M/S VIJAY TRADING AND TRANSPORT COMPANY versus CENTRAL WAREHOUSING CORPORATION on 7 November 2019

1162

SUPREME COURT REPORTS

[2019] 13 S.C.R.

A

M/S VIJAY TRADING AND TRANSPORT COMPANY

v.

CENTRAL WAREHOUSING CORPORATION

(Civil Appeal No.655 of 2016)

B

NOVEMBER 07, 2019

[R. BANUMATHI, A.S. BOPANNA ANDHRISHIKESH ROY, JJ.]

Arbitration and Conciliation Act, 1996: s.34 – AppellantCcontractor entered into an agreement with respondent corporationfor carrying out work of Handling and Transportation at InlandClearance Depot – Respondent corporation terminated the contractdue to appellant’s non-performance of contractual obligations andforfeited the security deposit and also fork lift and hand trolleys –Arbitration award in favour of respondent corporation – Held:DFailure to transport the container to the Port at Navi Mumbairesulted in missing of the export schedule – Taking into considerationthe failure of the appellant to deliver the container at the Port atNavi Mumbai and the time taken in recovery of the container andthe expenditure incurred by the respondent-Corporation inEparticular, furnishing of bank guarantee of Rs.10 lakhs, thedetention of the equipments cannot be said to be arbitrary or beyondthe terms of the agreement – Arbitrator and courts below recordedthe concurrent findings that the appellant Contractor failed incarrying out the work as per the terms and conditions of the contractF– Arbitrator rightly allowed the detention and forfeiture of theequipments of the contractor – Similarly, counter claim for thedamages for the alleged detention and use of hand trolleys wasrightly rejected – No reason warranting interference with the awardpassed by the Arbitrator – Contract – Termination of – Export-Import.G

Dismissing the appeal, the Court

HELD: 1. The Export loaded Container was handed overby the Manager, ICD, Varanasi to the appellant on 06.11.2001for delivery of the container at JNP, Navi Mumbai; but the H

appellant failed to transport the container to the destination portand only with the intervention of the Court, the container waslocated and recovered at Ghaziabad and received back at ICD,Varanasi on 23.05.2003. But by then, the said container alreadymissed the export schedule. When the said Export loadedContainer was entrusted to the appellant, the appellant ought tohave transported the container to the port of destination withdue diligence. The respondent-Corporation was justified theforfeiture of the security deposit on two counts:- firstly, in viewof the heavy claim raised by the Exporter for which they havefiled a claim of Rs.40 lakhs before the Consumer Forum andsecondly, on account of bank guarantee in the sum of Rs.10 lakhsfurnished by the respondent-Corporation for release of thecontainer. The Arbitrator and courts below recorded theconcurrent findings by holding the termination of the contractlegal and levy of forfeiture of the security amount and the levy offork lift is justified. [Para 11][1168-C-F]

2. The container handed over to the appellant was detainedby the third party who filed a Civil Suit against the appellant statingthat his dues had not been cleared by the appellant. Therespondent-Corporation had filed an application in the said suitfor release of the container which was rejected by the Civil Court,Ghaziabad on 28.11.2002 and the respondent had to file a CivilRevision Petition before the High Court in which a directionwas issued to the trial court to dispose of the application afresh.It was thereafter, the trial court released the container onfurnishing a bank guarantee of Rs.10 lakhs by the respondent-Corporation. The trial court released the container only onfurnishing of bank guarantee of Rs.10 lakhs. It is stated that thesaid civil suit is still pending in the Ghaziabad Court and is at thestage of recording evidence. As held by the Arbitrator, theappellant was given a contract to assist in smooth running ofinternational business of import and export and to have the timemanagement on top priority. Failure to transport the containerto the Port at Navi Mumbai resulted in missing of the exportschedule. Taking into consideration the failure of the appellantto deliver the container at the Port at Navi Mumbai and the time A

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Ataken in recovery of the container and the expenditure incurredby the respondent-Corporation in particular, furnishing of bankguarantee of Rs. 10 lakhs, the detention of the equipments cannotbe said to be arbitrary or beyond the terms of the agreement.[Paras 12, 13][1168-G-H; 1169-A, D-E]

B

B3. Even before filing of the objection petition under Section34 of the Act, the appellant received the full payment due andpayable to him as per the arbitral award. According to therespondent-Corporation, the appellant has not disclosed thereceipt of the money at the time of filing the petition under Section34 of the Act. The Arbitrator and the Courts below have recordedCthe concurrent findings that the appellant Contractor has failedin carrying out the work as per the terms and conditions of thecontract and the Arbitrator has rightly allowed the detention andforfeiture of the equipments of the contractor and disallowed thecounter claim No.4 of the appellant. Similarly, counter claim No.5Dwhich was for the damages for the alleged detention and use ofhand trolleys was rejected and thus, the counter claim Nos.4 and5 were rightly disallowed by the Arbitrator. [Paras 14, 15][1169-F-H; 1170-A-B]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 655 ofE2016.

