TMI Blog2021 (11) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... h April, 1992, that require the respondent-Company to take delivery of the collected Sal seeds within a stipulated time and prescribe that in case of failure to do so, supervision charges and godown rent shall be payable at a fixed price of 0.05p. [five paise] per quintal per day. It remains undisputed that though the appellant-State did raise an objection before the Arbitral Tribunal on the claim of the respondent-Company seeking deduction of supervision charges, for which it relied on Clause 6(b) of the Agreement and the Circular dated 27th July, 1987 to assert that recovery of supervision charges along with expenses was a part and parcel of the contract executed with the respondent- Company, the said objection was turned down by the learned Sole Arbitrator by giving a complete go by to the terms and conditions of the Agreement governing the parties and observing that there is no basis to admit any such indirect expenses . The Circular dated 27th July, 1987 issued by the Government of Madhya Pradesh that provides for imposition of 10% supervision charges on the amounts calculated towards the cost of the Sal seeds in the expenditure incurred, was also ignored. Once the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TICE HIMA KOHLI] JUDGMENT HIMA KOHLI, J. 1. The appellant-State of Chhattisgarh is aggrieved by a common judgment dated 21st October, 2009 passed by the Chhattisgarh High Court disposing of two appeals; one preferred by the appellant Appeal No. 22 of 2006 and the other preferred by the respondent-M/s. Sal Udyog Private Limited M.A. No. 727 of 2006 , whereby the order dated 14th March, 2006 passed by the learned District Judge, Raipur in a petition filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 For short the 1996 Act has been partially modified and the interest awarded in favour of the respondent from the date of the notice i.e. 6th December, 2009 till realisation, has been reduced from 18 per cent per annum to 9 per cent per annum. At the same time, the appeal preferred by the respondent-Company came to be dismissed. 2. In brief, the relevant facts of the case are that on 30th August, 1979, the State of Madhya Pradesh had entered into an agreement with the respondent-Company for supply of 10,000 tonnes of Sal seeds per annum for a period of 12 years. In the year 1987, faced with loss of revenue, Government of Madhya Prade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant-State filed a petition under Section 34 of the 1996 Act before the District Judge, Raipur. Vide order dated 14th March, 2006, the learned District Judge declined to interfere with the Award except for modifying the same to the extent of the interest awarded in favour of the respondent- Company and making it payable from the date of the notice i.e. 6th December, 1999, instead of, from the date of the Agreement, till 31st December, 1999. 6. The appellant-State assailed the order dated 14th March, 2006 by preferring an appeal under Section 37 of the 1996 Act. The respondent- Company also filed a Cross Appeal being aggrieved by the modification of the Award and reduction of the period of interest awarded in its favour. Several pleas were taken by the appellant-State in the appeal, including the ground of non-joinder of the State of Madhya Pradesh as a necessary party; that the respondent-Company never claimed refund of the excess recovery throughout the tenure of both the Agreements and that the respondent s claim was barred by limitation. A plea of estoppel was also taken against the respondent-Company. 7. In view of the order dated 30th April, 2010 whereunder leave was gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pervision expenses, the agents commission, transports would all be assembled. After the examination of the price on both the ends the first end would be of royalty according to the industrial policy of the state government of Madhya Pradesh the meaning of royalty implies the meaning the price at the production site. For the calculation the bazaar rate or the auction or the price received on tender, the transport (in wood matter the cutting) expenses may be reduced. In this was in the matter of royalty from the point of production and protection and until the arrangement for the sake of trading all in direct expenses are assembled so far as the second part is concerned from the point of collection of Sal seeds until its delivery all expenses are assembled. In order it to make more clear the first part has been shown which relates to the expenses relating to storing and the purchase price to the producers and other handling and supervision expenses . In so far as the guidelines which have been issued by virtue of the notification of the state government dated 25.04.1981 in so far as in para 17 is concerned and particularly the guidelines which has been issued by Madhya Pradesh Rajya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had waived its right to take any such plea in the Section 37 petition filed in the High Court and for that matter, before this Court. He cited State of Maharashtra v. Hindustan Construction Company Limited [2010] 4 SCC 518 to substantiate such an objection. 11. Learned counsel for the appellant-State relied on the judgment in Lion Engineering Consultants v. State of Madhya Pradesh and Others [2018] 16 SCC 758 to meet the aforesaid objection raised by learned. counsel for the respondent-Company that the appellant-State did not take a specific ground in the Section 34 petition on the aspect of refund of supervision charges . She reiterated that the objection regarding supervision charges was taken by the appellant-State before the learned Sole Arbitrator as also in the Section 37 petition and ought to have been considered by the High Court. 12. We have carefully perused the records and given our thoughtful consideration to the submissions advanced by learned counsel for the parties. 13. The law on interference in matters of Awards under the 1996 Act has been circumscribed with the object of minimising interference by courts in arbitration matters. One of the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany Limited v. National Highways Authority of India (NHAI) [2019] 15 SCC 131, speaking for the Bench, Justice R.F. Nariman has spelt out the contours of the limited scope of judicial interference in reviewing the Arbitral Awards under the 1996 Act and observed thus : 34. What is clear, therefore, is that the expression public policy of India , whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to Renusagar understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd.,(2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA,(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality. 