THE HONOURABLE MR v. Central Warehousing Corporation

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 03-12-2007CORAM:THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN ANDTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANO.S.A.NOs.228 and 229 OF 2002M/s.Raasi Transport Corporationrepresented by its Managing PartnerN.Swaminathan, Ex.H. & T Contractor50, Rajaji SalaiMadras – 600 001. .. Appellant in both O.S.AsVersus1. Central Warehousing Corporation rep.by Shri A.Vinoban Deputy Manager (General) O/o.The Regional Manager 153, Eldams Road Madras – 600 0182. Shri U.R.Kurlekar Sole Arbitrator Flat B-10, Golden Co.operative Group Housing Society Plot 9-A, Patparganj Delhi – 110 092. .. Respondents in both O.S.AsFor Appellant :: Mr.P.SeshadriFor Respondents :: Mr.V.Raghavachari for Mr.A.J.Abdul Razaak in O.S.A.No.228 of 2002 for Respondent No.1 in and Mr.S.R.Sundaram for Respondent No.1 in O.S.A.No.229 of 2002Prayer: Original Side Appeal Nos.228 and 229 of 2002 arepreferred against the judgment and decree made in O.P.Nos578 of 1992and 92 of 1993 dated 8.9.1999 passed by the single Judge. https://hcservices.ecourts.gov.in/hcservices/ JUDGMENTK.RAVIRAJA PANDIAN, J.These two appeals are filed by the contractor - Raasi TransportCorporation against the common order dated 8.9.1999 made by thelearned single Judge in O.P.Nos.578 of 1992 and 92 of 1993. 2. O.P.No.578 of 1992 was filed by the first respondent CentralWarehousing Corporation to direct the sole arbitrator – the secondrespondent to file the award published by him on 10.6.1992 and pass adecree in terms of the award, whereas O.P.No.92 of 1993 was filed bythe appellant herein- the contractor under Section 30 of theArbitration Act, 1940 (Act No.X of 1940) to set aside the awardpassed by the second respondent. The award was dated 10.6.1992. 3. The material facts necessary for disposal of these appeals areas follows:The appellant has become a successful bidder under the firstrespondent Corporation for handling and transport of food grains andfertilisers to the first respondent warehouses at Tiruchirapalli.Prior to the commencement of the period, one S.M.Sait wasappointed as a contractor on temporary basis from 18.11.1988 to17.2.1989. The appellant commenced the work on 18.2.1989. In the meantime, on 30.1.1989, a bridge nearby the warehouses of the firstrespondent was closed due to which the appellant has to take adeviated route to reach the first respondent godowns. The appellanton 30.1.1989 has sent a telegram to the first respondent to considerthe actual distance for transportation on pro rata basis as per thetender conditions before finalising the rate. The appellant hasaccepted the contract without prejudice to its right to claimadditional rate for the increased distance. Ultimately the contractwas concluded on 6.3.1989 for a period of two years with effect from18.2.1989. The appellant has also agreed to supply workmen at therate of RS.10/- per day. Immediately after the appellant enteringinto agreement, by proceedings dated 20.3.1989 the Government hasincreased the minimum wages to Rs.21/- per day for casual labourers.This increase in wages was also not accepted by the first respondentin spite of the demand made by the appellant. The appellant thussustained loss heavily in respect of the increased distance intransportation of the food grains and fertilisers and of the increasein the minimum wages payable to the work force supplied by theappellant. The appellant on 14.9.1989 sent further telegramrequesting the first respondent to accept the increase in the ratesfor transportation as well as the labour charges and further informedthe first respondent that the appellant would discontinue the workfrom 16.9.1989 if the two conditions have not been accepted andvirtually the appellant discontinued the contract with effect from16.9.1989. Because of the discontinuance of the work by theappellant, the first respondent appointed independent contractors onadhoc basis from 27.11.1989 to 14.2.1990 at enhanced rate of 63percent above the schedule of rates. Subsequent to that, from15.2.1990 to 17.2.1991, the respondent appointed independentcontractors on adhoc basis at 68 percent above the scheduled rate. https://hcservices.ecourts.gov.in/hcservices/

