FOOD CORPN. OF INDIA vs. PACIFIC BASIN SHIPPING & TRADING CO.LTD

C/FA/7439/1995 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL NO. 7439 of 1995

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH

and HONOURABLE MR.JUSTICE R.P.DHOLARIA

============================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ============================================= FOOD CORPN. OF INDIA & 1....Appellant(s) Versus PACIFIC BASIN SHIPPING & TRADING CO.LTD & 2....Defendant(s) ============================================= Appearance: MR JAL SOLI UNWALA, ADVOCATE for the Appellant(s) No. 1 - 2 MR DAKSHESH MEHTA, ADVOCATE for the Defendant(s) No. 1 RULE SERVED for the Defendant(s) No. 2 SERVED BY AFFIX(N) for the Defendant(s) No. 3 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA

Date : 11/04/2014

ORAL JUDGMENT Page 1 of 11

C/FA/7439/1995 JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 22.09.1995 passed by the learned Civil Judge (Senior Division), Morbi in Civil Misc. Application No. 15 of 1993, by which, the learned Judge has dismissed the said application submitted by the appellants herein under Section 30 of the Arbitration Act, 1940 (hereinafter referred to as 'the Act') for setting aside the award declared by the learned Arbitrators, the appellants herein – original applicants have preferred the present First Appeal u/s. 39 of the Act. 2. That the appellants herein entered into charter party agreement dated 19.08.1988 with respondent No.1 herein – original opponent No.1 for the purpose of bringing bulk wheat from U.S.A. to India and cargo was brought in “M.V. Anitra” at port Navlakhi. That dispute arose between the parties and as per the agreement the dispute was referred to the Arbitrators. One Shri K. P. Patel was appointed as an Arbitrator by opponent No.1 Shipping Company and one Captain R. K. Lal was appointed as Arbitrator on behalf of the appellants – original applicants. It appears that due to the sad demise of Captain R. K. Lal, the learned Arbitrator appointed on behalf of the applicants, by communication/order dated 12th March 1991, one Shri N. Sukhraman came to be appointed as new Arbitrator on behalf of the applicants. That thereafter, the learned Arbitrators passed the award on 29.09.1992 of U.S.$ 1,27,910=53 together with interest @ 13% per annum from 09.04.1989 till the date of the award and on 21.10.1992 the award was corrected. As such the Arbitrators were required to file the award in the Court but they failed to do so, the appellants herein – original applicants Page 2 of 11

C/FA/7439/1995 JUDGMENT have filed an application u/s. 14 (2) of the Act requesting the Court to direct the Arbitrators to file the award in the Court and consequently the learned Arbitrators filed the award in a sealed cover on 16.02.1993. That the appellants herein – original applicants challenged the said award by submitting Civil Misc. Application No. 15 of 1993 in the Court of learned Civil Judge (Senior Division), Morbi u/s 30 of the Act mainly on the ground that the award is vitiated on account of the errors apparent on the face of the record and that the claimants in their statement of claim in para 5 have set out that F.C.I. have made deduction in six counts from the balance freight and there was counter claim by F.C.I. In other words, four claims were remained and Arbitrators were bound to refer to them and they have to state in the award as to which claim is allowed and which claim is disallowed. The award was challenged on the ground that the award is a non- speaking award. It was also the case on behalf of the appellants – original applicants that the Arbitrators are bound to give a reasoned award and as they have not given any reasons, the award is vitiated. The award was challenged on the other grounds also. 2.1 That the learned trial Court framed the points for determination and after considering the submissions made by the rival parties, by impugned judgment and order, the learned Judge has dismissed the said Civil Misc. Application and held that the award is not vitiated on the ground that the same is not a speaking and reasoned award and also on the ground that the case does not fall in any of the parameters of Section 30 of the Act. Page 3 of 11

C/FA/7439/1995 JUDGMENT 3. Feeling aggrieved by and dissatisfied with the impugned judgment and order dated 22.09.1995 passed by the learned Civil Judge (Senior Division), Morbi in Civil Misc. Application No.15 of 1993 rejecting the said M.C.A., the appellants herein – original applicants have preferred the present First Appeal. 4. Shri Jal Soli Unwala, learned advocate has appeared on behalf of the appellants – original applicants and Shri Dakshesh Mehta, learned advocate has appeared on behalf of contesting respondent No.1. 4.1. Shri Unwala, learned advocate appearing on behalf of the appellants – original applicants has vehemently submitted that the learned Judge has materially erred in rejecting the Civil Misc. Application submitted u/s. 30 of the Act and confirming the award declared by the learned Arbitrators. 4.2. It is submitted by Shri Unwala, learned advocate appearing on behalf of the appellants – original applicants that while passing the award, the learned Arbitrators have not assigned any reasons and as such the award is a non-speaking and unreasoned award, the learned Judge ought to have quashed and set aside the award declared by the Arbitrators. 4.3. It is submitted that it is true that at the relevant time and considering the law prevailing at the relevant time, the learned Arbitrators were not required to assign any reasons while passing the award. However, in the present case, as per the memorandum/communication dated 12th March 1991, which can be said to be the corrigendum and/or an additional agreement entered into between the parties, the Arbitrators Page 4 of 11

