IMPORTANT POINTS
1. Re-appraisal of evidence by the court is unknown to a proceeding under Section 30 of the Arbitration Act. Re-appreciation of evidence is not permissible.
2. Event the time is the essence of the contract, question of their being any presumption or presumed extension or presumed acceptance of a renewed date would not arise. The extension if there be any, should and ought to be categorical in nature rather than being vague or in the anvil of presumptions.
3. When the contract itself provides for extension of time, the same cannot be termed to be the essence of the contract and default however, in such a case does not make the contract voidable either. It becomes voidable provided the matter in issue can be brought within the ambit of the first paragraph of Section 55.

Headnote:Indian Contract Act, 1872-Section 55-Effect of failure to perform contract at fixed time-Presumption as to extention of time-Not permissible in case timee is essence of contract-Extention if any should be categorical.
       Held : In the event the time is the essence of the contract, question of their being any presumption or presumed extension or presumed acceptance of a renewed date would not arise. The extension if there be any, should and ought to be categorical in nature rather than being vague or in the anvil of presumptions. In the event the parties knowingly give a go to the stipulation as regards the time-the same may have two several effects: (a) parties name a future specific date for delivery and (b) parties may also agree to the abandonment of the contract-as regards (a) above, ther emust be a specific date within which delivery has to be effected and in the event there is no such specific date available in the course of conduct of the parties, then and in that event,the courts are not left with any other conclusion but a finding that the parties themselves by their conduct have given a go by to the original term of the contract as regards the time being the essence of the contract. (Para 12)
       When the contract itself provides for extension of time, the same cannot be termed to be the essence of the contract and default however, in such a case does not make the contract voidable either. It becomes voidable provided the matter in issue can be brought within the ambit of the first paragraph of Section 55. (Para 13)
       (ii) Indian Contract Act, 1872-Section 55-Time is essence of contract-Test to determine-Mere fixation of time for performance of contract by itself does not make time essence of contract-Agreement must be read as a whole with corresponding obligations of parties to ascertain true intent of parties-Agreement to purchase sugar from appellant-Sugar was to be delivered on o r before fixed date-Delivery not affected in time-Buyer still showing anxeity by telex message to get delivery-Cancellation of contract-Subsequent withdrawal of cancellation without fixing new time schedule for delivery-Seller s request to fix date of delivery and place of delivery-Silence on part of buyer-Subsequent cancellation of contract stating that seller failed to deliver Sugar in terms of original agreement-Forfeiture of performance guarantee-Not tenable-In fact situation it could not be said time of was essence of contract-Buyer had a duty to speak failure of which caused prejudice to seller-Buyer entitled to get back performance guarantee deposit.
       Held : The essential point is that the seller must be instructed in accordance with the terms of the contract as to the way in which he can perform his duty in terms of the agreement and effect delivery upon the goods being put on board-In the event the Port of Discharge is not named can the goods bbe put on board or can the seller be made responsible for his failure to put the goods on board? The answer cannot but be in the negative. In the contextual facts, the goods were on thehigh seas and to be diverted to the Ports of India, shortly, as such nomination of the port, was an essential requirement, in order to make the seller liable for breach and entitlement of the buyer to claim damages. (Para 22)
       Mere fixation of a period of delivery or a time in regard thereto does not by itself make the time as the essence of the contract, but the agreement shall have to be considered in its entirety and on proper appreciation of the intent and purport of the clauses incorporated therein. The state of facts and the relevant terms of the Agreement ought to be noticed in its proper perspective so as to assess the intent of the parties. The Agreement must be read as a whole with corresponding obligation of the parties so as to ascertain the true intent of the parties. (Para 23)
       In the instant case, the Port of Discharge has not been named neither the Surveyor is appointed-without whose certificate, question of any payment would not arise-can it still be said that time was the essence of the contract, in our view the answer cannot but be a positive No . (Para 23)
       In the premises it would thus be safe to conclude that by reason of the non-fulfilment of the three conditions as noted above, question of time being the essence of the contract would not arise and as such delivery was to be expected within a reasonable time but before the expiry of the reasonable time, diverse letters were sent asking for details but the buyer maintained total silence when there was a duty to speak as noted above. The Appellate Court s finding that the contract stood extended upto 14th/15th October, 1989 does not have any factual support and as such totally unwarranted and thus cannot be sustained. For the self-same reason the finding of the Appellate Court as regards the issue of law, warranting intervention of the High Court vis-a-vis the award, cannot also be sustained. This is apart from the fact that it is a factual issue upon proper reading of the material documents on record. In any event upon coming to a conclusion that facts detail out in the judgment (under Appeal) unmistakably record that a new date of delivery is available on record-Question of the same being an issue of law does not arise in the facts of the matter under consideration. The letter of the Government of India dated 11.11.89 stated that the matter has since been reconsidered and the letter of cancellation stands withdrawn though however, without prejudice to rights and contentions of the Government but there was as a matter of fact, reconsideration of the entire issue and it is only on that basis that the letter of cancellation was withdrawn. The facts depict that on 15th November, 1989, an intimation was sent by the Appellants to FCI stating that due to the cancellation, the cargo already arranged for has gone out of control and a new cargo was being arranged. In the same letter the Appellant further asked for fixation of a new date of delivery and to make consequential amendment for acceptance of documents under the letter of credit by the Bank but no reply is sent. Letters of reminders have been sent again on 20th November, 1989, 24th November, 1989 but without any response whatsoever and subsequently the cancellation came in January, 1990 as noticed above, forfeiting the performance Bank Guarantee by FCI. In that view of the matter, question of the time being the essence would not arise in the contaxtual facts. More so by reason of the fact that the cargo was a cargo afloat on the High seas. (Para 27)
       (iii) Letter of credit-Amendment of-Contract with stipulation as to time for performence-Date of performence mentioned in letter of credit-Subsequent extention of time to perform contract-Whether date stipulated in letter of credit about also be altered?-Law does not require, it is a matter of prudence to get altered date mentioned in letter of credit.
       Held : While it is true that the documents by themselves make and create a separate agreement with the Bank, and the Bank cannot possibly raise any dispute in regard thereto as to whether the goods are actually been supplied or not, but two factors ought to be kept in mind apart from what we have stated herein before in this judgment. The first being, to facilitate payment it is better to have the extended delivery date on the letter of credit itself by way of an amendment, so as to avoid any future complication. This is not a rule of law or a requirement of law but a matter of prudence. (Para 26)
       (iv) Arbitration Act, 1940-Section 30-Grounds to set aside award-Scope of power of court to interfere with award-Reappraisal of evidence by Court is not permissible-If award does not contain reasons question of interference would not arise at all.
       Held : Section 30 of the Arbitration Act, 1940 providing for setting aside an award of an arbitrator is rather restrictive in its operation and the statute is also categorical on that score. The use of the expression shall in the main body of the Section makes it mandatory to the effect that the award of an arbitration shall not be set aside excepting for the grounds as mentioned therein to wit: (i) arbitrator or umpire has misconducted himself; (ii) award has been made after the supersession of the arbitration or the proceedings becoming invalid; and (iii) award has been improperly procured or otherwise invalid. The above noted three specific provisions under Section 30 thus can only be taken recourse to in the matter of setting aside of an award. The legislature obviously had in its mind that the Arbitrator being the judge chosen by the parties,, the decision of the Arbitrator as such ought to be final between the parties. (Paras 28 & 29)
       It is now a well settled principle of law that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the Court to reappraise the evidence is unknown to a proceeding under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the Court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law: In the event however two views are possible on a question of laww as well, the Court would not be justified in interfering with the award. (Para 30)
       The common phraseology error apparent on the face of the record does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record: The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined. (Para 31)