38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award. 39. To elucidate, para 42.1 of Associate Builders [Associate Builders v DDA(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an Arbitral Award. Para 42.2 of Associate Builders [Associate Builders v DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. 40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An Arbitral Award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression patent illegality. 16. Having regard to the aforesaid parameters, we may proceed to examine the facts of the instant case. As noted above, this Court is required to examine the singular issue as to whether any interference is called for in the Award on the ground taken by the appellant-State that the learned Arbitrator as also the High Court has ignored the binding terms of the contract governing the parties relating to recovery of supervision charges from the respondent- Company and the Circular dated 27th July, 1987 issued by the State Government on the same lines which as per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Seeds or fails to remove the same within the period prescribed above, then the Purchaser shall pay to the Governor supervision charges and godowns rent at the rate of five paise per quintal per day from the date of expiry of the period mentioned above. (iii) If failure to take delivery of Sal Seeds continue beyond the prescribed period of 15 days, the concerned Divisional Forest Officer may, in tis discretion, refuse delivery of Sal Seeds to the Purchaser and permit delivery to any other person or party in respect of a part or the whole quantity of such Sal Seeds to any other person or party and in such circumstances, the Purchaser shall be liable to pay the amount of loss as well as other expenses on supervision etc. Incurred by the Governor and this sum shall be recoverable as arrears of land revenue. 18. It is an admitted position that both, the Original Agreement dated 30th August, 1979 and the renewed Agreement dated 30th April, 1992 included a clause relating to levy of supervision charges . Most of the terms and conditions of the Original Agreement dated 30th August, 1979 and the Renewed Agreement dated 30th April, 1992 are materially the same. Clause 6(b) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (C) No. 6/2000, State of M.P. Vs. Bastar Oil Mills case, that was about 60% of the price, meaning thereby the terms of contract contains two types of supervision charges i.e. one is General handling and Supervision charges and second is Special supervision charges when there is delay in the taking of delivery of Sal Seed under Clause (9) of the agreement and there was no dispute at all about the supervision charges charges under Clause (6) at the rate of 10% of the price nor such dispute was ever raised by the respondent. So, the order directing refund of general handling and supervision charges collected is bad in law and is error apparent on the face of the record. 21. Though the aforesaid plea has been recorded in paras 3 and 5 of the impugned judgment, as can be seen from the following, it has remained un-answered by the High Court:- 3 *** *** Learned Arbitrator has also ignored circular of the erstwhile State Government whereby general supervision charges was fixed by 10% of the price which did not require assessment. Learned Arbitrator also not considered that High Court of M.P. at Jabalpur in W.P. No. 3177/99 in Bastar Oil Mill s case fixed the recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the first time, claimed refund of the excess amount purportedly paid by it to the appellant-State towards supervision charges incurred for supply of Sal seeds. In our opinion, this is the patent illegality that is manifest on the face of the Arbitral Award inasmuch as the express terms and conditions of the Agreement governing the parties as also the Circular dated 27th July, 1987 issued by the Government of Madhya Pradesh have been completely ignored. 23. We are afraid, the plea of waiver taken against the appellant-State on the ground that it did not raise such an objection in the grounds spelt out in the Section 34 petition and is, therefore, estopped from taking the same in the appeal preferred under Section 37 or before this Court, would also not be available to the respondent-Company having regard to the language used in Section 34(2A) of the 1996 Act that empowers the Court to set aside an award if it finds that the same is vitiated by patent illegality appearing on the face of the same. Once the appellant-State had taken such a ground in the Section 37 petition and it was duly noted in the impugned judgment, the High Court ought to have interfered by resorting to Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhya Pradesh regarding imposition of 10% supervision charges and adding the same to cost of the Sal seeds, after deducting the actual expenditure been questioned by the respondent- Company. We are, therefore, of the view that failure on the part of the learned Sole Arbitrator to decide in accordance with the terms of the contract governing the parties, would certainly attract the patent illegality ground , as the said oversight amounts to gross contravention of Section 28(3) of the 1996 Act, that enjoins the Arbitral Tribunal to take into account the terms of the contract while making an Award. The said patent illegality is not only apparent on the face of the Award, it goes to the very root of the matter and deserves interference. Accordingly, the present appeal is partly allowed and the impugned Award, insofar as it has permitted deduction of supervision charges recovered from the respondent-Company by the appellant-State as a part of the expenditure incurred by it while calculating the price of the Sal seeds, is quashed and set aside, being in direct conflict with the terms of the contract governing the parties and the relevant Circular. The impugned judgment dated 21st Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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