R.C. Chopra, J.
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act' only) is directed against an Award dated 26.4.1999 passed by the Arbitrator in Arbitration Case No. 11-F/98. The objector/petitioner prays for selling aside the Award dated 26.4.1999.
2. The facts relevant for disposal of this petition, briefly stated, are that vide an agreement dated 10.11.1994 respondent No. 1 had entered into a contract with the petitioner for supply of 500 ml. of refined mustard oil. In the agreement there was a risk purchase clause also. The respondent was required to furnish a security deposit by 24.11.1994. Time was extended up to 8.12.1994, but still the respondent failed to furnish the security amount. According to the petitioner/objection, respondent No. 1 could not deliver refined mustard oil in terms of the agreement till the extended period up to 20.2.1995 and as such, the contract was cancelled by a notice dated 10.3.1995. Risk purchase was made from State Trading Corporation Limited. On the basis of difference in the price, the petitioner/objector served a notice upon respondent No. 1 to recover the loss on account of risk purchase. However, respondent No. 1 declined to pay the amount. The disputes between the parties were referred to the Arbitrator, respondent No. 2. According to the petitioner, although it had made risk purchase from the lowest offer as shown in the chart (Annexure P1), the Arbitrator rejected its claim holding that the lower offer was ignored. The Arbitrator perhaps got misled by the prices quoted by the tenderers on account of different rates of Central Sales Tax, which was to be borne by the petitioner/objector. It is pointed out that the rates quoted by STC, Delhi from whom the risk purchase were the lowest, if the CST was also taken into consideration, but still the Arbitrator came to the conclusion that a lower offer was ignored,
3. Respondent No. 1 has opposed the prayer of the petitioner/objector mainly on the ground that the objections raised by the petitioner are not covered by Section 34 of the Act for setting aside the Award. It is also pleaded that there was no valid and binding contract between the parties and the respondent could not supply the material to the petitioner due to the fact that the goods were to be packed in HDPE jars/drums as per specifications given in the contract, but the same were not available in the market. It is also asserted that while making risk purchases, the petitioner had ignored the lowest offer, which was from M.P. State, OICFED, Bhopal. The petitioner filed rejoinder to the reply filed by respondent No. 1 and controverter its pleas.
4. I have heard learned counsel for the petitioner and learned counsel for the respondent. I have gone through the records.
5. Learned counsel for the petitioner/objector has vehemently argued that the impugned Award passed by respondent No. 2 is liable to be set aside in view of the fact that the Arbitrator had not only misread the evidence on record but taken a totally capricious view also resulting in miscarriage of justice, It is submitted that the Arbitrator had totally failed to apply his mind to the material before him and had drawn conclusions which were absolutely contrary to the record.
6. On the other hand, learned counsel for respondent No. 1 has relied upon State of Rajasthan v. Puri Construction Co. Ltd. and Anr. : (1994)6SCC485 ; Indu Engineering & Textiles Ltd. v. Delhi Development Authority : [2001]3SCR916 . S. Sony & Co. v. Delhi Development Authority : 53(1994)DLT267 and Madan Lal v. Union of India and Ors. : 40(1990)DLT330 to contend that the objections raised by the petitioner are not covered by Section 34 of the Act and as such, this Court has no jurisdiction to interfere with the Award even if the findings given by the Arbitrator are erroneous or based upon misreading, misconstruction on mis-appreciation of the material on record. It is submitted that an error of law or fact committed by an Arbitrator does not warrant interference by the Court.
7. In State of Rajasthan v. Puri Construction Co. Ltd and Anr., the Apex Court while disfavoring interference with arbitral awards on account of error of law or facts observed that in commercial and other transactions involving substantial amounts, the Courts were impelled to have fresh look on the ambit of challenge to an Award so that the Award does not get undesirable Immunity and by expanding the import and implication of 'legal misconduct' of an Arbitrator, an effort was made that the Arbitrator does not perpetrate gross miscarriage of justice and does not reduce the arbitration to a mockery. In Indu Engineering & Textiles Ltd. also, the Apex Court was of the view that a plausible view taken by the Arbitrator may not be interfered with unless the view is vitiated by a manifest error on the face of the Award or is wholly improbable or perverse. In the case of S. Sony & Co., also a learned Single Judge of this Court observed that it could not be said that the Courts cannot interfere with an Award made without being based on any evidence whatsoever. In the case of Madan Lal, another learned Judge of this Court while discussing the powers of the Courts to interfere with the Awards referred to Apex Court judgment in MCD v. Jagan Nath Ashok Kumar and Anr. : [1988]1SCR180 in which it was held that the case before the Court was not where the Arbitrator had refused cogent and material factors to be taken into consideration and the Award was not vitiated by non-reception of material or non-consideration of the relevant aspects of the matter. These observations of the Apex Court clearly indicate that Courts are not helpless and are under a duty to interfere with Awards to prevent miscarriage of justice.
