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High Court Of Delhi
FERTILIZER CORPORATION OF INDIA LIMITED - Appellant
Versus
I.D.I.MANAGEMENT INC. - Respondent
First Appeal (OS) 28 of 1978
Decided On : 03/07/1984
ARBITRATION - AWARD - MAJORITY AWARD - NON-SPEAKING AWARD - CONSTRUCTION OF CONTRACT - ACCORD AND SATISFACTION - ERROR OF LAW ON THE FACE OF THE AWARD - INTEREST ON DECRETAL AMOUNT.
Fact of the Case:
A contract was entered into between the Fertilizer Corporation of India (the Corporation) and Girdler Corporation, later known as C. I. Girlder Inc. (the contractor), for the erection and installation of a Methanol Plant at the Corporation's Trombay Division in Bombay. The plant was supplied on a turn-key basis and was to have a capacity to produce 100 metric tons of Methanol per continuous day of 24 hours. The contract contained an arbitration clause providing for the appointment of two arbitrators, one by each party, and an Umpire to be nominated by the two arbitrators. Disputes arose between the parties, and in 1967, the Corporation terminated the contract and took "juridical possession" of the plant. Arbitration proceedings were initiated, and a three-member Arbitral Tribunal was constituted, consisting of Lord Deviin, Mr. J. Russell Wilson, and Mr. B. Sen. The Tribunal made an interim award in 1973 and a final award in 1974. The majority of the Tribunal, Lord Deviin and Mr. Wilson, rejected the Corporation's claim for loss of production and allowed the contractor's claim for the balance 5% of the plant's price. Mr. B. Sen dissented from the majority awards and issued a dissenting note giving reasons for his disagreement. The Corporation filed objections to the awards under sections 30 and 33 of the Arbitration Act, 1940, which were dismissed by the trial court. The Corporation appealed to the High Court.
Finding of the Court:
The High Court held that the majority awards were non-speaking awards and that the dissenting note of Mr. B. Sen could not be looked at for the purpose of finding the reasons for the majority awards. The court found that the majority was entitled to come to the conclusion that the March Agreement defined the rights and duties of the parties and that the Corporation's claim for loss of production was not tenable. The court also held that the majority awards did not disclose any error of law on their face and that the question of construction of the contract was a question of law that was within the exclusive domain of the arbitrator. The court declined to interfere with the trial court's discretion in not awarding future interest on the decretal amount.
Issues: 1. Whether the dissenting note of Mr. B. Sen could be looked at for the purpose of finding the reasons for the majority awards. 2. Whether the majority was entitled to come to the conclusion that the March Agreement defined the rights and duties of the parties. 3. Whether the Corporation's claim for loss of production was tenable. 4. Whether the majority awards disclosed any error of law on their face. 5. Whether the question of construction of the contract was a question of law that was within the exclusive domain of the arbitrator. 6. Whether the trial court erred in not awarding future interest on the decretal amount.
Ratio Decidendi: 1. The dissenting note of Mr. B. Sen could not be looked at for the purpose of finding the reasons for the majority awards because it was a minority opinion and formed no part of the award. 2. The majority was entitled to come to the conclusion that the March Agreement defined the rights and duties of the parties because it was a clear case of accord and satisfaction where the parties put their past behind them and agreed to be bound by the terms of the agreement in supersession of the original agreement. 3. The Corporation's claim for loss of production was not tenable because the March Agreement was a full and final settlement of all the obligations of the parties and the Corporation had accepted the plant. 4. The majority awards did not disclose any error of law on their face because the arbitrators had not tied themselves down to any legal proposition and had not stated any reasons for their decision. 5. The question of construction of the contract was a question of law that was within the exclusive domain of the arbitrator because the arbitrators were entitled to give their own interpretation or construction of the contract and their finding was not open to review on a motion to set aside the award. 6. The trial court did not err in not awarding future interest on the decretal amount because the matter of future interest was in the discretion of the court.
Final Decision: The High Court dismissed the Corporation's appeal and upheld the majority awards.
( 1 ) THIS arbitration has been a long drawn out affair. By a contract dated 12-2-1964 between the Fertilizer Corporation of India (the Corporation) and Girdler Corporation, later known as C. I. Girlder Inc. (the contractor), the contractor agreed to erect and instal a Methanol Plant at the Corporation s Trombay Division at Bombay of the description and on the terms set out in the said contract. The plant was supplied on a turn-key basis. It was to have a capacity to produce 100 metric tons of Methanoi per continuous day of 24 hours with either refinery gas or petroleum naptha as the feed stock. The contractor was to be paid 45 million rupees as the price of the plant.
( 2 ) ARTICLE XIV of the said contract contained an arbitration clause which is as follows:
"all disputes and differences between the Contractor and the Corporation shall be REFERRED TO to arbitration, each party appointing an Arbitrator, and the Two Arbitrators nominating an Umpire, as the first step before consideration of any specific issue REFERRED TO to them. The decision arrived at unanimously by the two Arbitrators, or on their failure to reach unanimous decision the award of the Umpire shall be accepted as final and binding upon both the parties. The provisions of the Indian Arbitration Act, 1940 shall govern the said arbitration proceedings. The venue of the Arbitration shall be New Delhi. The parties hereby expressly submit to the jurisdiction of the courts at New Delhi for all disputes arising out of the Agreement, the Arbitration proceedings and the enforcement of any award that may be made therein. "
( 3 ) THE plant was ready for commissioning on December 29, 1965. The performance of the plant was eratic and unsatisfactory. It did not produce the required quantity of hundred metric tons of Methanoi per day. This was the main complaint of the Corporation. They said that the Catalyst installed in the Reformer Furnace which was specifically guaranteed under the contract to function satisfactorily for a period of one year had repeatedly failed to perform its function, there being repeated failures and shut downs in the plant. There was considerable correspondence between the parties. On February 16,1967 the contractor notified the Corporation that performance test would be carried out by February 19, 1967. Performance test was given accordingly.
( 4 ) AS a result of various discussions and negotiations that took place between the parties certain understandings were arrived at which were recorded in a letter of March 21, 1967 (the March Agreement ). In this agreement the outstanding disputes between the parties were defined. The case of the Corporation is that despite the assurances given by the contractor there was a failure of the Catalyst in operation and the performance of the plant was far from satisfactory. It is alleged that there being something basically wrong with the Reformer Furnace, which was a vital part, the plant was not capable of giving sustained production of 100 metric tons per day. As the contractor failed to remedy the defects in the plant the Corporation terminated the contract and took "juridical possession" of the plant by its letter dated July 8, 1967.
( 5 ) IN or about 1967 disputes and differences arose between the Corporation and the contractor and in accordance with the said Article XIV the Corporation duly appointed Mr. B. Sen as an arbitrator and the contractor duly appointed Mr. J. Russell Wilson as an arbitrator and the two arbitrators on February 7,1969 nominated Lord Deviin as Umpire. By a supplemental agreement between the parties made on 1-3-1973 it was provided that the disputes and differences aforesaid should be considered as having always been REFERRED TO to Lord Deviin, Mr. Russell Wilson and Mr. B. Sen as the three arbitrators, that Lord Deviin should act as the Chairman of the Arbitral Tribunal and that the award or awards should be made in the manner provided in section 10 (2) of the In
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