From the Judgment and Order dated 19.07.2010 of the HighCourt of Delhi at New Delhi in CM No. FAO (OS) 435/2010.

Aniket Jain, Arvind Kumar Gupta, Abinash Kumar Mishra, Advs.Ffor the Appellant.

K.K. Tyagi, Iftekhar A., P. Narasimhan, Advs. for the Respondent.The Judgment of the Court was delivered by

R. BANUMATHI, J.

G1. This appeal arises out of the impugned judgment dated19.07.2010 passed by the High Court of Delhi in FAO(OS) No.435 of2010 in and by which the High Court dismissed the appeal filed by theappellant thereby upholding the judgment of the learned Single Judgethereby affirming the dismissal of the objections filed under Section 34Hof the Arbitration and Conciliation Act, 1996 against the arbitral awarddated 18.03.2005.

2. Brief facts which led to filing of this appeal are as under:- An agreement dated 30.08.2001 was entered into between therespondent-Central Warehousing Corporation and the appellant for aperiod of two years from 28.08.2001 to 27.08.2003 for carrying out thework of Handling and Transportation at Inland Clearance Depot (ICD),Varanasi. The respondent-Corporation terminated the contract on21.02.2002 under Clause X(A) and X(B) of the agreement due toappellant’s poor performance as Handling and Transportation Contractorand deterioration of the situation at the Inland Clearance Depot. Thesecurity deposit furnished by the appellant upto the date of terminationwas also forfeited.

3. Dispute arose between the parties which led to the appointmentof an arbitrator vide reference order dated 23.09.2002. The respondent-Corporation claimed a sum of Rs.98,06,000/- with interest @ 18% thereon.It was contended by the respondent-Corporation that the performanceof the appellant was not found satisfactory particularly, in regard to Exportloaded Container No.TRIU-4991702x40’, which was illegally detainedby the appellant and the appellant failed to transport the container to thePort at Navi Mumbai. The said container was handed over to the appellanton 06.11.2001 from the Inland Clearance Depot, Varanasi and did notreach its destination, JNP, Navi Mumbai within the stipulated time periodi.e. upto 16.11.2001. When the exporter, M/s Bhola Nath Industriespressed for early recovery of the container and also raised claims towardscompensation for loss of the container, the respondent-Corporation startedinquiries and issued several notices to the appellant for recovery of thecontainer and non-performance of contractual obligations. Only afterintervention of the Courts, the container was located and recovered atGhaziabad and received back at ICD, Varanasi on 23.05.2003. But bythen, the said container missed the export schedule. The exporter initiallydeclared that the cargo stuffed in the container was of no use to him; butsubsequently, reprocessed the same to make it usable.

4. The appellant filed counter claims under various heads claimingRs.52,00,000/- with interest @ 18% thereon. It was submitted by theappellant that the container in question was illegally detained byM/s ODC Roadways to whom the container was entrusted fortransportation to Port, Navi Mumbai. According to the appellant, it hadtaken all possible steps including approaching the High Court for speedy A

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Arecovery of the container and in spite of all the efforts taken by theappellant, respondent-Corporation terminated the contract illegally.