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

The court clarified that re-appraisal or re- appreciation of evidence is not permissible in proceedings under Section 30 of the Arbitration Act. The decision of the arbitrator is final, and the court's role is limited to examining whether the award was made properly and whether any grounds for setting aside the award exist, such as misconduct or invalid proceedings (!) (!) .
The scope of judicial interference with arbitral awards is restricted. The court cannot substitute its own evaluation of evidence or facts, and unless the award is shown to be patently perverse or based on a wrong legal proposition, it should be upheld (!) (!) .
When the award contains reasons, the court's review is limited to checking for legal misconduct or manifest error. If the award is reasoned and the reasons are not demonstrably incorrect or irrational, the court should not interfere (!) (!) .
The phrase "error apparent on the face of the record" does not permit a detailed review of the merits or intrinsic evaluation of evidence. The court cannot substitute its judgment for that of the arbitrator unless the error is obvious and demonstrable from the record (!) .
The arbitrator’s decision is presumed to be correct if it is within the scope of their authority and based on possible interpretations of the facts and law. An award can only be challenged if there is a clear legal misconduct or a legal proposition that is patently erroneous (!) (!) .
The court emphasized that the arbitrator is a judge chosen by the parties, and their decision should be final unless it involves misconduct, invalid proceedings, or improper procurement of the award (!) (!) .
The court acknowledged that errors of law or fact that are not apparent on the face of the award, or that are within the realm of possible interpretations, do not justify interference. The scope of challenge is limited to errors that are manifest and demonstrable (!) (!) .
The judgment highlighted the importance of considering the entire contract and the intent of the parties. Fixation of a specific delivery date or extension thereof must be based on clear and categorical evidence. Vague or presumptive extensions are not sufficient to establish that time was the essence of the contract (!) (!) .
If the contract provides for extension of time, such extension, if mutually agreed upon, does not automatically make time of the essence. The contractual obligations and the conduct of the parties are crucial in determining whether timely performance is essential (!) (!) (!) .
The court also pointed out that the absence of explicit stipulation that time is of the essence, combined with the conduct of the parties and the circumstances, suggests that the contract was not strictly time-bound. Silence or lack of response to requests for extension can imply acceptance of delay, unless explicitly stated otherwise (!) (!) .
In cases involving international commercial contracts, the importance of clear instructions regarding the port of delivery, surveyor appointment, and the terms of shipment is emphasized. The failure to specify or amend these details can impact whether time is considered of the essence (!) (!) .
Regarding the validity of the arbitral award, the court reaffirmed that the scope of judicial review is limited. It cannot re-examine the evidence or substitute its own findings unless there is a manifest and palpable error, or the award is based on a legal proposition that is clearly erroneous (!) (!) .
The court reiterated that the arbitrator’s decision should be respected, and the grounds for setting aside an award are strictly limited to misconduct, invalid proceedings, or improper procurement. Mere disagreement with the findings or legal interpretations that are possible within the scope of the award are insufficient grounds (!) (!) (!) .
Overall, the judgment underscores the importance of the contractual terms, conduct of the parties, and the limited scope of judicial review over arbitral awards, emphasizing that courts should avoid re-evaluating factual or legal issues unless there is a clear and manifest error.