4. On 4.10.1999, the sole arbitrator has been appointed foradjudicating the claim of loss sustained by the first respondent in asum of Rs.5,56,341/- because of the abrupt stoppage of the work bythe appellant. The arbitration proceedings were went on between28.1.1992 to 10.6.1992 in which the appellant also made a counterclaim in a sum of Rs.6,19,759.82ps on the ground of extra distancetransportation and payment towards work force in a higher rate asfixed by the Government. 5. On 10.6.1992, the Arbitrator passed an award as sought for bythe first respondent and rejecting the counter claim made by theappellant. 6. As already stated, the first respondent filed O.P.No.578 of1992 under Section 17 of the Arbitration Act, 1940 to pass a decreein terms of the award and the appellant filed O.P.No.92 of 1993 underSection 30 of the Arbitration Act, 1940 to set aside the arbitralaward. 7. The learned single Judge upon consideration of the contentionsmade before him has come to the conclusion that the two events,which were vital for consideration, have happened during the pendencyof the contract, because of those events, some financialdisadvantage would have been caused to the appellant in performingthe contract, but the changes could not be regarded as events, whichcould be regarded as impossible of performance. The action of theappellant in abruptly stopping the contract work forced the firstrespondent to engage adhoc contractors for two spells for over andabove the agreed price and the first respondent is entitled torecover the price paid to the adhoc contractors from the appellant asper the contract. The learned single Judge has also confirmed thearbitration award in non-suiting the appellant for counter claim onthe ground that inasmuch as the appellant has breached the contract,he was not entitled to counter claim, which has not been accepted bythe first respondent. Hence, these appeals. 8. Mr.Seshadri, learned counsel appearing for the appellant hascontended that notwithstanding the fact that the appellant hasdiscontinued the work from 16.9.1989, the contract granted in favourof the appellant has not been terminated. When the contract was wellin subsistence, the very appointment of an arbitrator during thecurrency of the contract period cannot be legally sustainable. Thearbitrator has exceeded his jurisdiction in granting the relief asclaimed by the first respondent, which is not the subject matter ofthe referral. The arbitrator cannot enlarge his jurisdiction todecide the issue on the point. Had the enhanced rate given to theadhoc contractor was offered to the appellant, he would havecontinued the contract. In support of the said contention, he reliedon a decision of the Supreme Court in the case of MD.ARMY WELFAREHOUSING CORGANISATION VS. SUMANGAL SERVICES (P) LIMITED reported in(2004) 9 SCC 619 (paragraphs No.43, 69 and 112). https://hcservices.ecourts.gov.in/hcservices/

9. On the other hand, Mr.Raghavachari, learned counsel appearingfor the first respondent submitted that the arbitrator has beenappointed only in accordance with the clauses contained in theagreement, which has been duly signed by the appellant. The referenceto the arbitrator is also regarding the dispute touching upon thecontract. The arbitrator has correctly decided the issue before it,which requires no interference by the Court. The learned single Judgehas correctly rejected the contention of the appellant and made adecree in terms of the award. Having regard to the peculiar nature ofwork of the first respondent, a loss of a day would cause heavily tothe coffer of the first respondent. The action of the appellant inabruptly stopping the work made the first respondent to engageindependent contractors on adhoc basis for two spells from 27.11.1989to 14.2.1990 and 15.2.1990 to 17.2.1991 and paid the rates as agreedwith them. The amount thus spend was at the risk and cost of theappellant and the same has to be reimbursed by the appellant. Thearbitrator having regard to the facts of the case with reference tothe terms of the contract has granted the relief as prayed for. Thelearned single Judge was correct in passing the order impugned whichrequires no interference.10. We heard the argument of the learned counsel on either sideand perused the materials on record.11. It is an admitted fact that the appellant has entered into anagreement and commenced the work from 18.2.1989 at the agreed rate.While that being so, because of the closure of the bridge nearer tothe warehouses of the first respondent, the appellant was forced tospend little more on transportation, as the distance the appellanthas to cover has increased. Likewise, the appellant was also forcedto spend more towards