Corporation of India Vs. Surendra, Devendra & Mahendra
Transport Co.  Insc 54 (5 February 2003)
B. Shah, Ashok Bhan & Arun Kumar Bhan, J.
Corporation of India (for short "the
Corporation") has filed this appeal against the Division Bench judgment
and order of the High Court of Calcutta whereby and where under the High Court
has upheld the award made by the arbitrator appointed under the directions of
was appointed as a handling and transport contractor on 14th June, 1979. On 4th January, 1980 respondent addressed a letter to the Managing Director of
the Corporation requesting him to refer the disputes which had arisen between
the parties for arbitration. Since no arbitrator was appointed to resolve the
dispute, he filed an application under Section 20 of the Arbitration Act, 1940
(for short "the Act") in the High Court on the original side, with a
prayer to issue a direction to the Managing Director of the Corporation to
appoint an arbitrator in terms of the arbitration Clause XX of the agreement
entered between the parties. Court by its Order dated 16th June, 1988 issued a direction to the Managing
Director of the Corporation to appoint an arbitrator in terms of Clause XX of
the agreement within six weeks from the date of communication of the order. The
direction was given in the following terms:
Order in terms of prayer (a) of the petition. The Managing Director, Food
Corporation of India is directed to appoint an
arbitrator in terms of Clause 20 of the agreement within six weeks from the
date of communication of the order. All disputes in the petition particularly
the disputes mentioned in para 24 thereof be referred to the Arbitrator to the
appointed by the Managing Director.
appear marked to be mentioned 8 weeks hence.
parties including Managing Director, Food Corporation of India and the proposed Arbitrator to act
on a signed copy of the minutes of the Order on the usual undertaking."
The relevant portion of the Clause XX is as under:
disputes and difference arising out of or in any way touching or concerning
this agreement whatsoever (except as to any matter the decision of which is
expressly provided for in the contract) shall be referred to the sole
arbitration of any person appointed by the Managing Director of the Food
Corporation of India. It will be no objection to any such appointment that the
person appointed is or was an employee of the Corporation that he had to deal
with the mattes to which the contract related and that in the course of his
duties as such employee of the Corporation he had expressed views on all or any
of the matter in dispute or difference. The award of such arbitrator shall be
final and binding on the parties to this contract. It is a term of this contract
that in event of such arbitrator to whom the matter is originally referred
being transferred on vacating his office or dying or being unable to act for
any reason, Managing Director of the Food Corporation of India at the time of
such transfer, vacation of office, death or inability to act shall appoint
another person to act as arbitrator.
person shall be entitled to proceed with the reference from the stage at which
it was left by his predecessor. It is also a term of this contract that no
person other than a person appointed as aforesaid should act as arbitrator and
if for any reason that is not possible the mater is not to be referred to
arbitration at all." Under this clause all disputes and differences
arising out of or in any way concerning the agreement whatsoever were to be
referred to the sole arbitration of a person appointed by the Managing Director
except as to any matter the decision of which was expressly provided for in the
XII enumerates the items excluded from the purview of clause XX.
sub-clauses (a), (d) and (e) of Clause XII are as under:
The contractors shall be liable for all costs, damages, demurrages, wharfage
charges and expenses suffered to incurred by the Corporation due to the
contractors' negligence and unworkman like performance of any service under
this contract or breach of any terms thereof or their failure to carry out work
with a view to avoid incurrence of demurrage etc. and for all damages or losses
occasioned to the Corporation or in particular to any property or plant
belonging to the Corporation due to any act whether negligent or otherwise of
the contractors themselves or their employees. The decision of the Sr. Regional
Manager regarding such failure of the contractors and their liability of the
losses etc. suffered by Corporation shall be final and binding on the
contractors shall be responsible for the safety of the goods from the time they
are loaded on their trucks from Rly. Station/sidings, Depots/Godowns or at
other destinations. They shall provide tarpaulin on the decks of the trucks so
as to avoid loss of grain etc. through the holes/crevices in the decks of the
trucks. They shall deliver at the destination the number of bags and the weight
of food grains etc. received by them and loaded on their trucks and shall be
liable to make good the value of any loss, shortage or damage in transit. The
Regional Manager will be the sole Judge for determining after taking into
consideration all the relevant circumstances, the quantum and value of loss and
also as regards the liability of the contractors for such loss and the amount
to be recovered from them. The decision of the Regional manager in this regard
shall be final and binding on the contractors.
case of loss, shortage, damage, pilferage, mis-appropriation (including missing
of lorry loaded with consignments) to foodgrains/sugar/fertilisers and gunnies
during transit, the Regional Manager shall have the right, without prejudice to
other rights and remedies under this contract, to impose upon and recover from
the contractors an amount not exceeding three times (3 times) the issue rates
of the foodgrains/sugar/fertilisers applicable at the time of occurrence of
such pilferage/mis- appropriation and one time (1 time) value of the gunnies.