8. It is true that an Arbitrator is a Judge by the choice of the parties and more often than not a person with little on no legal background and as such the findings given by the Arbitrator can be challenged only within the limited scope of the provisions of the Act. It is also true that the Courts disfavor interference with arbitral Awards merely on account of error of law or fact or on the ground of mis-appreciation and misreading of material on record but if in a case, the Court finds that the Arbitrator has arrived at a finding which is contrary to the material before him or has arrived at a conclusion which is capricious on the face of it, the Court cannot sit as a silent spectator and allow miscarriage of justice. The Act of 1996 aims at expeditious disposal of the disputes between the parties through arbitration and narrows down the scope of interference by the courts but the purpose of Section 34 of the Act is to permit an aggrieved party to knock at the doors of theCourt if Award suffers from any of the vices mentioned therein. The object of Section 34 of the Act would stand defeated if the Courts put their shutters down andthrow out any and every objection even if gross injustice is brought to their notice. inspire of extensive powers and wide discretion an Arbitrator has to ensure that the Award passed by him is in accordance with law. If an Award passed by an Arbitrator is capricious and contrary to law, it can be safely termed as an Award in conflict with the public policy of India, which is founded on rule of law. The public policy of India does not countenance any violation of law resulting in miscarriage of justice.
9. In the present case a perusal of the Award clearly reveals that the Arbitrator had misread the rates offered by M.P. State OICFED, which were Rs. 38,600/- per metric ton as compared to Rs. 39,6000/- offered by STC, Delhi. The Arbitrator ignored and overlooked that the Central Sales Tax, which was to be paid by the purchaser/petitioner and had to be added to the total price was 4% in the case of purchases to be made from M.P. State OICFED and only 1% in case of purchaser to be made from STC, Delhi. thereforee, after adding Central Sales Tax, price offered by M/s. STC, Delhi was Rs. 39,996/- per metric ton whereas the price quoted by M.P. State OICFED was Rs. 40,144/- per metric ton. The price quoted by STC was lowest and as such, it could not be said that the petitioner/objector had ignored any lower offer while making the risk purchase. The packing conditions in the contract with the respondent No. 1 as well as M/s. STC remained the same and the plea of respondent No. 1 that HDPE jars/drums were not available in the market could not be a ground for avoiding the supply. Respondent No. 1 was under an obligation to supply the goods in the agreed packing material. It is not discernible as to how the Arbitration held that packing conditions were changed.
10. It is also not understandable as to how the Arbitrator could record a finding that the goods were accepted with price variation and were not of the same specifications. A perusal of the material placed before the Arbitrator clearly shows that the observations made by the Arbitrator that the risk purchase was not made at the lowest price were contrary to the material before him which showed that the price quoted by M/s STC, Delhi was the lowest. There was no change in the specifications of the goods. Clauses 3 of the orders placed by the petitioner on the respondent as well as on M/s STC show that the goods sought to be purchased from both were having same specifications and as such it was absolutely against the record on the part of the Arbitrator to say that the goods accepted from M/s STC were not of the same specifications. The observations of the learned Arbitrator that the claim for general damages could not be allowed because the claimant-petitioner had not given proof of market value were also totally groundless for the reason that in the face of the actual risk purchase as made by the petitioner after inviting tenders from various suppliers, there was no scope for looking for the market price on which the risk purchase could be made. It appears that the Arbitrator, respondent No. 2, was beni (sic) upon making an adverse Award against the petitioner/objector and as such, took refuge under absolutely frivolous and perverse pleas. Such an irrational, arbitrary, perverse and capricious Award can Be safely held to be in conflict with the public policy of India.
11. In view of the foregoing reasons, this Court is of the considered view that the impugned award dated 26.4.1999 passed by the learned Arbitrator in Arbitration Case No. 11-F/98 was totally perverse, capricious and contrary to the material available to the Arbitrator. It can be held to be in violation of and in conflict with the public policy of India and as such cannot be sustained. The Award is remitted back to the learned Arbitrator for re-considering the material on record and thereafter passing a fresh award giving reasons in support thereof,
12. The petition stands disposed of. The Arbitrator shall pass the award within four months.