220 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO-2075-2020 (O&M)

Date of decision: 24.09.2025 THE PUNJAB STATE CO-OPERATIVE SUPPLY AND MARKETING FEDERATION LIMITED ...Appellant(s)

VERSUS M/S PUNJAB RICE MILLS AND OTHERS ...Respondent(s)

CORAM: HON'BLE MR. JUSTICE JASGURPREET SINGH PURI Present:- Mr. K. K. Gupta, Advocate for the appellant.

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JASGURPREET SINGH PURI, J. (Oral)

1. The present appeal has been filed against the judgment dated 16.09.2019 passed by the learned Additional District Judge, Chandigarh, whereby the objection petition filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’), seeking to set aside the award dated 10.06.2016 was dismissed.

2. Learned counsel for the appellant submitted that it is a case where there was an agreement between the appellant-MARKFED and the respondents- Millers pertaining to custom milling of rice. He further submitted that as per the practice, the paddy is purchased by the Government Agencies such as the appellant and thereafter, the same is allocated to various registered Millers and in the present case, some of the paddy was allocated to the respondents-Millers. He submitted that the quantity of paddy and the time frame work are also stipulated. He further submitted that there was an allegation against the respondents-Millers regarding unauthorized conversion of 40257 bags of paddy into rice and there is a Clause 8(p) mentioned in Annexure P-2, which is the Custom Milling Policy of the Government of Punjab, which provides that in case of such unauthorized conversion of paddy into rice, the Miller will be liable to pay interest @ 12% per annum on the value of paddy for the duration of defalcation. He further submitted that in this way, since there was unlawful conversion of paddy into rice by the respondents-Millers, then in terms of the aforesaid Clause, interest @ 12% per annum was to be charged from the Millers and therefore, a claim of Rs.3,40,276/- along with interest @ 12% per annum was raised against the respondents-Millers.

3. Learned counsel for the appellant-MARKFED further submitted that however, the learned Arbitrator dismissed the claim of the appellant on the ground that there was no such provision in the milling agreement between the parties pertaining to charging of interest, if any, and in the absence of any such provision, no such claim could have been allowed. He further submitted that in fact the aforesaid Clause 8(p) does not find mention in the milling agreement but the same finds mention in the Custom Milling Policy issued by the Government of Punjab, which is attached along with the present appeal as Annexure P-2 and since the parties are governed by the Custom Milling Policy and it is a part of the agreement, the source for charging the interest @ 12% per annum came from the aforesaid Custom Milling Policy and therefore, the appellant could not have been non-suited only on the ground that there did not exist any provision or Clause for charging the aforesaid interest.

4. Mr. Gupta further submitted that after the award was passed against the appellant-MARKFED by the learned Arbitrator, the appellant filed objections under Section 34 of the Act before the learned Additional District Judge, Chandigarh, which were dismissed vide judgment dated 16.09.2019 on the ground that none of the parameters contained as grounds under Section 34 of the Act were fulfilled and the Court cannot re-appreciate evidence on merits. He further submitted that once the aforesaid Clause itself was present in the Custom Milling Policy (Annexure P-2), then the aforesaid aspect was required to have been considered by the learned Additional District Judge, Chandigarh while hearing the objections under Section 34 of the Act. He also submitted that the dispute relates not to the milling but to the paddy stock and therefore, the aforesaid judgment passed by the learned Additional District Judge, Chandigarh, is er