TMI Blog2011 (3) TMI 1759X X X X Extracts X X X X X X X X Extracts X X X X ..... Under the Consignment Stockist Agreement, Appellant had been appointed as Consignment Stock Agent in Punjab, Haryana, Himachal Pradesh, Uttar Pradesh, Rajasthan, Union Territory of Delhi and Jammu and Kashmir to sell directly or indirectly to persons or firms located in those Territories. Consignment Stock Agent was required to send the account sale accompanied by Demand Draft for the sale amount after deducting 20% commission and admissible expenses. If it fails to remit the amount, it has to pay interest at 20% per annum. Consignment Stockist Agreement dated 12.07.1997 contains Arbitration clause that is if any dispute arises between the parties, by the Managing Director of the 1st Respondent's Company or his nominee. 1st Respondent has been consigning its Leather Chemicals to the Appellant for sale as per the agreement. Inspite of supply of goods to the Appellant which in turn has been sold by the Appellant, the amounts due and payable to the 1st Respondent has not been paid. There were also certain unsold stocks at Delhi and Kanpur which have not been returned to the 1st Respondent nor their value remitted. The said default committed by the Appellant gave rise . d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ₹ 95,02,333.54 towards overdue interest for delayed payments. Third Claim : As per Ex.C3, Appellant is bound to return the unsold Value of goods or pay their value to the 1st Respondent. As unsold goodsper Ex.C13, the remittance price of the stocks as on 31.8.1999 is ₹ 15,02,301.15. Therefore, 1st Respondent-Claimant is entitled to ₹ 15,02,301.15 towards the value of unsold stocks. Thus 2nd Respondent-Arbitrator has passed the Award for a total sum of ₹ 2,85,01,745.00. On the amount awarded, Appellant was directed to pay interest at the rate of 18% p.a. from the date of claim i.e. 21.12.1999 till the date of payment. 5. Challenging the Award, Appellant filed O.P.No.197 of 2001 under Sec.34 of Arbitration and Conciliation Act, 1996. Award was challenged mainly on two grounds:- (i)Lack of opportunity to participate in the hearing particularly, no notice of hearing on 24.6.2000 was given; (ii)Only Consignment Stockist Agreement dated 12.7.19997 effective from 01.4.1997 contains Arbitration clause and while so, the 2nd Respondent-Arbitrator went beyond the scope of reference and he has adjudicated on claims in respect of matters not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34(2)(a)(iii) of Arbitration Act, lack of proper notice of appointment of Arbitrator or of arbitral proceedings or some other inability to present the case would vitiate the Award. Learned counsel for Appellant would contend that no notice was given for the adjourned hearing on 24.06.2000 and in the absence of parties while adjourning the case, Arbitrator has to give notice for the adjourned date and non-issuance of notice for the hearing on 24.06.2000 would have effect of vitiating the Award. 10. Drawing our attention to the proceedings of 2nd Respondent-Arbitrator, learned counsel for Appellant would further contend that admittedly, Appellant did not attend the hearing on 03.06.2000 and 2nd Respondent-Arbitrator ought to have given notice of next hearing date 24.06.2000 and because of non-issuance of notice, Appellant was unable to present his case and the Award is liable to be set aside for lack of proper opportunity . 11. For setting aside the Award, Sec.34(2)(a)(iii) of Arbitration Act covers three inter-related as well as separate grounds:- (1)lack of proper notice of appointment of arbitrator; (2)lack of proper notice of arbitral proceedings; or (3)ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty ignores procedural deadlines imposed by the tribunal but maintains he still has points to put before it in support of his case? Inevitably each situation has to be dealt with in it own context but the following general considerations should be taken into account.' 23. For constituting a reasonable opportunity, the following conditions are required to be observed: 1)Each party must have notice that the hearing is to take place. 2)Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses. 3)Each party must have the opportunity to be present throughout the hearing. 4)Each party must have the opportunity to present evidence and argument in support of his own case. 5)Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument. 6)The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument. 29. The principles of natural justice, it is trite, cannot be put in a straight jacket formula. In a given case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustively referred to in State Bank of Patiala v. S.K.Sharma. In that case, the principle of 'prejudice' has been further elaborated. The same principles has been reiterated again in Rajendra Singh v. State of M.P. 14. Dealing with the question of reasonable opportunity and that principles of natural justice must not be stretched too far, in CDJ 2003 SC 809 [Sohan Lal Gupta (dead) through L.Rs. and others v. Smt. Asha Devi Gupta and others], the Supreme Court held that parties should not only prove that he was not given proper notice, but also to show that he was seriously prejudiced thereby. 15. Grievance of Appellant is that he has not been given proper opportunity to present his case before the 2nd Respondent-Arbitrator and adduce evidence in support of his case. The copy of Minutes/Proceedings of the 2nd Respondent-Arbitrator was produced before us. By perusal of the same, the various sittings/gist of proceedings of Arbitrator are as follows:- 11.12.1999-Arbitrator entered on reference and intimated the date of first sitting. 22.12.1999-First Sitting Claimant filed claim statement and documents. Appellant represented by counsel. Time given til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Respondent-Arbitrator clearly shows that Appellant was well aware of the proceedings on 20.05.2000. In fact, notice was also sent to the Appellant regarding adjournment of the matter to 03.06.2000. As pointed out by the learned single Judge, Appellant should have taken steps to find out the outcome result on the basis of the letter dated 19.05.2000. Having not taken any steps, Appellant cannot contend that no notice was given for the hearing held on 03.06.2000 and 24.06.2000. Award cannot be challenged on the ground that no sufficient opportunity was given to the Appellant . 