214 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH FAO-5250-2014 (O&M)

Date of Decision:20.08.2025 MANAGING DIRECTOR, PUNJAB STATE CIVIL SUPPLIES CORPORATION LTD. AND ANOTHER ....Appellant(s)

Versus M/S MAHAVIR RICE MILLS AND OTHERS .....Respondent(s)

CORAM: HON’BLE MR. JUSTICE JASGURPREET SINGH PURI Present: Mr. Naresh Gopal Sharma, for the appellants.

Mr.Sanjeev Manrai, Senior Advocate with Mr. S.P. Garg, Advocate,for respondents No.1 and 2.

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JASGURPREET SINGH PURI , J. (Oral)

1. The present is an appeal filed by the appellants challenging the order passed by the learned Additional District Judge, Chandigarh dated 23.10.2013, whereby the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) has been allowed and the award dated 01.06.2006 has been set aside and liberty has been granted to the MD, PUNSUP to proceed further afresh in accordance with law.

2. Learned counsel appearing on behalf of the appellants while giving the brief facts of the case submitted that there was an agreement between the appellants and the respondent-Mill for the year 2001-2002 dated 08.10.2001 by which the appellants-Corporation which is a Government Procurement Agency was to purchase the paddy from the open market and give the same to the respondent-Miller for the purpose of shelling and thereafter, the rice which is a product of the shelling of the paddy is to be given back which ultimately would go to the FCI which is the central pool. However, after total paddy of 32728 quintals was supplied to the respondent-Miller, after calculating the percentage of the product of rice which is to come out from the total paddy shelled, there was a shortfall in the delivery of the rice back to the appellants or the FCI and because of the aforesaid shortfall, the arbitration clause which was a part of the agreement was invoked. By virtue of the arbitration clause which is Clause 21, the matter was referred to the Sole Arbitrator and the learned Arbitrator thereafter pronounced an Award dated 01.06.2006 (Annexure A-1). He submitted that against the aforesaid Award, which was pronounced, the respondent-Miller filed a petition under Section 34 of the Act which was allowed by the learned Additional District Judge, Chandigarh primarily on two grounds, firstly that the subject matter was not arbitrable in view of Clause 8 of the arbitration agreement and also while referring to various other judgments passed by Co-ordinate Benches of this Court and secondly, the total amount claimed was only Rs.31,89,309/- as on 31.12.2003 with future interest of 30% but the award which was pronounced was of the principal amount of Rs.64,11,832/- which was in excess of even the claim amount.

3. Learned counsel submitted that once the paddy was entrusted to the respondent-Miller, it was supposed to supply the entire product in the nature of rice after shelling the same and since as per the arbitration agreement Clause 21, which provides that all the disputes and differences arising out of or in any manner touching or concerning this agreement whatsoever shall be referred to the sole arbitration of the Managing Director, PUNSUP the same was so referred to an independent Sole Arbitrator, namely, Sh. R. K. Gupta, who gave the award and therefore, it cannot be said that the nature of the subject matter was not arbitrable in nature and in this way, the learned Additional District Judge, Chandigarh has erroneously decided and set aside the award. So far as the second aspect is concerned, he submitted that the calculation of Rs.64,11,832/- was made on the basis of the calculation which was drawn up on the basis of the shortfall taking into account the cost factor and therefore, it cannot be said that the amount which was awarded by the Arbitral Tribunal was bad since the same was based upon the factual aspect.

4. On the other hand, Mr. Sanjeev Manrai, learned Senior Advocate assisting by Mr. S.P. Garg, Advocate submitted that