An arbitral award may be set aside if it is in conflict with the public policy of India or if it is so unfair and unreasonable as to shock the conscience of the court.

Sanjib Banerjee, J.

The story may be narrated first and the legal context later. The sheer quality of the story demands this extraordinary treatment of the facts de hors the legal premise against which it has to be seen.

2. The appellant entered into an agreement with the Food Corporation of India in June, 1975 for, in effect, letting out his godown having nearly 73,000 sq. ft space for storage of foodgrain up to 12,000 MT at a time. The agreement was in the nature of an agency under which the appellant was to handle and receive only such consignments and bags of foodgrain as were to be allotted by FCI. As on October 10, 1988, only about 1900 MT of foodgrain remained at such Shibpur godown and the vast area of the godown remained unutilised. The agreement provided for the appellant to be paid on the basis of the quantity of the goods stored. The agreement also precluded the godown being let out to any other or the appellant storing any goods other than the FCI’s therein. For a substantial period between October, 1988 and November, 1991 fresh stocks of foodgrain were not sent for storage at the Shibpur godown. By a letter dated November 2, 1991, the appellant terminated the agreement by giving two months’ notice. Thus, the agreement stood determined with effect from January 2, 1992.

3. Prior to the termination of the agreement, the appellant had invoked the arbitration clause contained in the agreement and referred several claims to arbitration. An arbitrator was appointed in February, 1990 and in course of the reference before such arbitrator additional claims were filed by amending the original statement of claim such that the claims of the appellant till May 31, 1997 formed the subject-matter of such initial arbitral reference.

4. The appellant succeeded substantially in such reference. The award was made a rule of court by repelling FCI’s challenge thereto under Section 30 of the Arbitration Act, 1940. An appeal was carried to this court by FCI. For the moment, it may suffice to only notice that the appellant herein had claimed under two several heads for rent and compensation for the stock of foodgrain remaining in the godown and not being removed by the FCI despite notice. Godown rent was claimed from January 4, 1992 to May 31, 1996 at Rs.37,38,357.36/- and, simultaneously, compensation for the foodgrain not being shifted from the godown during the period January 1, 1992 to May 31, 1996 was claimed at Rs.1,12,24,365/-. It was further indicated that the goods continued to occupy the godown beyond May 31, 1996. This court held in the appeal that godown rent and compensation for the goods not being removed could not be claimed in the same breath. It was observed that the consideration of the claim on account of compensation was without jurisdiction. However, the relevant head of claim was not set aside as a consequence; but the matter was remanded to the arbitrator to examine several heads of claim in the light of the observations made in the judgment. In other words, quite astoundingly, the appellant earned rent for the entirety of the godown of a sum in excess of Rs.37.38 lakh merely by citing that about 1900 MT of foodgrain remained stored at the 73,000 sq. ft godown from October, 1988 to the end of May, 1997.

5. Buoyed by such remarkable success in the relevant appeal, the appellant lodged a further claim for the same stock lying in the godown from June 1, 1997 and sought a further sum of about Rs.1.33 crore till November 30, 2000. The arbitrator dutifully considered the claim over 29 pages and passed an award for a sum of Rs.1,01,24,012/- with interest at three per cent per annum from the date of the reference.

6. It is such award of February 23, 2005 that was challenged before the Single Bench, the rejection whereof has given rise to the present appeal. The Single Bench found the claim in the reference to be “absurd” and found fault with FCI for facilitating the appellant in making the claim and not taking appropri