The decision of the Regional Manager in this regard shall be final and binding
on the contractors. " Respondent raised certain claims on the basis of
which the following issues were framed. Corporation also claimed a sum of Rs. 5,62,522.70
p. on account of payment made towards demurrage and wharfage charges.
on the claim of the contending parties the arbitrator framed the following
the claim of the claimant barred by limitation?
the claimant entitled to a sum of Rs. 6,71,903. 59 paise towards handling and
transport bills or to any part thereof?
the claimant entitled to get refund of Rs. 67,149.65 paise deducted for transit
the claimant entitled to refund of Rs. 89,743.34 paise deduced for other
the claimant entitled to refund of Rs. 1,68,500/- deducted on account of
demurrage and wharfage charges?
he claimant entitled to Rs. 1,92,873.10 paise towards price of wheat and rice
delivered in excess to the respondent?
the claimant entitled to Rs. 3,21,870/- for running of trucks empty from Howrah siding to Howrah I and Howrah II for empty tare?
the FCI entitled to Rs. 5,61,522.70 paise on account of payment made towards
demurrage and wharfage charges?
the claimant entitled to interest @ 18% per annum from the respective due dates
of the bills till payment on the awarded sums? Claim made by the Corporation
for the sum of Rs. 5,62,522.70 p. was rejected. The sole arbitrator by a
speaking and detailed order gave the award in the following terms:
that the claimant is entitled to a sum of Rs. 4,87,318.54 paise (Four lakhs
fifty seven thousand and three hundred eighteen rupees and paise fifty four)
only from the respondent on account of handling and transport bills, and refund
of Rs. 67,149.65 paise (Sixty seven thousand one hundred forty nine rupees and paise
sixty five) only deducted by the respondent from the claimant's pending bills
towards transit loss and refund of Rs. 1,68,500/- (One lakh sixty eight
thousand five hundred rupees) only deducted by the respondent from the
claimant's pending bills on account of demurrage and wharfage charges. The
claimant will be entitled to claim interest before the Hon'ble Court on the sum awarded from the date of
publication of the award till such time as the Hon'ble Court will deem fit and proper." Corporation being aggrieved
filed objections against the award before the High Court which were rejected.
Contention of the Corporation that the arbitrator could not make an award
regarding item which was specifically excluded from the purview of arbitration
Clause XX and that by doing so the arbitrator had acted in excess of his
jurisdiction to that extent was rejected.
contentions raised by the Corporation were also rejected.
against the order of the High Court the present appeal has been filed. Counsel
appearing for the Corporation relying upon the Eastern Engineering Enterprises
& Anr., 1999 (9) SCC 283, contended that the arbitrator acted in excess of
his jurisdiction in entering upon a dispute and making an award of a claim
which was not permitted to be referred to the arbitrator under the contract.
According to him, the claim made and given by the arbitrator under issue Nos. 3
and 5 regarding transit loss and demurrage and wharfage charges could not be
made as the same had been specifically excluded under Clause XX read with
Clause XII of the agreement. We find substance in this submission. Arbitration
Clause XX provided that all disputes and differences arising out of or in any
way touching or concerning the agreement whatsoever could be referred to the
sole arbitration of a person appointed by the Managing Director except "as
to any matter the decision of which is expressly provided for in the
contract". Clause XII of the agreement provided that the contractor would
be liable for all costs, damages, demurrages, wharfage charges and expenses
etc. or transit loss suffered by the Corporation and the Sr. Regional Manager
shall be the sole authority to determine the said failures on the part of the
contractors or the loss caused thereby, thus excluding the reference to the
arbitrator for the decision of these disputes. This Court in Rajasthan State
Mines & Minerals Ltd.'case (supra) has held:
To find out whether the arbitrator has travelled beyond his jurisdiction, it
would be necessary to consider the agreement between the parties containing the
arbitration clause. The arbitrator acting beyond his jurisdiction is a
different ground from the error apparent on the face of the award.
order to determine whether the arbitrator has acted in excess of his
jurisdiction what has to be seen is whether the claimant could raise a
particular claim before the arbitrator. If there is a specific term in the
contract or the law which does not permit or give the arbitrator the power to
decide the dispute raised by the claimant or there is a specific bar in the
contract to the raising of the particular claim then the award passed by the
arbitrator in respect thereof would be in excess of jurisdiction." High
Court issued a direction by order dated 16th June, 1988 referring the disputes for
arbitration in terms of Clause XX. The matters which were excluded from the
reference to the arbitrator therefore could not be referred to or decided by
the arbitrator. Entrance of reference by the arbitrator on disputes which were
excluded from reference and the adjudication thereupon would amount to
exceeding in the exercise of the jurisdiction as held by this Court in
Rajasthan State Mines & Minerals Ltd.'case (supra). Since there was a
specific bar to the raising of a claim regarding transit, demurrage and wharfage
charges, the award made by the arbitrator in respect thereof would be in excess
of the jurisdiction.
the appeal is partly allowed. Order of the High Court confirming the award
regarding the aforesaid two amounts as well, is set aside. Award of the
arbitrator on issues 3 and 5 relating to the refund of Rs. 67,149.65 paise
towards the transit loss and the refund of Rs. 1,68,500/- towards demurrage and
wharfage charges is set aside. Corporation would not be liable to pay these
amounts. There is no infirmity in the award regarding other claims made by the
respondents. There shall be no order as to costs.