IN THE SUPREME COURT OF INDIA

C. A. No. 1945 of 1989 (Arising out of S.L.P. (C) No. 3392/85)

Decided On: 03.03.1989

Appellant: Food Corporation of India

vs.
Respondent: Joginderpal Mohinderpal

Hon'ble Judges/Coram: S. Ranganathan and Sabyasachi Mukherjee, JJ

FACTS

The Respondent entered into a contract with the appellant Food Corporation of India whereunder
the appellant Corporation was to give to the Respondent Paddy for being shelled/ converted into
rice at the rate of 70% of the Paddy. The Paddy was to be lifted from the godowns of the
appellant. The shelling charge was fixed at Rs.2/20p. per quintal. Dispute had arisen when the
respondent had failed to lift the balanced paddy as per the agreement. Corporation had to get the
unlifted paddy shelled by transporting to other centre as well as getting the same shelled at heavy
additional expenditure but there was no proof of the same. The next claim dealt with was the
claim of Rs.3,23,856.08 claimed by the Corporation as the cost of non-delivery of 137-39549
tonnes of rice at the rate of Rs. 165 per qtl. of paddy. However, no economic cost was taken into
account. Civil Revision filed by the appellant. The award given was challenged to the higher
courts.

ISSUES :

 Were there pre-estimated damages for not lifting the paddy by the respondent?
 Is the award liable to be set aside once awarded and can it be modified?
 Does court have any jurisdiction to interfere or modify the award in manner sought for by
the appellant?
RULES

Rules, Sections and Laws applicable in the present case are as follows from

Arbitration Act, 1940—

 Section 14
 Section 30
 Section 33

Cases
 Mukkudduns of Kimkunwady v. Inamdar Brahmins of Soorpai, 3 MIA 380;
 M/s. Sudarsan Trading Co. v. The Government of Kerala & Anr., [1989] 1 Jt. Today SC
339;
 Champsey Bhara & Co. v. Jivraj Balloo Spinning & Weaving Co. Ltd., L 1922 IA 324,
followed.
 Puri Construction Pvt. Ltd. v. Union of India, [1989] 1 SCC 411, referred to.

APPLICATION & ANALYSIS

In the present case, two claims were taken for non lifting and non delivery of paddy as per the
agreement between the appellant and the respondent.

Addressing Issue 1 : Were there pre-estimated damages for not lifting the paddy by the
respondent?

The respondent filed an application under section 14 of the Arbitration Act, 19481 for filing of
the award and prayed for making the award the rule of the court. The arbitrator did not permit the

1
Section 14 of the Arbitration act, 1940 : Award to be signed and filed.
(1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the
parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration
and award.
(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming
under such party or if so directed by the Court and upon payment of the fees and charges due in respect of the
arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it,
cases of the appealing party as asserted according to the terms of the agreement. The arbitrator
permitted certain cases where a claim of Rs. 55,060.29 which had asserted as penalty at Rs.2 per
qtl. for not lifting the remaining paddy. Partnership needed to get the unlifted paddy shelled by
transporting to other focus and also getting the same shelled at substantial extra consumption.
The arbitrator noticed that there was no proof of the same. Also, compensation would have been
allowed only if there would have been any proof. Since, there was no proof the claim was
rejected of appealing party for Rs. 55,090.19.

The following case managed by the authority was the claim of Rs.3,23,856.08 asserted by the
Corporation as the cost of non-delivery of 137-39549 tons of rice at the rate of Rs. 165 for every
qtl. of paddy. As per the clause of the Contract, in case of inability to supply rice as per
agreement, the mill operators were subject to pay to the Corporation for the amount of rice short
delivered at the penal rate of 11/2 times the financial cost of the concerned assortment of the
paddy comparable to the deficiencies. As there was no meaning of 'Economic Rate' and no
mention anywhere in law it is unjustified. The Corporation has included half penalty and in this
way has guaranteed the cost at Rs. 165 for each qtl. At the point when the paddy had been
acknowledged by the mill operators genuinely and with no reservation, they will undoubtedly
provide for the Corporation 70% of the yield. As they didn't do it, so they are at risk to pay the
cost of the undelivered rice. Also, the quality cut was admitted to have been correctly assessed
under the said Punjab Rice Order and to that the millers submitted. This item is, therefore,
allowed.

Addressing Issue 2 :Is the award liable to be set aside once awarded and can it be modified?

The procedures of arbitration must stick to the Principles of natural justice and must be in
consonance with such practice and strategy which will prompt a legitimate goals of the dispute

together with any depositions and documents which may have been, taken and proved before them, to be filed in
Court, and the Court shall thereupon give notice to the parties of the filing of the award.
(3) Where the arbitrators or umpire state a special case under clause (b) of section 13, the Court, after giving notice
to the parties and hearing them, shall pronounce its opinion thereon and such opinion shall be added to, and shall
form part of, the award.
and make certainty of the general population for whose advantage these procedures are depended
on.

