Chowgule Brothers vs Rashtriya Chemicals & Fertilizers Ltd.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2006 Supreme(Bom) 576

IN THE HIGH COURT OF BOMBAY
(O.S.)
Radhakrishnan S. (Dr.) & Vazifdar S.J., JJ.
Chowgule Brothers & Ors. - Appellants.
Versus
Rashtriya Chemicals & Fertilizers Ltd. & Ors. - Respondents.
Appeal No. 884 of 1997 in Arbitration Petition No. 19 of 1993 in Award No. 127 of 1992,
Decided on 5-4-2006.
Advocates appeared:
Dr. V.V. Tulzapurkar, Sr.Adv. with Ms. Alpana Ghone i/b. Kanga & Co., for appellants.
Nitin Thakkar, Sr.Adv. with S. John i/b. M.P. Savla & Co., for respondents.

Headnote:Arbitration Act, 1940 - Section 30 Award also granting interest Challenged Appeal Contention Arbitrator wrongfully awarded interest Objection not raised earlier Would be unfair to raise now If allowed, it would only deprive appellant an opportunity of meeting same. Despite the fact that Clause 5.01 of the contract provided that no interest shall be paid on outstanding bills, this point was not raised in the reply to the statement of claim. It was not raised before the Single Judge. It would be unfair to the appellant to permit the point to be raised across the bar. The appellant was not even put to notice that an objection regarding interest would be taken. This would be so even assuming that the clause is clear for there may well have been an answer to this argument on facts. If we permit respondent No. 1 to raise this point in this manner, it would deprive the appellant an opportunity of meeting the same.
Arbitration Act, 1940 - Section 30 Setting aside majority award Contention Erroneous award Based on a wrong award Only one angle of issue involved was considered Held Such presumption not correct Majority award needs to be proved as wrong, does not matter it was based on an erroneous minority award. It is not permissible to look at the minority award while considering a petition to set aside a majority award for several reasons. Firstly, such an approach predicates that the majority arbitrators took into consideration only those facts and documents relied upon in the minority award. Such an approach also predicates that the majority arbitrators did not consider the question from any other angle. It also predicates that the majority arbitrators considered only the questions of law considered by the minority award. These presumptions would be incorrect. This would also be unfair to the majority arbitrators. Such an approach would, in fact, lead to tremendous confusion in the adjudication of petitions for setting aside arbitration awards. The majority award can only be set aside on the basis of what is stated therein and not on the basis of what is stated in the minority award. To hold otherwise would open up a pandoras box.
Arbitration Act, 1940 - Section 37(3) Limitation Act, 1963, Section 5 Award challenged as beyond limitation Contention Limitation to be decided on basis of appellant’s case Rebuttal Presumption baseless Not warranted and not fair Before rule of ICA, Section 37(3) of Arbitration Act has no relevance Claim of being beyond limitation not sustainable No error being about limitation. In the present case, Section 37(3) did not apply as the parties had agreed as to how the arbitration would commence and that there was no necessity for one party to serve any notice upon the other party, requiring the appointment of arbitrator. Thus, Section 37(3) has no application in a case, such as this, where parties have agreed to a procedure for the appointment of arbitrators. Lastly, he submitted that in this case, time stops running only when an application is made in accordance with Rule 16 of the Rules of the ICA. Unable to agree with these submissions. Submission that Section 37(3) of the Arbitration Act is of no relevance in view of the Rules, in particular, Rule 16 of the ICA, is not well founded. The Rules pertain to the procedure to be adopted by the parties for the conduct of the arbitration proceedings. They do not negate, impliedly or expressly, Section 37(3) of the Arbitration Act. So long as the procedure prescribed under Section 37(3) is followed, it cannot possible be contended that the claim is barred by limitation.

Per VAZIFDAR S.J., J.: - This is an Appeal against the order of the learned Single Judge allowing the respondents Petition under section 30 of the Arbitration Act, 1940 setting aside the majority award made by respondent Nos. 2 and 3.

2. Respondent Nos. 2 and 3 awarded a sum of Rs. 61,73,067.90 and dismissed the counterclaim of respondent No. 1. Respondent No.4, who made a minority award, dismissed the claim of the appellant and the counterclaim of respondent No.1. Respondent No.4 dismissed the appellants claim only on the ground of limitation. Respondent No.4 did not consider the merits of the rival contentions regarding the maintainability of the claim for statutory increase in wages, Thus, View of the majority award, the appellant was entitled to the sum of Rs. 61,73,067.90.

3. The learned Single Judge set aside the award on the ground that the same was contrary to a term of the contract and on the ground that the claims were barred by limitation.

4. Pursuant to the tender submitted by the appellant, respondent No.1 issued a work order dated 10.1.1983. The contract involved clearing, forwarding and handling jobs of bulk bagged fertilizers to be imported by respondent No.1 at Mormugao Port. The contact was initially for the period 15.1.1983 to 14.1.1984. Respondent No.1 in exercise of he option conferred upon it, extended the same for the period 15.1.1984 to 14.1.1985. clause 32 of the terms and conditions of contract pertaining to arbitration reads as under:

"32. SETTLEMENT OF DISPUTES - All disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the Award made in pursuance thereof shall be binding on the parties." 2lauses 2.01 and 2.03 of the contract which falls for consideration reads as under:

"2.01 Period of contract is one year from the date of award of work. 15.1.83/14.1.84" 2.03 It is hereby agreed that if the Company gives one months notice to extend the Contract for a further period of one year from the expiry or the period mentioned in Clause 2.01, the Contractor shall be bound to continue to do the work and render services on the same terms and conditions as contained herein during such extended period, except for the statutory increase in the wages of Dock Labour allowed by the Mortgagor Dock Labour Board, for which documentary evidence shall have to be finished by the Contractor. The manner in which such statutory increase in the wages of Dock Labour will be allowed for the extended period of one year, if any, is indicated below;

Example showing method of calculating escalation for extended period of one year, in case of statutory increase in wages of Dock Labour allowed by the MDLB:

First year 2nd year of Contract.

1. Wages per gang )

(for 3 gangs) )

1st year )

Rs. 695.91 x 3)

2nd year )

Rs.889.72 x 3 ) Rs.2087.73Rs.2669.16

2. Night Weightage Rs. 47.70Rs.47.70

3. Winch set Rs.498.70Rs.633.33

4. Night WeightageRs.11.76Rs.11.76

Charges for 3 gangs

(out of 210 MTs.) Rs.2645.26 Rs.3350.35

Charges per MT.Rs.12.59Rs.15.95

Increase in wages of labour for 2nd year per MT. Rs.15.95 - Rs.12.59=Rs. 3.36 + M Assuming the quoted rate for the work in 1 st year is (X) and the escalation works out to (V) for the 2nd year, the revised rate for the 2nd year, if the Contract is extended, will be Y - X.

NOTE: The rates, indicated against first and second year above, have been taken from MDLBs circulars from time to time. But the rates at which the Contract is initially awarded shall remain firm through out the period of one year from the date of award and shall not be subject to any escalation whatsoever. Similarly the rates allowed for the extended period of the year, if any, after considering the statutory increase, if any, in the wages of Dock Labour will also remain firm through out the extended period of one

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2006 Supreme(Bom) 576

Cases Referred (6)