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2018 Supreme(Del) 2470
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
FCI, Bhatinda – Petitioner
Versus
M/s Malwa Rice Mills and Others – Respondents
O.M.P. No. 397 of 2012
Decided On : 11-09-2018
For the Petitioners: Mr. Sukumar Pattjoshi, Mr. Mohan Lal Sharma.
The central legal point established in the judgment is the unsustainable nature of the arbitrator's reasoning and the safeguarding of FCI's right to claim damages despite the paddy being sold to the millers.
Headnote:
FCI - Contractual Dispute - Arbitration Act - 21 - The court discussed the agreement between FCI and the Respondent, the arbitration clause, and the claims raised by FCI. The court highlighted the key legal provisions of the arbitration clause and the implications of the Respondent's failure to fulfill the contract.
Fact of the Case:
The Food Corporation of India (FCI) filed a petition challenging the rejection of its claims against M/s. Malwa Rice Mills for failure to fulfill a storage-cum-milling agreement. The Respondent stored paddy in its mill but failed to complete the milling process, causing a significant loss to FCI.
Finding of the Court:
The court found that the arbitrator's award lacked coherence and reasoning, and the reasoning that the contract was deemed to have been performed by the Respondent was unsustainable. The court also highlighted an earlier order safeguarding FCI's right to claim damages despite the paddy being sold to the millers.
Issues: The issues revolved around the failure of the Respondent to fulfill the storage-cum-milling agreement, the validity of FCI's claims, and the arbitrator's decision.
Ratio Decidendi: The court emphasized that the Respondent's liability for not completing the milling process and the arbitrator's reasoning were unsustainable. It also highlighted the earlier order safeguarding FCI's right to claim damages.
Final Decision: The court set aside the arbitrator's award and allowed the parties to begin fresh arbitration if desired.
PRATHIBA M. SINGH, J.
1. The Food Corporation of India (hereinafter ‘FCI’) has filed the present petition challenging the award dated 14th December, 2011 whereby all the claims of FCI had been rejected.
2. The chronology of facts and events are that an agreement was entered into on 17th October, 1994 between FCI and M/s. Malwa Rice Mills, Bhatinda – Respondent (hereinafter ‘Respondent’). As per the said agreement, the Respondent was to store paddy in its mill, and mill the same. After undertaking the process of milling, the resultant rice was to be supplied to FCI. The terms and conditions as contained in the contract are as under: -
“AGREEMENT FOR STORAGE-CUM-MILLING OF FCI PADDY STORED IN MILLERS PREMISES INTO CONVENTIONAL RATE/PERIODICAL RICE.”
“1. The miller shall be supplied paddy available at R Phul as per the arrangements agreed upon by the miller and accepted by the Corporation.
2. The miller may associate himself at the time of paddy purchases in the mandis and weigh bridges to cross check its quality and quantity respectively. Paddy shall be moved from mandis to mill premises to be stored in joint custody of FCI and the miller and the transportation and stacking operations in mills premises shall be arranged and cost against threes operations shall be borne by the Food Corporation of India.
The miller shall undertake storage of paddy in his premises without claiming any storage and preservation charges.
3. The Miller shall undertake shelling of paddy at FCI applicable custom milling rate which will include all services as per details given below:-
SERVICES:
(a) Lifting paddy from storage points in the mills, loading into trucks and carriage to mills.
(b) Drying of paddy.
(c) Katal of paddy bags before dehusking.
(d) Dehusking of paddy.
(e) Filling of bags of rice prior to dara-making.
(f) Dara making of rice bags and filling/sewing of bags.
(g) Transportation of milled rice to railway stationed loading into wagons, inspection, weighment and sampling as per directions of the Corporation; or transportation of milled rice to the storage points to the Corporation including those of CWC/SWC hired godowns as per directions of the Corporation, unloading of trucks and delivery after inspection, weighment, sampling at scale point at the cost of miller.
| Name of District | Name of the storage centre | Variety of paddy | Weight of the paddy in qtls. For which contract is to make for storage and milling. | 67% | As fixed by FCI | 19358.43=12970.14.900 |
| Bhatinda | R Phul | Fine | 30390=19753-50 |
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| Out-turn ratio for conservation of paddy into rice | Milling Rate | Qty. of paddy out of which (col. 4) rice will be manufactured |
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7. The miller shall be responsible for the safe custody miling of paddy issued to him for/delivery of rice, as per agreed and recovery of out-turn ratio. Miller shall also take good and losses that may be incurred in paddy/rice during transit/storage at 1.5 times the economic cost of the variety of paddy/rice towards the shortfall.
8(iii) In case there is shortfall in the recovery of rice the miller shall pay to the Corporation the cost of paddy equivalent to the shortfall at the rate of 1 & half times the economic cost of paddy.
9(iii) The miller shall complete delivery of rice within 10 days of issuance of paddy to him and rice due to the Corporation on the total quantity of paddy issued to him or in joint custody released at regular interval shall be delivered not later than the 28th February, 1995. The miller shall further ensure milling of paddy and delivery of rice in the following manner:-
| October/November | 20% |
| December | 26% |
| January | 26% |
| February | 28% |
However, in case of process of milling is slowed down due to operational exigencies beyond the control of Miller/SRM may consider and extend the above mentioned milling sched
