Decided on December 06,1954



Falshaw - (1.) THIS is an appeal by the Union of India against the order of a Sub-Judge at Delhi setting aside the award of an umpire and dismissing the Government's appplication under Section 14, Arbitration Act.
(2.) THE facts of the case are that the respondent a contracting firm named Messrs Allied Trading Co., had a number of contracts with the Supply Department of the Government of India during the war for the supply of various articles and commodities. One of these contracts related to the supply of what is described a Dubbin Protective. A quantity of this amounting to about 20 tons was accepted by an Inspector of the Department and an acceptance note issued on 3-3-1944 and in pursuance of this acceptance note the contractor obiained a payment from the Government a sum of Rs. 64,000/-. Subsequently the Department received information that the consignment which had been accepted find paid for was not upto the proper standard and that its acceptance by the Inspector was fraudulent and collusive. In consequence of this fresh samples were taken from the consignment and retested, and it was discovered that instead of beeswax considerable quantities of liquid paraffin had been used as an ingredient in the dubbin. On this the Department rejected the whole consignment and claimed the refund of the money paid for it from the contractor, who refused repayment. The Government then stopped the payment of Rs. 3,397/- which was due to the contractor on account of a number of bills connected with other supply contracts and he was Informed that the Department intended to withhold payment. The Government then stopped the payment of Rs. 3,397/- which was due to the contractor on account of a number of bills connected with other supply contracts and he was informed that the Department intended to withhold payment of his bills in the other contracts for goods already supplied and still to be supplied until the whole amount which the Government claimed had been wrongly paid to the contractor had been recovered. On this threat the contractor stopped making any further supplies in connection with any of these contracts after June 1944. The dispute regarding the repayment of Rs. 64,000/- odd was referred to arbitration under the standard terms governing supply contracts but the arbitrators appointed by the Government and the contractor respectively were unable to agree and the dispute was referred to Mr. Tara Chand Aggarwal then a Subordinate Judge at Delhi who was the umpire appointed by the arbitrators. The umpire delivered his award on 28-8-1945 to the effect that the Government was not entitled to recover anything from the contractor as the goods had been unconditionally accepted in accordance with the terms of the contract and the allegations of fraud and collusion were extremely vague and not supported by any evidence worth the name. He also held that the Government could not claim any sum as damages as there was no proof of the extent of the damage sustained.
(3.) AFTER the delivery of this award, which was apparently not challenged by the Government, the sum of Rs. 3,000/- odd which had been with- held was paid to the contractor, and he then put forward his claim which gave rise to the arbitration proceedings from which this appeal haa arisen. He claimed from the Government a sum of Rs. 1,11,775/- on account of damages arising from the breaches of his various contracts by the Government. This claim, was also referred to arbitration, Mr. Prithvi Raj Thapar Advocate being appointed by the contractor and Bakshi Shiv Charan Singh by the Government as their respective arbitrators. These arbitrators were nominated in July and August 1947 and it was only in February 1948 that they nominated Mr. Sunder Dass Midha, the Deputy Commissioner of Jullundur as umpire. However, although this delay took place in the appointment of the umpire, the arbitrators made, the appointment before they actually began the hearing of the case. In the end they disagreed, the Government's arbitrator by his order dated 22-21949 holding that the contractor's claim should be dismissed with costs while the contractor's arbitrator held that he was entitled to recover Rs. 82,4697127- as damages also with costs. In due course the dis-pute was referred to Mr. Midha as umpire. The parties did not produce any further evidence be- fore him but argued on the record as it stood, and by his order dated 21-4-1949 he held that the contractor's claim should be dismissed with costs. The Government then applied under Section 14 of the Act for the award to be filed in Court and a decree passed in accordance with it. This was opposed by the contractor who raised some technical objections to the jurisdiction of the umpire, and alleged that in any case the umpire had misconducted himself and that the award wasliable to be set aside on this ground. These objections were accepted by the lower Court which set aside the award and appointed Mr. Prehlad Singh Bindra, then Additional District and Sessions Judge, Rohtak, as umpire to deal with the matter afresh. The present appeal is against this order.;

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