wages of the workmen. It is purely acontractual obligation and the dispute could very well be thrashedout with the first respondent. If not accepted, legal action wouldhave been taken for claiming escalation of rate. But the action ofthe appellant abruptly stopping the work from 16.9.1989 is notexpected of a contractor of the first respondent Corporation, havingregard to the activity of the first respondent. Thus, the firstrespondent was compelled to spend more money for the engagement ofindependent contractors for two spells at the risk and cost of theappellant as agreed in the agreement. The arbitrator, in our view,has rightly granted the award in favour of the first respondent,which they expended for the purpose of adhoc engagement of thecontractors to carry out the day to day work of the first respondent.Even under the Arbitration Act, 1940, the award granted by thearbitrator could be set aside when the arbitrator or umpire hasmisconducted himself or the proceedings, an award has been made afterthe issue of an order by the Court superseding the arbitration orafter arbitration proceedings have become invalid under Section 35 oran award has been improperly procured or is otherwise invalid. Thenon-suiting of the counter claim made by the appellant is also onlyin accordance with the agreement entered into as the lapse was on thepart of the appellant only. The contention that the arbitrator hasmisdirected himself in the arbitral proceedings by not taking intoaccount the loss caused to the appellant for extra distance oftransportation and extra payment of wages for workmen cannot beentertained because of the action of the appellant in stopping the https://hcservices.ecourts.gov.in/hcservices/ work abruptly. To support his contention, the counsel sought aid ofthe decision of the Supreme Court reported in (2004) 9 SCC 619referred supra. The Supreme Court in that case has re-affirmed thewell established principle of law that the arbitrator does notconstitute the Court of Law, his orders and functions are notjudicial ones and he cannot exercise his powers ex debito justitiae.His jurisdiction is confined to the four corners of the arbitrationagreement and he can pass only such an order which may be the subjectmatter of the reference. 12. In this case, the subject matter of the reference was whetherthe appellant was liable to pay the amounts spent by the firstrespondent Corporation towards transportation and engagement oflabour force, because of the failure on the part of the appellant inperforming his part of the agreement. The arbitrator has held thatthe first respondent is entitled to recover the amount from theappellant as they were forced to spend the amount at the risk of theappellant, because the appellant has stopped performing theobligation accepted under the agreement. We are not able to see anyforce in the contention of the learned counsel for the appellant thatthe arbitrator has exceeded his jurisdiction in passing the award. 13. Mr.Seshadri, learned counsel appearing for the appellant hashalfheartedly argued that the arbitrator was for some time advisor tothe first respondent Corporation, hence, he was biased. We are notable to agree with the contention, because that was not the case ofthe appellant either before the arbitrator or before the learnedsingle Judge. Even assuming for a moment the said statement of factis correct, the appellant having assumed to the jurisdiction of thearbitrator, without raising his little finger about this point, andparticipated in the proceedings before the arbitrator and thelearned single Judge, now cannot resile and contend that thearbitrator is biased. The contention of the learned counsel for theappellant that the arbitral proceedings cannot be initiated until theagreement is terminated is also cannot be legally sustainable,because there is no such requirement in the contract entered intobetween the parties, rather the agreement proceeds that the partiescan refer the matter to arbitration as and when a dispute arise inrespect of or touching upon the contract between the parties. 15. For the foregoing reasons, the appeals fail and aredismissed. However, there is no order as to costs. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.usk https://hcservices.ecourts.gov.in/hcservices/ ToThe Sub Asst.RegistrarOriginal SideHigh CourtMadras. + 2 CCs To Mr.P.Seshadri, Advocate SR NO.71128+ 1 CC To Mr. A.J.Abdul Razak, Advocate SR NO.71171 O.S.A.NOs.228 and 229 OF 2002mrd[co]gp/10.12.