CHAUHAN, J. - (1.) BOTH these appeals arise out of the same factual matrix, although they are challenging different judicial findings. In the first appeal the appellant, the Food Corporation of India (henceforth to be referred to as `the FCI', for short) is challenging the award dated 4. 6. 2003, whereby the learned Sole Arbitrator has granted a compensation of Rs. 7,50,194. 50/- to the , as well as the Order dated 4. 2. 2006 passed by the District Judge, jaipur, whereby the learned Judge has partly dismissed the objections filed by the FCI against the award dated 4. 6. 2003. On the other hand, in the second appeal, filed by Niyaz Mohammad (henceforth to be referred to as `the claimant', for short), he has challenged only the judgment dated 4. 2. 2006, whereby the learned Judge has reduced the interest rate from 12% per annum to 9% per annum and has directed that no interest needs to be paid on the security deposit which was kept by the FCI. Since both the appeals share the same factual foundations, they are being decided by this common judgment.
(2.) THE brief facts of the case are that on 16. 10. 1997, the FCI issued Notice inviting Tenders for the appointment of Transport contractor from Covered and Plinth/food Storage Depot Alwar to Bandikui. Since Niyaz Mohammad, had submitted the lowest tender, the FCI accepted his tender on 22. 12. 1997. Subsequently, a work order was issued to him. According to the work order, he was granted the work of transporting the food grain for a period of two years, i. e. from 26. 12. 1997 to 25. 12. 1999 from Alwar to Bandikui. According to the Agreement, he deposited a sum of Rs. 91,000/- towards 50% of the Security Deposit and the other 50% was agreed by the FCI to be deducted from the bills, @ 5% of each bill of the claimant. However, during the tenure of the contract, certain disputes arose between the parties. In accordance with the arbitration clause contained in the agreement eventually the Indian Council of Arbitration appointed Mr. J. L. Nehru as the Sole Arbitrator. The claimant filed his claim petition before the learned Sole Arbitrator. According to the claim petition, the FCI had illegally deducted Rs. 4,50,371. 50/- on account of short delivery of the food grain, had illegally deducted Rs. 29,400/- on account of penalty and had illegally kept the security deposit with them. According to the claimant, the FCI should have given him the allowance of 0. 25% as admissible shortage in transit as was given by the FCI to some other transporters in accordance with their circulars. However, the FCI denied such allowance to the claimant. Moreover, the reason for the alleged shortage of transport of food grain was due to the difference of weight scales used by the FCI at the loading and the unloading points. The difference in weight is not affected by the seasons. Thus, there was no fault on the part of the claimant. However, despite there being no fault on his behalf, the FCI has still deducted the amount for short supply of food grains. Moreover, the FCI had imposed a penalty ostensibly on the ground that the claimant had not been supplied the requisite number of trucks for transporting the food grain. Because of this omission on the part of the claimant, the required amount of food grain was not transported. Hence, the public distribution system suffered. Hence, the penalty imposed on the FCI. In its claim petition, the claimant specifically pleaded that it never failed to supply the required trucks demanded by the FCI, from time to time. Thus, the imposition of the penalty was patently illegal. Lastly, since the claimant had transported the entire stock of food grain with the stipulated period of two years, there was no justification for the FCI to forfeit the security deposit. Hence, the same should be refunded to the claimant. The FCI filed its reply to the claim petition and stated that th claimant did not perform his duty successfully. It failed to supply the requisite number of trucks as and when needed. The quantity of food grain given to him at the loading point, it failed to deliver the same at the unloading point. There was a district shortage between the two points. According to the contract the food grain was deemed to be in the custody of the claimant till the food grain was delivered at the destination. Thus, the claimant was responsible for any shortfall in the quantity of food grain transported by it. Hence, the deduction for shortage of food grain was made in accordance with Clause XIX (3) (6) and XIX (f) of the contract. Lastly, since the claimant had not fulfilled his contractual obligations, the FCI was justified in forfeiting the security deposit. However, after hearing both the parties, the learned Sole Arbitrator granted compensation in favour of the claimant as under: Deduction on account of shortage Rs. 3,91,461. 