Jammu and Kashmir Industries Ltd v. M/s Engineering Projects (India) Ltd

arbitrator-Mr. Justice O.P. Sharma (retired), former judge of this Court is sought to be challenged for getting it set aside.

3. The arbitration proceedings came to be commenced by the petitioner herein against the respondent. The petitioner and the respondent were in a state of contractual relationship for the work and preparation of a techno-economic feasibility and a detailed project report for the establishment “Modern Rosin and Turpentine Project” at Miran Sahib, Jammu. The contractual relationship between the petitioner and the respondent was embodied in an agreement executed on

03.05.1980 in terms whereof the respondent undertook to execute the project on turn-key basis within a work period of 22 months from the date of issuance of letter of intent by the petitioner. This relationship was subject to arbitration. 3 AA no.06/2010 c/w AA no. 22/2009

4. Upon the premise that the performance of the respondent with respect to contract work was unsatisfactory, the petitioner served a legal notice dated 15.12.1986 thereby pointing out the deficiencies/defects with respect to the installation of the plant and also demanding payment of Rs. 4,22,45,000/-.

5. This claim of the petitioner was disputed by the respondent which resulted in the petitioner invoking section 20 of the Jammu and Kashmir Arbitration Act, 2002 (1945 AD) by way of a petition registered as AA no. 532/1987 on the docket of this Court which came to be disposed of vide judgment dated 19.07.1988 thereby appointing an arbitrator, the first of whom being Mr. Justice Mufti Baha- ud-din Farooqi (retired), former Chief Justice of this Court and later on to be substituted by Mr. Justice G.L. Raina (retired) and lastly by Mr. Justice O.P. Sharma (retired), both former judges of this Court.

6. In the arbitration proceedings so commenced, the petitioner and the respondent submitted their respective claim and counter claim attended with recording of admission and denials with respect to the documents and the issues came to be framed in terms of an order dated 24.04.1989 by the arbitrator. Said issues are reproduced hereunder: 4 AA no.06/2010 c/w AA no. 22/2009 (i) Whether Rosin Derivative plant and Turpentine Fraction Plant as assembled by the EPI was and is incapable of giving stipulated results on account of design defects and as such, these plants were never commissioned for commercial purposes. (OPP) (ii) If reply to issue no. 1 be in the affirmative, what is the effect and in particular: (a) (b) Whether JKI is entitled to rectify the defects at the cost of EPI and, if so, what will be required costs; Whether JKI has suffered any loss in the form of profits or otherwise on this account and if so, what should be the amount of compensation? (OPP) (iii) Whether the Civil works, tin handling system, Rosin Melter were not executed in accordance with the terms of the agreement and if so, whether JKI is entitled to have the same re- structured in accordance with the provisions of the agreement at the cost of EPI and what will be the required cost? (OPP) (iv) Whether the Rosin and Turpentine Plant produced during the trial runs and continues to produce rosin containing more violative content and whether it did not and still does not come up quality wise to the agreed standard and quantity wise to the agreed measure due to inherent technical snag? (OPP) (v) If reply to issue no. 4 be in the affirmative, what is the effect and in particular:- (a) Whether JKI is entitled to have the defects removed at the cost of EPI and if so, what will be the required cost? 5 AA no.06/2010 c/w AA no. 22/2009 (b) Whether JKI has suffered any loss either in the form of profits or otherwise on this account and if so, what should be the amount of compensation? (OPP) (vi) Whether EPI has failed to complete installation and commissioning of the project within 22 months from the date of receipt of letter of Intent along with the advance, as stipulated in the agreement? If so, whether the JKI is entitled to compensation on this account and what should be the amount of such compensation? (OPP) (vii) Whether JKI is entitled to recover a sum of Rs. 64.69 lakhs from EPI under the following heads:- (a) (b) (c) Interest on term loan Rs. 41.16 lakhs Insurance premium on fixed assets. Other Administrative and Trial run expenses Total Rs. 4.24 lakhs Rs. 18.69 lakhs Rs. 64.69 lakhs (OPP) (viii) Whether JKI has carried certain modifications and substitutions in Rosin and Turpentine Plant at a cost of Rs. 1.00 lakh? If so, whether JKI is entitled to recover this amount from EPI? (OPP) (ix) Whether JKI is entitled to interest on the sums found due to it from EPI? If so, whether the rate of interest should be 18% per annum? (OPP) (x) Whether the execution of the contract work has been completed in accordance with the terms of the agreement and EPI is entitled to refund of 5% 6 AA no.06/2010 c/w AA no. 22/2009 of the contract value kept as security deposit? (OPD) (xi) Whether EPI is entitled to recover a sum of Rs. 14,91,305/- from JKI under the following heads:- (a) (b) (c) (d) (e) (f) (g) (h) Project Management Rs. 69,887.00 Design & Consultancy Rs. 40,000.00 Civil & Structural work Rs. 26,595.00 Plant & equipment supply Rs. 66,900.00 Erection & commissioning Rs. 1,01,428.00 Taxes and duties Rs. 3,00,408.00 Extra works(Electricals) Rs. 16,295.00 Escalation payment Rs. 8,47,352.00 (i) cost of burnt tin Handling system Rs. 22,500.00 Amount of auction sale towards Total Rs. 14,91,305.00 (xii) Whether EPI had left any material at site? If so, whether EPI is entitled to recover the material or its cost from JKI and what is amount of cost? (OPD) (xiii) Whether labour arranged by EPI remained idle due to any default on the part of JKI? If so, whether EPI is entitled to recover such charges from JKI and what is the amount of such charges? (OPD) (xiv) Whether EPI is entitled to interest on the sums found due to it from JKI? If so, what should be the rate of interest? (OPD) 7 AA no.06/2010 c/w AA no. 22/2009 (xv) To what relief/reliefs are the parties entitled?