C/FA/7439/1995 JUDGMENT were required to record the reasons for the award. It is submitted that therefore in view of the memorandum dated 12th March 1991, the Arbitrators were required to record the reasons for the award and as while passing the award the learned Arbitrators have not recorded the reasons, the learned Judge ought to have set aside the award. 4.4. Shri Unwala, learned advocate appearing on behalf of the appellants – original applicants has also submitted that neither the learned Arbitrators nor the learned Judge has considered anything with respect to the income-tax to be deducted and to be paid by the respondents. It is submitted that as such the liability to pay the income-tax / to deduct the TDS would be upon the respondents and while passing the impugned award, the learned Arbitrators have not considered anything about the same. 4.5. It is further submitted that even the learned Judge has not considered the fact that the case would fall u/s. 16 (1)(c) of the Act. Therefore, it is requested to remand the matter to the learned trial Court. 5. Present appeal is opposed by Shri Dakshesh Mehta, learned advocate appearing on behalf of respondent No.1 herein. It is submitted that as the case does not fall within Section 30 of the Act, the learned Judge has rightly rejected the MCA. It is submitted that in absence of any specific agreement between the parties by which the learned Arbitrators were required to assign the reasons while passing the award, in view of the decision of the Hon'ble Supreme Court in the case of Raipur Development Authority etc. v. Page 5 of 11

C/FA/7439/1995 JUDGMENT M/s. Chokhamal Contractors etc. reported in AIR 1990 SC 1426 as well as in the case of Nagar Palika, Mirzapur v. The Mirzapur Elect. Supply Co. Ltd. reported in AIR 1990 SC 2273 as well as in the case of Secretary, Irrigation Department, Govt. of Orissa & Ors. v. G. C. Roy reported in AIR 1992 SC 732, the award declared by the learned Arbitrators is not required to be quashed and set aside. 5.1. It is further submitted by Shri Mehta, learned advocate appearing on behalf of respondent No.1 - original opponent No.1 that even the case also does not fall within the provisions of Section 16(1) of the Arbitration Act and as there is no error apparent on the face of the record, the matter is not required to be remanded to the learned Judge/Arbitrators. 5.2. Now, so far as the contention on behalf of the appellants – original applicants that the learned Arbitrators and/or the learned Judge has not considered anything with respect to the income-tax to be deducted and to be paid by the respondents is concerned, it is pointed out by Shri Mehta, learned advocate appearing on behalf of respondent No.1 – original opponent No.1 that as such by making the payment of 50% as per the interim order passed by this Court, out of an amount of Rs.62,04,144/-, respondent No.1 has been paid only Rs.54,50,675/- i.e. after deducting Rs.7,53,469/- as income- tax, which has been remitted to the Income-Tax Department. It is submitted that therefore while making further payment, as per the award declared by the learned Arbitrators, the income-tax shall be deducted by the appellants and only the balance amount is required to be paid to respondent No.1. It is submitted that as such respondent No.1 does not dispute its Page 6 of 11

C/FA/7439/1995 JUDGMENT liability to pay the income-tax and/or tax to be deducted at source (TDS) on the amount due and payable to respondent No.1 under the impugned award passed by the learned Arbitrators and confirmed by the learned Judge. Making above submissions and relying upon the above decisions, it is requested to dismiss the present appeal. 6. Heard the learned advocates appearing on behalf of the respective parties at length. 6.1. At the outset, it is required to be noted that the learned Arbitrators declared the award and feeling aggrieved and dissatisfied with the said award the appellants herein – original applicants submitted Civil Misc. Application No. 15 of 1993 u/s 30 of the Act for setting aside the award declared by the learned Arbitrators. The said application has been dismissed by the learned Civil Judge (S.D.), Morbi by impugned judgment and order by observing that none of the ingredients of Section 30 of the Act are satisfied and/or no case is made out to set aside the award u/s 30 of the Act. 6.2. Section 30 of the Act reads as under: “Sec. 30 - Grounds for setting aside award:- An award shall not be set aside except on one or more of the following grounds, namely:- (a) that an arbitrator or umpire has misconducted himself or the proceedings: (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is otherwise invalid.” Page 7 of 11