5. Taking into consideration the claim and grounds for terminationand also the reply filed by the appellant, the Arbitrator vide award dated18.03.2005 upheld the termination of the contract as valid and decidedBcertain claims of the respondent in its favour. Certain counter claims ofthe appellant were also allowed by the learned Arbitrator. Other claimsincluding counter claim No.3 (claim of Rs.4,30,284/- towards refund ofsecurity deposit) and counter claim No.4 (claim of Rs.15,75,484/-including interest of Rs.4,64,815/- towards illegal detention of the forkClift) were decided against the appellant. It was held by the Arbitratorthat the termination of the contract is legal and justified and in viewthereof, the respondent had the right to forfeit the security deposit. As tothe claim of the appellant towards alleged detention of the fork lift andhand trolleys, the Arbitrator held that the detention of the equipments isright and justified. The Arbitrator held that it is seen from Clause 5(g) ofDthe tender conditions of the contract that the respondent has the right todemand the balance due when sufficient sum is not available to coverthe full amount recoverable from security deposit and other dues. Inview of the heavy claim amount of M/s Bhola Nath Industries andCustoms/Excise Department and others, the learned Arbitrator concludedEthat there is no illegality in the action on the part of the claimant indetaining the equipments like fork lift and hand trolleys as security.

6. The appellant filed objections under Section 34 of the Arbitrationand Conciliation Act contending that the order of termination wherebythe security deposit was also forfeited does not record any reason forFforfeiture of the security deposit. Similarly, no reason has been given bythe Arbitrator for rejecting the counter claim No.3. In support of itscounter claim No.4, the appellant averred that for successful executingof the contract, it had employed one fork lift and four hand trolleys atInland Clearance Depot, Varanasi, which were owned by them and thesame have been illegally detained by the respondent. On behalf of theGrespondent-Corporation, it was contended that the forfeiture of thesecurity deposit was justified on the following reasons – firstly in viewof the heavy claim raised by M/s Bhola Nath Industries before theConsumer Forum, Lucknow and secondly, on account of bank guaranteeto sum of rupees ten lakhs furnished by the respondent for release of theH

container. The respondent submitted that a claim of rupees forty lakhswas lodged by M/s Bhola Nath Industries Ltd. Accordingly, it was decidednot only to withhold the payment due to the appellant, but also to forfeitall the equipments in use.

7. Considering the objections of the appellant and the claim of therespondent-Corporation, the learned Single Judge of the High Court foundno infirmity in the reason recorded by the learned Arbitrator whilerejecting counter claim No.4. Counter claim No.3 was allowed to theextent that in case the bank guarantee furnished by the respondent-Corporation is discharged, the appellant would be entitled to refund thesecurity deposit in the sum of Rs.4,30,284/-. The appeal filed by theappellant under Section 37 of the Arbitration and Conciliation Act wasdismissed vide the impugned judgment affirming the order of the learnedSingle Judge.

8. Before the Supreme Court, the appellant has only pressedcounter claim Nos.3 and 4. Mr. Aniket Jain, learned counsel for theappellant has contended that the courts below erred in not appreciatingthe fact that the appellant exercised due diligence and has taken effortsfor the recovery of illegally detained container including lodging of FIRand initiating legal proceedings. It was submitted that the courts belowfailed to appreciate that the conditions imposed regarding the refund ofsecurity deposit is beyond the terms of the agreement between the partiesas well as the terms of reference made to the arbitrator and the order ofthe learned Single Judge to replace the bank guarantee is untenable andprayed for allowing of the appeal.

9. Insofar as the forfeiture of security deposit is concerned,Mr. K.K. Tyagi, learned counsel for the respondent-Corporation hassubmitted that M/s Bhola Nath Industries, whose containers remainedmissing for a long time on account of the conduct of the appellant hadlodged a claim against the respondent for a sum of rupees forty lakhsand though the same has been dismissed for non-prosecution, the samemay be restored at any time at the instance of the complainant M/sBhola Nath Industries Ltd. It was therefore, contended that the forfeitureof the security amount and fork lift cannot be said to be arbitrary orunjustified and in accordance with the terms of the contract. Learnedcounsel further submitted that the respondent Corporation had to furnisha bank guarantee of rupees ten lakhs to get the container released in A

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Aview of the suit filed by the third party-M/s ODC against the appellantfor retaining the container till their dues are paid by the appellant and thecase is still pending and therefore, the learned Arbitrator has rightly upheldthe act of the respondent-Corporation in forfeiting the security deposit.

10. We have carefully considered the contentions of both the partiesBand perused the impugned judgment and the award passed by the learnedArbitrator and the order of the learned Single Judge and other materialson record.