JUDGMENT

Banerjee, J.-These two Appeals by the grant of Special Leave and arising out of the Judgment of the Delhi High Court focus two singularly singular questions pertaining to (i) the time being the essence of the contract and (ii) authority of the High Court in the matter of interference with an Arbitral Award under the Repealed Act of 1940 (The Arbitration Act, 1940).

2. For effectual disposal of these two questions, noticed above, reference to certain factual details in this judgment is inevitable and adverting thereto it appears that on October 4, 1989 Union of India floated an invitation to tender for purchase of sugar to meet the urgent requirement of anticipated scarcity in the Indian market during the Dussehra and Diwali festivals in November, 1989 which however, and without much of a factual narration, culminated in an Agreement dated 24th/25th October, 1989 with M/s. Arosan Enterprises, being the Appellants herein, for the supply of 58000 metric tonnes of sugar. The Contract as above inter alia contained the following terms:

(a) That the claimant shall supply 58,000 M.T. of sugar (net weight plus minus 5 at sellers option).

(b) That the claimant shall arrange shipment of entire quantity of the contracted sugar so as to reach Indian Ports not later than 31st October, 1989; shipment within the contracted delivery period was to be the essence of the contract.

In case of delay the seller waas to be deemed to be in contractual default with a right to the buyer to cancel the contract. The buyer could however extend the delivery period at a discount as may be mutually agreed between the buyer and the seller.

(d) That the seller had to establish an unconditional irrevocable performance guarantee in favour of the buyer by any Indian Nationalised Bank at New Delhi for 10 of the total contract value of the maximum guaranteed quantity to be shipped, within 7 days of the contract.

(e) That the payment was to be made to the seller by irrevocable letter of credit (L/C) covering 100 value of the contract quantity. The L/C was to be estblished by the buyer within seven days of the receipt of an acceptable performance Bank Guarantee.

(f) The performance Bank guarantee (PBG) was to be by any Indian Nationalised Bank at New Delhi and was to be kept valid for a minimum period of ninety days beyond the last date of contract shipment period."

3. The factual score further depicts that on 24th October, 1989, itself the appellant did furnish a performance bank guarantee for $ 29,28,000 and upon bank guarantee being furnished, the Government of India assigned the contract to the Food Corporation of India (FCI) under clause 20 of the Agreement. FCI also in its turn opened a Letter of Credit for the full value of the contract though, however, as the records depict that while on 26th October, 1989, the Letter of Credit was opened by FCI but its authentication was not effected within the delivery date i.e. 31st October, 1989.

4. Be it noted that in terms of the payment clause, the payment was to be made by the buyer by way of irrevocable letter of credit covering 100 of the contract quantity and letter of credit was to be established by the buyer within seven days from the receipt of performance bank guarantee and it is upon completion of the period of 7 days from the date of acceptance of the performance guarantee, the letter of credit should have been authenticated and that was to be effected by about 31st October, 1989. In the contextual facts the authenticated bank guarantee was effected only on 2nd November, 1989 i.e. after the expiry of the date of the delivery-It is on this in support of the appeal and Mr. Dholakia appearing for FCI and Mr. K.N. Rawal, the learned Addl. Solicitor General for the Union of India and it is in this perspective certain further deta

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1999 Supreme(SC) 1045

Cases Referred (6)