Point of Law: Arbitration - Award - Appealable order - Mere erroneous application of law, or appreciation of evidence, does not call for interference of award on ground of patent illegality - Court cannot set aside award by re-appreciating evidence, which is taken into consideration, by an Arbitral Tribunal.

JUDGMENT :

RAJIV SHAKDHER, J.

Preface:

1. This is an appeal preferred under Section 37 of the Arbitration Act, 1996 (in short “1996 Act”) read with Section 13 of the Commercial Courts Act, 2015 against the judgment dated 21.05.2021, passed by the learned Single Judge, in O.M.P. (COMM.) No. 147/2018. Via the impugned judgment, the learned Single Judge has sustained the award dated 03.11.2017, passed by the Arbitral Tribunal, comprising Hon'ble Mr. Justice (Retd.) S.P. Arora, Hon'ble Mr. Justice (Retd.) K.S. Gupta and Mr. R.K. Sharma.

2. It is important to note, at the very outset, that, when the matter was taken up for hearing for the first time, on 19.07.2021, both the sides represented by counsel, indicated to us, that, the only issue which arises for consideration in the instant appeal concerns the loss of stock, in terms of money, quantified by the Arbitral Tribunal. The Arbitral Tribunal has pegged the total loss towards closing stock suffered by the respondent, at Rs. 4,42,36,337/-.

3. Accordingly, the appellant has been directed to pay Rs. 2,08,76,700/- after adjusting the loss, towards stock, arrived at by the surveyor, appointed by the appellant. It would be relevant to note that, the loss towards closing stock adverted to by the Arbitral Tribunal, comprised raw material, semi-finished goods and finished goods.

Background facts:

4. Before we proceed further, it may be relevant to etch out the broad contours of the case, which led to the dispute obtaining between the parties, being referred to the Arbitral Tribunal.

4.1. The respondent, which is, apparently, in the business of manufacturing and selling footwear and footwear components, on 20.03.2008, obtained the Standard Fire and Special Perils policy from the appellant. The policy period spanned between 20.03.2008 and 19.03.2009. The total sum assured under the policy initially, was 24,25,00,000/- which was enhanced to Rs. 27,25,00,000/- w.e.f. 30.06.2008 and covered the following assets of the respondents, albeit, on a reinstatement value basis:

4.2. On 14.12.2008, a fire broke out in one of the two units of the respondent i.e. the unit located at village Moginand, Kala Amb, Nahan Road, District Sirmour, H.P. (hereafter referred as “Kala Amb Unit”). It is not in dispute that, the aforementioned policy purchased by the respondent concerned the Kala Amb Unit.

4.3. The fire, inter-alia, caused damage to the building, plant and machinery, stocks, furniture, fixtures and fittings etc. Intimation about the incident was communicated to the appellant by telephone, which was followed by a letter dated 15.12.2008. The incident was also reported by the respondent to the closest police station located in Kala Amb and the fire department.

4.4. Fire brigades were pressed into service to douse the fire which had occurred in the Kala Amb Unit of the appellant. The appellant appointed an entity going by the name Aditi Consultant Pvt. Ltd. as the surveyor. The surveyor's representative made its first visit to the Kala Amb Unit on 16.12.2008, which was followed by several visits, and an inspection of the damage caused to the building and other property. On 10.01.2009, the respondent submitted its provisional claim to the surveyor. At this stage, the respondent had pegged its loss at Rs. 13,21,56,318/-. The provisional claim was submitted in the form, prescribed for the purpose.

4.5. The surveyor recommended the release of interim payment in favour of the respondent, and, accordingly, in March 2009, Rs. 2,50,00,000/- were paid to the respondent.

4.6. On 10.08.2009, the respondent scaled down its cl