7. The evidence came to be led from both the sides with petitioner examining eight witnesses during the course of period from 10.06.1989 to 24.02.1990.

8. On the basis of the evidence led in the case, the arbitrator forward with issue wise appraisal and finding stretching in detail. Issues no. 1 and 2

9. On issues no. 1 and 2, by sparing a detailed factual and legal appraisal and understanding by drawing out the intent and import of the documents in reference, the learned arbitrator came to decide the said issues against the petitioner-claimant. The factual basis which led to the issues no. 1 and 2 to be held against the petitioner was that the industrial plant set up pursuant to the agreement between the parties went into commercial production w.e.f.,

15.10.1984. Issue no. 3

10. With respect to issue no. 3, the learned arbitrator came to decide against the petitioner on the factual basis that notice for removal of the deficiencies and defects was given from 8 AA no.06/2010 c/w AA no. 22/2009 the end of the petitioner much after expiry of the guarantee period of one year expiring in October, 1985 as such there was no question of the respondent carrying out the removal of defects/replacement of any items of machinery. Issue no. 4.

11. On the issue no. 4, the findings came to be returned against the petitioner on the basis that no evidence regarding the quality of turpentine supplied and running of the plant was produced on the record in the absence of which the respondent could not be held liable for loss suffered by the petitioner due to shortfall in the production. As the issue no. 5 was dependent upon the outcome of issue no. 4, as such issue no. 5 also came to be decided and held against the petitioner. The learned arbitrator came to arrive at a conclusion on the basis of facts and circumstances appreciated and discerned by him that the plant set up by the respondent for the petitioner was run by inexperienced and inefficient people engaged from the end of the petitioner and, therefore, any shortfall in the production resulting in losses was because of inefficient handling of the system and not on account of any defect in the plant installation. 9 AA no.06/2010 c/w AA no. 22/2009 Issue no. 6

12. The said issue came to be decided against the petitioner by reference to an admission of the petitioner which was reckoned by the learned arbitrator neither retracted nor withdrawn and as such any evidence to the contrary deserved rejection and, therefore, the finding on the issue no. 6 turned against the petitioner. Issues no. 7 to 9

13. The said issues came to be held against the petitioner in the light of the findings of the learned arbitrator on issues no. 1 to 6. Issues no. 10 to 14

14. With respect to issues no. 10 to 14, the respondents abandoned those issues and thus, the learned arbitrator did not enter any adjudication regarding the said issues and came to final conclusion that all the disputes obtaining between the petitioner and the respondent have been amicably resolved in terms of the agreement incorporated in the minutes of the meeting held on 30th and 31st August,

1984. 10 AA no.06/2010 c/w AA no. 22/2009

15. In the end, the claim of the petitioner against the respondent, which became subject matter of arbitration, came to be rejected by the learned arbitrator.

16. It is against this detailed arbitration award that the petitioner has come forward with a petition under sections 30 and 33 of the Jammu and Kashmir Arbitration Act, 2002 (1945 AD) for seeking its set aside.

17. This Court has to bear in mind that the arbitrator appointed in the case was a person of well recognized legal standing and mind and that is self stating from the very tone and tenor, text and context in which the issue wise detailing has been done on the part of the learned arbitrator before arriving to the finding. The learned arbitrator with respect to each issue has arrived at the finding and not jumped to the finding. The arbitrator is a judge of choice of both the parties who has been trusted by the parties to make judgment of the dispute between them on the basis of facts without getting into the mode of civil court adjudication and, therefore, to disturb an award of the quality as given by the learned arbitrator in the present case at the asking of the petitioner would be nothing but to undermine the very essence of adjudication by an arbitration. 11 AA no.06/2010 c/w AA no. 22/2009

18. A perusal of the petition would show that the petitioner is at loss to put in the requisite pleadings as to how the findings of the learned arbitrator with respect to each issue delved into and dealt by the learned arbitrator is factually and legally wrong. The petition is nothing but an attempt on the part of the petitioner to catch at a straw at the cost of having consumed more than thirteen years of court time in the pendency of this petition which was bereft of matter and inception deserving rejection. Accordingly, the petition is dismissed and the award passed by the learned arbitrator is hereby confirmed. (Rahul Bharti) Judge J A M M U 16.08.2023 Naresh, Secy. Whether the order is speaking: Whether the order is reportable: Yes/No Yes/No