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2019 Supreme(Del) 852
IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, J.
M.V.R. Industry Limited - Appellant
Vs.
Tribal Cooperative Marketing - Respondent
Original Miscellaneous Petition No. 379 of 2009
Decided On : 25-03-2019
Shashank Mishra, Adv., P.I. Jose, Adv., Buddy A Ranganadhan, Adv., Raunak Jain, Adv., Vishvendra Tomar, Adv., Rohan Ahlawat, Adv., N.L. Jangid D.M., Adv.
The main legal point established in the judgment is the liability for breach of contract and the calculation of damages based on the losses suffered by TRIFED from the open market sale of unlifted stock of cashews.
Headnote:
Arbitration - TRIFED - Arbitration and Conciliation Act, 1996 (Section 34) - 12.1, 12.2, 12.3, 12.4, 12.5, 12.6, 13, 3, 7 - The court discussed the issues related to termination of the agreement, short delivery of cashew nuts, bank guarantees, loss of goodwill, overhead expenses, cancellation of export orders, interest, breach of contract, unsold stock, loss on sale of raw cashew nuts, loss of profits, damages on loss of reputation, recurring cost, and interest rate. The court found that TRIFED suffered a loss of Rs.35,94,78,086 from the open market sale of unlifted stock of cashews. The court held MVR liable for breach of contract and awarded TRIFED a sum of Rs.73,56,17,875 with 15% interest per annum.
Fact of the Case:
TRIFED entered into a contract with MVR for the supply of raw cashew. MVR failed to lift the entire quantity of cashews, leading to TRIFED suffering huge losses from the open market sale of unlifted stock. The matter was referred to arbitration, and the Ld. Arbitrator found MVR liable for breach of contract and awarded TRIFED a sum of Rs.73,56,17,875 with 15% interest per annum.
Finding of the Court:
The court found that MVR was at fault and had committed a default in terms of the agreement. The court held MVR liable for breach of contract and dismissed MVR's claims while allowing some of TRIFED's counter claims. The court awarded TRIFED a sum of Rs.73,56,17,875 with 15% interest per annum.
Issues: The issues included termination of the agreement, short delivery of cashew nuts, bank guarantees, loss of goodwill, overhead expenses, cancellation of export orders, interest, breach of contract, unsold stock, loss on sale of raw cashew nuts, loss of profits, damages on loss of reputation, recurring cost, and interest rate.
Ratio Decidendi: The court held MVR liable for breach of contract and awarded TRIFED a sum of Rs.73,56,17,875 with 15% interest per annum based on the losses suffered by TRIFED from the open market sale of unlifted stock of cashews.
Final Decision: The court awarded TRIFED a sum of Rs.73,56,17,875 with 15% interest per annum, and if the total awarded sum is not paid within three months, the rate of future interest awarded by the Ld. Arbitrator shall stand.
Prathiba M. Singh, J.
The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act") has been filed challenging the award dated 20th May, 2005 passed by the Ld. Sole Arbitrator.
2. The Tribal Cooperative Marketing Development Federation of India Limited (hereinafter, "TRIFED"), is a Multi-State Cooperative Society of the Government of India, which is engaged in the procurement/storage/ processing of agro based products collected/grown by tribals throughout India. The contract in the present case with M/s. M.V.R. Industries Limited (hereinafter "MVR") was for supply/procurement of 25,000 metric tonnes ("MT") of raw cashew as per agreement dated 16th March, 1995. TRIFED was to invest its own funds and purchase the products from tribals. The products so procured were to be stored in various godowns/warehouses. As per the agreement, the schedule for procurement and for payment was clearly stipulated. MVR was to take delivery of the various quantities of raw cashew procured, and if the stocks were not lifted, interest was liable to be paid by MVR at the agreed rates. Due to the delays in lifting of stock, if there was any deterioration of the products, the same was the responsibility of MVR. Lifting was to commence from May, 1995 and was to continue till November, 1995.
3. The case of TRIFED is that though MVR took delivery of various quantities of raw cashew, it thereafter, stopped taking delivery and only 3858.902 MTs of cashews were lifted by MVR as against the agreed quantity of 14,034.4214 MTs, which was procured. This led to TRIFED disposing of the entire un-lifted stock in the open market, as a result of which TRIFED suffered huge losses due to such sale. It is, however, MVR's case that it had made excess payments to TRIFED. Disputes arose between the parties and the matter was referred to a Ld. Sole Arbitrator by this Court vide order dated 31st January, 1996. Due to demise of the appointed Arbitrator i.e., Mr. Justice G. C. Jain, thereafter, Mr. Justice Jaspal Singh (retired) was appointed as the Sole Arbitrator.
4. The newly appointed arbitrator continued with the proceedings from the stage where the earlier Arbitrator had left the matter. Before the Ld. Arbitrator, MVR appeared through its counsels and led evidence. Last date of appearance on behalf of MVR before the Ld. Arbitrator was 23rd September, 2004. After the said date, since MVR stopped appearing in the matter, Ld. Arbitrator issued repeated notices to MVR. On 9th September, 2004, Ld. Arbitrator records as under:
"Arrears of arbitration fee have again not been cleared by the Claimant MVR Industries. I have, in this regard, received a fax from Mr. Jose Advocate for the Claimant. The learned Counsel of TRIFED states that the proceedings, as far as the Claim of MVR Industries is concerned, should be terminated. Since Mr. Jose is not present today, I would rather like to hear him too on this aspect the matter. Put up on 23rd September, 2004 at 4:00 pm."
5. On 23rd September, 2004, Ld. counsel for MVR made the following statement.
"Statement of Mr. P. I. Jose, Advocate.
I have no instructions to appear on behalf of M.V.R. Industries & be allowed to withdraw."
6. In view of the said statement, the Ld. Arbitrator issued notice for appearance to MVR vide registered AD/ post. Original envelopes and speed post receipts are on the arbitral record. Again, on 29th October, 2004 fresh notice was issued to MVR. Original registered AD slips are on record. It was then noticed that the registered cover was received back unserved. Accordingly, fresh notice was issued. On 25th November, 2004, the following order was passed by the Ld. Arbitrator.
"Notices were sent by registered cover at two addresses. One registered cover sent at Anna Salai, Madras address has been received back with the report "left". The other sent at Pondicherry address has not been received back & is taken to have been served. Since none is present on behalf of MVR I