17. Section 25 of Arbitration and Conciliation Act, 1996 carries the provisions as to the effect of a party's default. An Arbitrator is authorised by the nature of his office to proceed exparte. He may make an exparte award if a party fails to appear inspite of notice to attend. Where a party once appeared before the Arbitrator and sought extension of time for filing his written statement, this amounted to submission to the jurisdiction of the Arbitrator. The Appellant might have remained exparte for any number of reasons. Having appeared before the Arbitral Tribunal and repeatedly taken adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had absented himself with a view to preventing justice or defeating the object of the reference, the arbitrator should issue a notice that he intends at specified time and place to proceed with the reference and that if the party concerned does not attend, he will proceed in his absence. But, if after making such a peremptory appointment and issuing such a notice, the arbitrator does not in fact proceed ex parte on the day fixed, but fixes another subsequent date, he cannot proceed ex parte on such subsequent date, unless he issues a similar notice in respect of that date as well. If he issues a similar notice and the party concerned does not appear, an award made ex parte, will be in order. But if he does not issue such a notice on the second occasion, but nevertheless proceeds ex parte, the award will be liable to be set aside in spite of a notice of a peremptory hearing having been given in respect of the earlier date, subject, however, to the condition that prejudice was caused to the party against whom the ex parte order was made. But this duty to give notice of an intention to proceed ex parte is not an absolute duty. If it appears from the circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 viz., Stockist Agreement [Ex.C1] to be commenced with effect from 1st April, 1995 and on 20.03.1996 [Ex.C2]-Consignment Stockist Agreement for a period of three years and yet another Agreement viz., Consignment Stockist Agreement dated 12.07.1997 [Ex.C3] with effect from 1st April, 1997 for a period of five years. As regards, Agreement No.1 [Ex.C1], admittedly, there was no clause for Arbitration. So far as, Agreement Nos.2 and 3 [Exs.C2 and C3] are concerned, Arbitration clauses have been incorporated. The said Arbitration clause in clause-22 of the third agreement [Ex.C3] was invoked and the Arbitrator has been appointed on emergence of disputes in between the parties. 24. In case of dispute, Clause-22 of Consignment Stockist Agreement dated 12.07.1997 provides for reference to Arbitration. Clause-22 of the said Agreement dated 12.07.1997 reads as under:- 22. If any dispute arises between the parties hereof as to the interpretation of the terms of the agreement or as to the performance or non-performance of the terms thereof or in connection with or arising out of this agreement, the same shall be referred first to the arbitration of the Managing Director of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .08.1995 is a Stockist Agreement and the other agreement dated 12.07.1997 is a Consignment Stock Agency Agreement, the finding of the learned single Judge is erroneous. 27. Merits of the above contention is to be considered in the light of Sec.16 (3) of Arbitration Act. Sec.16(3) reads as follows:- Sec. 16 (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. Sub-section (3) of Section 16 provides that a plea that the arbitral tribunal is exceeding the scope of its authority should be raised as soon as the matter is referred to Arbitration and during the proceedings. The arbitral tribunal can admit on these points even at a later stage if the delay is justified. In the case on hand, the claim statement filed before the 2nd Respondent-Arbitrator on 22.12.1999 makes specific reference to Stock Agreement dated 01.08.1995 and the salient features thereon. The claim statement also refers to the salient features of Consignment Stockist Agreement dated 12.07.1997. The claim of ₹ 15,02,301.15 is made towards valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent is that in the claim statement, he had stated all the three agreements [Exs.C1 to C3] as disputed agreements and they have been annexed with the claim statement for ready reference, since they are arising out and in connection with the transactions of the same product in between the same parties and the Appellant did not object to the same. 30. No doubt, the letter of reference mentions that the dispute between the parties pertains to the agreement dated 12.07.1997 [Ex.C3]. However, the parties to the other agreements namely first and second agreements [Exs.C1 and C2] are one and the same and the disputes in between the parties to the agreement dated 12.07.1997 [Ex.C3] would apply to parties who are Principal and Agent in other two agreements also. As pointed out earlier, the first agreement dated 01.8.1995 [Ex.C1], we could see that 1st Respondent has appointed the Appellant as Stockist Agent for the area viz., Union Territory of Delhi, Punjab, Uttar Pradesh, Haryana, Rajasthan and Jammu Kashmir for the leather chemicals products of 1st Respondent. The Consignment Stockist Agreement in between the same parties have been entered into through the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h each other. As per Clause-22 of Consignment Stockist Agreement dated 12.07.1997 if any dispute arises between the parties ...... in connection with or arising out of the agreement shall be referred to the arbitration . In our considered view, 2nd Respondent-Arbitrator was justified in proceeding to consider the dispute of unsold stocks as being connected with the Consignment Stockist Agreement dated 12.07.1997. 32. In AIR 1985 SC 1156 : (1984) 4 SCC 679 [Renusagar Power Company Ltd. v. General Electric Company and another], the Supreme Court considered the scope of the terms arising out of , in relation to and in connection with used in an arbitration clause. In the said decision, the Supreme Court pointed out as follows:- 25. Four propositions emerge very clearly from the authorities discussed above: (1) Whether a given dispute inclusive of the arbitrator's jurisdiction comes within the scope or purview of an arbitration clause or not primarily depends upon the terms of the clause itself; it is a question of what the parties intend to provide and what language they employ. (2) Expressions such as 'arising out of' or in respect of or in conne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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