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2019 Supreme(Del) 178
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH. J,
Food Corporation of India (Amritsar) - Petitioner
Versus
M/S Lekh Raj Dhawan Rice & General Mills & Its Partners Amritsar - Respondent
O.M.P. 1066 of 2013, I.A. 25601 of 2015 & 14300 of 2016
Decided On : 10-01-2019
For the Petitioner:Mr. Mohan Lal Sharma, Advocate
For the Respondent:Mr. Arvind Kumar Tiwary, Advocate for Gurucharan Rai
The court emphasized that claims and awards must be in line with the provisions of the contract and government policy decisions.
Headnote:
FCI - Contract Dispute - 20th October, 1994 - Clause 7, Clause 8(iii), Clause 9(iii) - The court discussed the provisions of the contract related to the completion of work, losses, and delays. It highlighted the arbitrary nature of treating the delivery of rice after milling and the absence of a penalty provision for 1.5 times economic cost. The court also referred to a similar case and government policy decisions to conclude that the claim for 1.5 times economic cost was not justified.
Fact of the Case:
The Food Corporation of India (FCI) entered into a contract for storage-cum-milling of paddy with a firm. Disputes arose regarding the claim of FCI for 1.5 times economic cost of the unmilled paddy.
Finding of the Court:
The court found that the claim for 1.5 times economic cost was not justified based on the provisions of the contract and government policy decisions.
Issues: Dispute over the entitlement of FCI to 1.5 times economic cost of the unmilled paddy and the performance of the milling contract.
Ratio Decidendi: The court held that the contract provisions did not support the claim for 1.5 times economic cost and referred to government policy decisions to support its finding.
Final Decision: The petition challenging the award was dismissed, and the miller was ordered to pay its share of the costs of arbitration to FCI.
Prathiba M. Singh, J.
1. In the present case, the Food Corporation of India (hereinafter, ‘FCI’) entered into a contract for storage-cum-milling of paddy dated 20th October, 1994 with M/s. Lekh Raj Dhawan Rice & General Mills, Amritsar. The arbitration was conducted under the aegis of the Indian Council of Arbitration (hereinafter, ‘ICA’). Disputes had arisen between the parties which were decided by the impugned award of the Sole Arbitrator dated 9th May, 2013.
2. An application under Order I Rule 10 CPC was filed in this case on 16th November, 2016 whereby FCI sought to implead the seven partners of the firm, who were inadvertently left out. Thereafter, the partners of the firm were represented by counsels. During the pendency of this application, it was reported that the proposed Respondent Nos.4, 5 and 6 have also expired.
3. The matter was then placed before Court on 15th November, 2018 on which date, notices were issued to the counsels who were earlier appearing. Mr. Arvind Kumar Tiwary has appeared and put in his appearance for Shri Gurucharan Rai, one of the partners of the firm. Submissions have been heard on behalf of the Petitioner and the said Respondent. In view of the fact that this matter is covered by the judgment of this Court in Food Corporation of India v. S. K. International [OMP 487/2011 decision dated 23rd October, 2018] (hereinafter, “FCI v. S.K. International”), no useful purpose would be served by impleading the legal heirs of the proposed Respondent Nos.4, 5 and 6 who have since expired.
4. Both counsels have addressed their submissions.
5. The present petition has been filed challenging the award dated 9th May, 2013 by which the learned Sole Arbitrator has rejected the claim of FCI that it is entitled to 1.5 times economic cost of the unmilled paddy.
6. FCI i.e., the claimant before the learned Arbitrator had entered into an agreement dated 20th October, 1994 for storage-cum-milling of paddy. The total quantity of paddy stored in the miller’s premises was 15412.15 quintals of common variety paddy, 7020.65 quintals of fine variety paddy and 864.50 quintals of superfine variety paddy. The Miller was to mill the paddy and return the same to FCI at the agreed price on or before 28th February, 1995. The date of completion was extended to 31st May, 1995. One of the clauses of the contract required the miller to pay 1 ½ times the economic cost of the paddy in the relevant season, in case of failure to supply the milled paddy.
7. As against the paddy stored in the miller’s premises, the miller milled, 4112.29.40 quintals of common variety paddy, 2497.04 quintals of fine variety paddy and 353.73 quintals of superfine variety paddy, and accordingly delivered the same to FCI by 31st May, 1995.
8. The FCI in the meantime issued, under a policy decision taken by the Government, a notice for open sale of paddy whereby millers were given an option to purchase the unmilled paddy failing which the same would be sold in the open market. The price was also fixed for such open sale. The Miller herein, purchased the unmilled paddy and paid the entire consideration as fixed in the said notice. However, the FCI was of the opinion that it is entitled to recover 1 ½ times the economic cost, despite the miller having purchased the unmilled paddy. The Miller did not agree to pay the amount demanded by FCI.
9. The FCI, alleged breach of contract by the miller and invoked arbitration for failure to mill the paddy on or before 28th February, 1995, claiming 11/2 times rate of the unmilled paddy as the economic cost. The total damages calculated to be due by the FCI amounted to a sum of Rs.94,00,012.65/-. The miller, on the other hand, claims that it had performed its part of the contract satisfactorily and there was no unmilled paddy lying in its premises as it had sold by the FCI. The miller further submitted that it purchased the balance unmilled paddy from FCI, pursuant to the open sale notice, and thus, no claim of the FCI fo