It is important to discover whether the arbitrator has misconducted himself or the procedures
lawfully or has gone in opposition to the terms of reference between the gatherings or whether he
has conferred any mistake of law obvious on the substance of the award. It is important to stress
that these are reason for putting aside the honor however these are discrete and unmistakable
grounds. Halsbury's Laws of England, Vol. 2 fourth Edn., para 623 emphasizes that a arbitrator’s
award might be put aside for mistake of law showing up on its substance or if the authority has
misconducted himself or the procedures.

Section 302 and Section 333 of the Act provide for the grounds on which an award of the
arbitrator can be set aside.

In this case, the arbitrator has made a speaking award, in other words, he has given explanations
behind his decision as has been accentuated in M/s Sudarsan Trading Co. v. The Government
of Kerala and Anr., 4 that a honor could be put aside if the authority has misconducted himself
or the procedures or has continued past locale. It could likewise be put aside where there are
blunders clear on the substance of the honor. However, these are discrete and unmistakable
grounds. In the event of mistakes obvious on the substance of the honor, it must be put aside if in
the award there is any recommendation of law which is clear on the substance of the award, to be
specific, in the honor itself or any report fused in the honor. The perceptions of the Judicial
Committee in Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., 5. Dr.

2
Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds,
namely:-
(a) that an arbitrator or umpire has misconducted himself or the proceedings
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after
arbitration proceedings have become invalid under section 35;
(c) that an award has been improperly procured or is other- wise invalid.
3
Arbitration agreement or award to be contested by application. Any party to an arbitration agreement or any person
claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have
the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:
Provided that where the Court deems it just and expedient, it may set down the application for hearing on other
evidence also, and it may pass such orders for discovery and particulars as it may do in a suit .

4
M/s Sudarsan Trading Co. v. The Government of Kerala and Anr., [1989] 1 Jt. Today SC 339
5
Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., L 1922 IA 324
L.M. Singhvi, were that the arbitrator wasn't right in not granting half of the additional penalty as
guaranteed by the litigant. The appealing party had asserted the cost of Rs. 165 for each qtl. The
arbitrator was of correct view that the articulation 'Economic Rate' had not been characterized.
The authority has noticed that the market rate did not surpass that sum at the time. The authority
had translated the impact of statement g(i) of the agreement as specified hereinbefore. It can't be
said that such a development is a development which isn't possible or conceivable.

Addressing Issue 3 : Does court have any jurisdiction to interfere or modify the award in
manner sought for by the appellant?

Dr. Singhvi looked to ask that according to the terms of the agreement the authority was obliged
to grant penal rate regarding clause g(i) of the contract. The arbitrator has examined the impact
of clause g(i) and has noticed that except if there was proof about which unexpectedly there was
none, this amount couldn't be dealt with as a pre-gauge of damage. In the event that be so then it
was penalty and was not recoverable. Dr. Singhvi's protest subsequently can't be acknowledged.
Error of law in that capacity isn't to be assumed, if there is lawful suggestion which is the
premise of the honor and which is wrong as saw in Champsey Bhara and Co, (supra), at that
point just the award can be put aside.

The Court can't sit in appeal over the perspectives of the arbitrator by reconsidering and re-
evaluating the materials. As can be found in Puri Con-struction Pvt. Ltd. v. Association of
India6, the previously mentioned perspective of the-matter, it appears to that the scholarly
Additional District Judge was right in the view it took and the High Court, in this manner, was
legitimized in expelling the correction. No request as to costs. Special leave allowed.

CONCLUSION

The respondent filed an application under section 14 of the Arbitration Act, 1948 for filing of the
award and prayed for making the award the rule of the court. The appellant thereby filed
objections under sections 30 and 33 of the Act. The learned Subordinate Judge found that the
award was liable to be set aside and modified the award and passed a decree in favour of the

6
Puri Con-struction Pvt. Ltd. v. Association of India, [1989] 1 SCC 411
appellant for the amount. Later, the Additional District Judge allowed the appeal by respondent
and reversed the Subordinate Judge's order.

This was fair order subsequent to thinking about every one of the records. It’s a plausible
conclusion by the arbitrator. The court has no purview to interfere or adjust the award in the way
looked for by the appealing party and in the way done by the scholarly Subordinate Judge in the
primary occurrence for this situation. In that perspective of the issue, the educated Additional
District Judge was supported in correcting the order of the scholarly Subordinate Judge and the
High Court was likewise legitimized in not interfering with the request of the Additional District
Judge. It can be said that Arbitrator had taken a conceivable view. Beyond this, the court has
nothing to look at. It isn't important for a court to look at the benefits of the honor with reference
to the materials created before the arbitrator.

REFERENCES

I have referred to following sources while completing my assignment :

 P.C. RAO AND WILLIAM SHEFFIELD, ALTERNATIVE DISPUTE RESOLUTION

Book
 Bare Act : Arbitration Act 1940
 Case law : https://www.casemine.com/judgement/in/56094e8de4b0149711281795
(Accessed on 13th September,2018)
 Case Law : https://indiankanoon.org/doc/525017/ (Accessed on 13th September, 2018)
 Online Legal Databases : SCC online and Manupatra