50/- Refund of Security Deposit Rs. 1,82,000/- Deduction on account of penalty Rs. 41,100/- Expenses of Arbitration Rs. 18,200/- Refund of excess amount deducted by FCI Rs. 18,433/- Grand Total Rs. 7,50,194. 50 The learned Sole Arbitrator further imposed an interest of 12% per annum on the amount of Rs. 3,91,461. 50 in case the same is not paid within the period of sixty days; on the amount of Rs. 1,82,000/- he imposed an interest of 12% per annum from 1. 7. 2000 till the actual realization; on amount of Rs. 41,100/- he imposed an interest of 12% per annum in case the same is not paid within the period of sixty days; no interest was imposed on amount of Rs. 18,200/-, but interest of 12% per annum was imposed on the amount of Rs. 18,433/- in case the same was not paid within a period of sixty days from the date of receipt of the copy of the award. Since the said award aggrieved the FCI, they filed their objection under Section 34 of the Arbitration and Conciliation Act, 1996 (henceforth to be referred to as `the Act', for short) before the learned Judge. But vide Order dated 4. 2. 2006, the learned Judge partly dismissed the objections. While the learned Judge has rejected most of the objections raised by the appellant, he did allow the objections with regard to imposition of the interest. Since most of the objections have been dismissed, hence, the first appeal filed by the FCI; since the learned Judge has reduced the interest rate applicable on the compensation amount, and has disallowed the interest on the security deposit kept by the FCI, the second appeal filed by the claimant. S. B. Civil Misc. Appeal No. 1660/2006:
(3.) WHILE arguing the first appeal, Mr. S. C. Mittal, the learned counsel for the FCI, has raised various contentions before this Court firstly, according to the arbitration clause contained in the contract the arbitration proceedings were to be carried out in conformity with the rules of arbitration of the Indian Council of Arbitration (henceforth to be referred to as the "ica Rules", for short ). According to the said ICA Rules, the Arbitrator has an option of either holding the proceedings according to the `regular' procedure, or to adopt the `fast Track Procedure'. However, before the Arbitrator can proceed according to the "fast Track Procedure", the consent of both the parties to arbitration is necessary. According to the learned counsel, though the parties had not agreed to the adoption of the "fast Track Procedure", the Arbitrator still adopted the "fast Track Procedure". Hence, he has committed a procedural illegality. Hence, the award stands vitiated. Secondly, according to the contract it was the responsibility of the claimant to supply adequate number of trucks for transporting the food grain in accordance with the instructions issued by he Senior Regional Manager or an officer acting on his behalf. Further, according to Clause 7 (f) of the contract, "in case the party fails to provide ten trucks each day for each centre, penalty of Rs. 100/- per any per truck would be imposed. (However, this would be based on the requisition made by the AM (D) / District Office on the party in writing)". Since the claimant failed to provide adequate number of trucks, the FCI was justified in imposing the penalty. But, the learned Sole Arbitrator has directed the refunding of the penalty ostensibly on the ground that the FCI did not prove the actual loss suffered by them. In absence of such a proof, the FCI was not entitled to impose the penalty as stipulated in the contract. For, the claimant had transported the entire stock of food grain during the stipulated period. But, according to the learned counsel such an interpretation is in violation of Section 74 of the Contract Act, which clearly stipulates that in case of breach of contract the non-offending party is entitled to receive the penalty named in the contract from the offending party even if no loss has been sustained. Thus, the award is in contravention of the Contract Act. Thirdly according to the contract once the food grain was loaded on to the trucks, the responsibility of transporting the same quantity of food grain was on the claimant. However, many a times, there was shortage in the food grain transported by the respondent. The FCI were entitled to recover for the shortage of food grain transported. This is clear from Clauses 19 (3) and (6) of the contract. Still the learned Sole Arbitrator has directed the money deducted by the FCI for shortage of food grain to be refunded to the claimant. Such a direction is in violation of Clause 19 (3) and (6) of the contract. ;