11. The Export loaded Container No.TRIU-4991702x40’ washanded over by the Manager, ICD, Varanasi to the appellant on 06.11.2001Cfor delivery of the container at JNP, Navi Mumbai; but the appellant hadfailed to transport the container to the destination port and only with theintervention of the Court, the container was located and recovered atGhaziabad and received back at ICD, Varanasi on 23.05.2003. But bythen, the said container already missed the export schedule. When the DExport loaded Container No.TRIU-4991702x40’ was entrusted to theappellant, the appellant ought to have transported the container to theport of destination with due diligence. The respondent- Corporation hasjustified the forfeiture of the security deposit on two counts:- firstly, inview of the heavy claim raised by M/s Bhola Nath Industries Ltd. forwhich they have filed a claim of rupees forty lakhs before the ConsumerEForum, Lucknow and secondly, on account of bank guarantee in thesum of rupees ten lakhs furnished by the respondent-Corporation forrelease of the container. The learned Arbitrator and the Courts belowhave recorded the concurrent findings by holding the termination of thecontract legal and levy of forfeiture of the security amount of Rs.4,30,284/F- and the levy of fork lift is justified.

12. The container handed over to the appellant was detained bythe third party-M/s ODC Roadways represented by Sh. Prabhu NathSing, who filed a Civil Suit No.1127 of 2001 against the appellant statingthat his dues had not been cleared by the appellant. The respondent-GCorporation had filed an application in the said suit for release of thecontainer which was rejected by the Civil Court, Ghaziabad on 28.11.2002and the respondent had to file a Civil Revision Petition No.180 of 2002before the High Court of Allahabad in which a direction was issued tothe trial court to dispose of the application afresh. It was thereafter, thetrial court released the container on furnishing a bank guarantee of rupeesH

ten lakhs by the respondent-Corporation. The trial court released thecontainer only on furnishing of bank guarantee of rupees ten lakhs. It isstated that the said civil suit is still pending in the Ghaziabad Court and isat the stage of recording evidence.

13. Insofar as the allegation of detention of fork lift and handtrolleys, the respondent-Corporation has stated that after finalisation ofthe arbitration case between the respondent-Corporation and the appellant,all the dues as per the order of the Arbitrator has been paid to thecontractor; but the appellant did not approach the respondent-Corporationfor lifting their equipments and as such the same were lying at ICD,Bhadohi occupying valuable space. According to the respondent-Corporation, for the space occupied by the equipments, the total rent forthe period up to 31.05.2007 works out to Rs.41,746/- and Rs.89,049/-for fork lift and hand trolleys respectively. Be that as it may, accordingto the respondent-Corporation, the detention of the equipments weremade as per the terms of the agreement at Clause 5(g) and the samewas accepted by the arbitrator. As held by the learned Arbitrator, theappellant was given a contract to assist in smooth running of internationalbusiness of import and export and to have the time management on toppriority. Failure to transport the container to the Port at Navi Mumbairesulted in missing of the export schedule. Taking into consideration thefailure of the appellant to deliver the container at the Port at Navi Mumbaiand the time taken in recovery of the container and the expenditureincurred by the respondent-Corporation in particular, furnishing of bankguarantee of rupees ten lakhs, the detention of the equipments cannotbe said to be arbitrary or beyond the terms of the agreement.

14. It is pertinent to note that the appellant has received an amountof Rs.11,06,598/- as the amount allowed by the Arbitrator vide awarddated 18.03.2005 by DD No.079915 dated 03.09.2005. Thus, even beforefiling of the objection petition under Section 34 of the Act, the appellanthas received the full payment due and payable to him as per the arbitralaward dated 18.03.2005. According to the respondent-Corporation, theappellant has not disclosed the receipt of the money at the time of filingthe petition under Section 34 of the Act.

15. The learned Arbitrator and the Courts below have recordedthe concurrent findings that the appellant Contractor has failed in carryingout the work as per the terms and conditions of the contract and the A

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Alearned Arbitrator has rightly allowed the detention and forfeiture of theequipments of the contractor and disallowed the counter claim No.4 ofthe appellant. Similarly, the counter claim No.5 which was for the damagesfor the alleged detention and use of hand trolleys has been rejected andthus, the counter claim Nos.4 and 5 have been rightly disallowed by theBlearned Arbitrator. We do not find any reason warranting interferencewith the award passed by the Arbitrator and the impugned judgment andthis appeal is liable to be dismissed.

16. In the result, the impugned judgment dated 19.07.2010 passedby the High Court in FAO(OS) No.435 of 2010 is affirmed and thisCappeal is dismissed. No costs.

Devika Gujral

Appeal dismissed.

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