it filed an Arbitration suit in the Delhi High Court, with an application for an interim order to retain the Respondent to recover the aforesaid amount, on the encashment of the Bank Guarantee. An interim injunction was issued by the High Court on February 10,1993. The Claimant’s repudiation of the Claim for differential amount was eventually reiterated by the Claimant in its Statement of Claim filed on October 4, 1994. The Statement of Counter Claim was filed by the Respondent on 28.7.1997. The Counter Claim would, therefore, be barred by time if the period is computed either from the date when the Respondent paid the amount to the foreign suppliers or the date on which the Claimant was required to pay the differential amount i.e. September 20,1991. It was also barred by the time if the period started from the injunction granted by the Delhi High Court in the Claimant’s Suit on February 10,1993.” (Emphasis supplied)

12. The counsel for the petitioner contended that since there were disputes and differences and legal proceedings between the parties with respect to the Bank Guarantees which were sought to be encashed by the petitioner, according to the petitioner, the disputes and differences survived and the limitations cannot be said to have been commenced. In response, the learned senior counsel for the respondent/non-applicant in this regard has, and in my opinion rightly so, drawn the attention of this court to Article 23 of the Limitation Act, 1963 which CS(OS) 2630A/2000 Page 10 states that limitation with respect to the amounts claimed by plaintiff against the defendant when the plaintiff has paid money for and on behalf of the defendant begins when the plaintiff has paid the money for and on behalf of the defendant. In the present case, I have already stated, the Arbitrator in para 41 as reproduced above has clearly stated that the counterclaim of the present petitioner which was filed on 28.7.1997 is ex facie time barred because the date for payment to the foreign supplier was 8.7.1991 without specifically so referring, the decision of the Arbitrator is based on Article 23 aforesaid. Further, the Arbitrator has said that even if he takes the period of limitation as commencing from the grant of injunction, by the Delhi High Court, the period of limitation would have commenced from 10.2.1993. Accordingly, even if, that be so, the Arbitrator has consequently held that the statement of counterclaim filed on 28.7.1997 would again be barred by limitation. The counsel for the applicant in these objections has canvassed that the limitation period in fact commenced only one month after the disposal of the suit with respect to the injunction against the bank guarantee because as per the order dated 10.2.1993, the bank guarantee was to be kept alive for one month after the disposal of the Award and consequently, it was contended that the counterclaim was not barred by limitation. I may note that this issue has also been considered by the Arbitrator and after considering the same in paragraphs 42 and 43, the Arbitrator has come to a conclusion that such a counterclaim even on that basis would be barred by time. Though the Arbitrator does not refer to Article 23 of the Limitation Act as stated by me CS(OS) 2630A/2000 Page 11 above, it is quite obvious that this Article 23 of the Limitation Act would squarely apply in the facts of the present case. In any case, one plausible view is taken by the Arbitrator, and, it cannot be said that the Arbitrator has misconducted himself and the proceedings merely because, another view can be canvassed with equal fervour. In any case, the issue in the present case has nothing to do with crystallization of the amount but the fact that under Article 23, the amount would stand crystallized when the payment is made by the petitioner to the foreign supplier. In this view of the matter, I am unable to agree with the contention raised by the applicant in this I.A/petitioner.

13. For the aforesaid reasons both the objection petitions are dismissed and the suit is disposed of leaving the parties to bear their own costs. The Award is made rule of the court.

DECEMBER 07, 2009 VALMIKI J.MEHTA, J ib

State Trading Corporation of India Ltd. v. Borax Morarji Ltd & Anr

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