8.2011 The Punjab State Civil Supplies Corporation Ltd & Anr. v. M/s B.D. Rice Mills, Sangrur & Ors.

B.D. Rice Mills, Sangrur (hereinafter referred to as `the respondent-Company') on 14.10.1994 for shelling a specified quantity of paddy crop 1994-95 and for delivering the milled rice to the appellant- Corporation upto 28.2.1995. It was stipulated in the said agreement that in case the respondent-Company failed to keep their commitment in regard to the delivery of the expected quantity of milled rice as per the fixed and the laid down norms, the miller would have to pay to the appellant-Corporation an amount equivalent to 1½ times of the economic cost of the left over paddy as also interest @ 21% per annum thereon. Some disputes arose between the parties and in terms of the agreement, the said disputes were referred for adjudication by way of arbitration to Mr. I.C. Aggarwal, Sole Arbitrator (respondent No.4). Respondent No.4 made his award holding the respondent-Company liable to pay `24,398.24 to the appellant- Corporation.

The Arbitrator did not allow the remaining claim of the appellant-Corporation by observing that the remaining disputes between the parties fell within the “excepted clause”. The appellant-Corporation challenged the award dated 13.10.2004 passed by Mr. I.C. Aggarwal, Sole Arbitrator (respondent No.4) before the learned District Judge, Chandigarh by way of filing a petition under Section 34 of the Act and sought setting aside the Award. The learned Additional District Judge, Chandigarh, vide judgment dated 25.7.2009 dismissed the objection F.A.O. No.3161 of 2010 (O&M) [3] petition filed by the appellant-Corporation by holding the objection petition devoid of merit. I have heard Mr. Rakesh Gupta, Advocate, appearing for the appellant-Corporation and have gone through the records of the case. Learned counsel for the appellant-Corporation has argued that the learned Additional District Judge has erred in law as well as on the facts of the present case in dismissing the objection petition filed by the appellant-Corporation.

It has been further argued that the learned Additional District Judge has not given any finding upon the objections of the appellant-Corporation and has in fact rendered an erroneous finding which overhauls the whole case that after the Corporation sold the stocks in open auction, the contract between the parties had come to an end and the new contract substituted in its place with regard to sale of paddy to the miller. This finding is totally perverse and is against the records of the case. He argued that liberty be granted to the appellant-Corporation to approach the Managing Director of the Corporation to decide the dispute afresh. Learned counsel has placed reliance on the decision of this Court in M/s Sukhbir Singh and Company v. The Punjab State Cooperative Supply and Marketing Federation Limited, 2010 (1) RCR (Civil) 760, to contend that if decision of any dispute or matter is expressly provided for in the contract between parties, that matter cannot be referred to arbitrator and the decision of the Managing Director was final in that regard.

After giving my careful thought to the submissions made by the learned counsel for the appellant-Corporation, I find force in the same. Clause 5 of the agreement provides that in case there is a shortfall in the recovery of rice provided in such sub-clause (1) above the miller F.A.O. No.3161 of 2010 (O&M) [4] (respondent-Company) shall pay to the PUNSUP (appellant-Corporation) the cost of paddy equivalent to the shortfall at the rate of 1.5 times of the economic cost of the paddy. Clause 6 (IV) provides that in the event of its failure to supply rice within the stipulated period, it shall be liable to pay interest @ 21% on the basis of the economic cost of left over quantity/stocks of paddy/rice and the decision of the Managing Director of the appellant Corporation in this behalf shall be final. Clearly, the Arbitrator had ignored Clauses 5 and 6 of the agreement in declining the claim of the appellant-Corporation with regard to the grant of economic cost of the paddy and the interest.