C/FA/7439/1995 JUDGMENT On bare reading of Section 30 of the Act, it appears that the award shall not be set aside except on one or more of the aforesaid grounds. It is not the case on behalf of the appellants that the Arbitrators have misconducted themselves or the proceedings. It also cannot be said that the award has been improperly procured or is otherwise invalid. Even considering the provisions of Section 16 of the Act, as there is no error apparent on the face of the record, the award is also not required to be remitted to the learned Arbitrators. Under the circumstances, as such, the learned Judge has rightly rejected the Civil Misc. Application which was submitted by the appellants herein – original applicants for setting aside the award passed by the learned Arbitrators. 6.3. The main contention on behalf of the appellants – original applicants is that as no reasons have been assigned by the learned Arbitrators while passing the award, the award declared by the learned Arbitrators is required to be set aside. Shri Unwala, learned advocate appearing on behalf of the appellants – original applicants has heavily relied upon the memorandum dated 12th March 1991 in support of his submission that the parties agreed that the Arbitrators shall record the reasons for the award. However, the memorandum/communication dated 12th March 1991 cannot be said to be an agreement between the parties. The memorandum/communication dated 12th March 1991 by the Managing Director of FCI is only in respect of appointment of another Arbitrator – Shri N. Sukhraman in place of earlier Arbitrator Captain R.K.Lal on his demise, as Arbitrator on behalf of the FCI. The aforesaid by no stretch of imagination can be said to be an agreement between the parties. It is not Page 8 of 11

C/FA/7439/1995 JUDGMENT in dispute that there is no specific provision and/or clause by which the learned Arbitrators were required to assign the reasons. Thus, in the agreement between the parties there is no provision by which the Arbitrators were required to assign the reasons. 6.4. In the case of Raipur Development Authority (Supra), it is observed and held by the Hon'ble Supreme Court that an award passed under the Arbitration Act is not liable to be remitted or set aside merely on the ground that no reasons have been given in its support except where the arbitration agreement or the deed of submission or an order made by the Court such as one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration requires that the arbitrator or the umpire should give reasons for the award. 6.5. In the case of Secretary, Irrigation Department, Govt. of Orissa & Ors. (Supra), the Hon'ble Supreme Court has observed and held that in absence of reasons by the Arbitrator, the award is not required to be set aside merely on that ground. Arbitrator not obliged to give reasons unless so stipulated in agreement itself. 6.6. Considering the aforesaid facts and circumstances and when in the present case, under the agreement, there is no stipulation that the Arbitrators are required to assign reasons while passing the award, the award declared by the Arbitrators is not required to be set aside on that ground. 7. Now, so far as the contention on behlaf of the appellants Page 9 of 11

C/FA/7439/1995 JUDGMENT – original applicants that neither the learned Arbitrators nor the learned Judge has considered anything with respect to the income-tax to be paid by the respondents and/or liability to pay the income-tax by the respondents is concerned, it is required to be noted that even while making the payment of 50% of the amount as per the interim order passed by this Court, out of an amount of Rs.62,04,144/-, respondent No.1 has been paid only Rs.54,50,675/- i.e. after deducting Rs.7,53,469/- as income-tax, which the FCI has reported to be remitted to the Income-Tax Department (as per the communication dated 24th March 2000). Shri Dakshesh Mehta, learned advocate appearing on behalf of respondent No.1 – original opponent No.1 has also stated at the bar that even as and when the entire amount due and payable to respondent No.1 under the judgment and award passed by the learned Arbitrators confirmed by the learned Judge is paid to respondent No.1, the TDS/income-tax is required to be deducted and the balance amount is required to be paid to the respondents. Therefore, as such, respondent no.1 has not disputed its liability to pay the income-tax on the amount due and payable and/or to deduct the TDS. In view of the above, as such, the apprehension on the part of the appellants with respect to deduction of income-tax, which, according to them, is required to be paid by the respondents, is very well taken care and the said apprehension has no substance. 8. In view of the above and for the reasons recorded hereinabove, present appeal deserves to be dismissed and is accordingly dismissed with a clarification and even as per the statement made by Shri Mehta, learned advocate appearing on behalf of respondent No.1 that the liability to pay the Page 10 of 11

C/FA/7439/1995 JUDGMENT income-tax on the amount due and payable to respondent No.1 would be upon respondent No.1. With above observations, present appeal is dismissed. In the facts and circumstances of the case, there shall be no order as to cost.

(M.R.SHAH, J.) (R.P.DHOLARIA,J.) Jani Page 11 of 11