Sappida Vaanga Restaurant Services (P) Ltd., rep.by its Director C. Sivagnanam Vs. Chennai Petroleum Corporation Ltd., rep.by its Deputy Secretary M. Sankaranarayanan and Another - Court Judgment

(Prayer: This Appeal is preferred under Order XXXVI Rule 11 of O.S.Rules r/w Clause 15 of the Letters Patent Act against the order of this Court dated 12.2.2010 in O.P.No.186 of 2007.)

A. Selvam, J.

This Original Side Appeal has been directed against the order dated 12.2.2010 passed in Original Petition No.186 of 2007 by the learned Single Judge of this Court.

2. The first respondent herein, as petitioner, has filed Original Petition No.186 of 2007 on the file of this Court under section 34 of the Arbitration and Conciliation Act, 1996 praying to set aside the award dated 6.1.2007 passed by the second respondent herein.

3. It is averred in the petition that the first respondent and petitioner have entered into an agreement dated 20.3.2003. The first respondent has agreed to supply food items to an average of 1500 persons per day. The price would be fixed on the basis of items supplied. Further it is agreed that the first respondent is not entitled to get anything towards escalation of price. A letter of acceptance dated 27.1.2003 has also become emerged. In the agreement, the mode of payment on the basis of coupons has also been stipulated. The first respondent has falsely contended that the petitioner has promised to supply foods to 1500 employees per day. Under such circumstances, the first respondent has claimed the value of items to the tune of Rs.3,45,55,487.50. Since the petitioner has not conceded the demand made by the first respondent, the first respondent has moved the arbitration proceedings and accordingly, an arbitration award has been passed on 6.1.2007. The arbitrator has passed an award against the terms of contract. Under such circumstances, the present petition has been filed for getting the relief sought therein.

4. The learned Single Judge, after considering the rival submissions made on either side, has allowed the Original Petition No.186 of 2007 and consequently set aside the arbitral award dated 6.1.2007 by way of passing the impugned order and the same is being challenged in the present Original Side Appeal.

5. Before contemplating the rival submissions made on either side, it would be more useful to narrate the following admitted facts:

It is an admitted fact that the present appellant and the first respondent has entered into an agreement dated 20.3.2003, wherein the present appellant has agreed to supply food items every day to the employees of the first respondent as per rate mentioned therein. Further, it is an admitted fact that on 3.11.2004, the present appellant has sent a request to the first respondent.

6. The main contention put forth on the side of the appellant herein is that as per terms of contract dated 20.3.2003, the appellant has agreed to supply food items to 1500 persons per day and the same has also been accepted by the first respondent. Only on that basis, the appellant herein has claimed the amount mentioned in O.P.No.186 of 2007.

7. The learned senior counsel appearing for the appellant/first respondent has contended with great vehemence to the effect that even in the agreement dated 20.3.2003, a specific stipulation is found place to the effect that the appellant/first respondent has agreed to supply food items to 1500 persons per day and the same has also been accepted by the first respondent herein and accordingly the food items have been supplied. Under such circumstances, a dispute has arisen and the same has been referred to an arbitrator and the arbitrator, after considering the rival contentions put forth on either side, has rightly passed the impugned award dated 6.1.2007 and the learned Single Judge, without considering the terms of the contract dated 20.3.2003, has erroneously set aside the award and therefore, the impugned order passed by the learned Single Judge is liable to be set aside.

8. Per contra, the learned counsel appearing for the first respondent has strenuously contended that in the agreement dated 20.3.2003, it is mentioned that the appellant/first respondent has to supply food items to 1500 persons as an average per day, but the cost of food items would be payable only on the basis of coupons given to the appellant/first respondent by the employees of the first respondent/petitioner. Under the said circumstances, the amount claimed on the side of the appellant/first respondent is totally contrary to the terms of the contract and the arbitrator has committed an error apparent on the face of the record by way of passing the impugned award dated 6.1.2007 and the learned Single Judge, after considering the terms of the contract dated 20.3.2003, has rightly set aside the award and therefore, the impugned order passed by the learned Single Judge does not call for any interference.

9. For better adjudication, the Court has to look into the following terms of the contract:

(i) In Clause 10 of the Agreement dated 20.3.2003, it is stated like thus:

"10. The caterers shall take full responsibility to prepare foodstuff according to the standards prescribed by the company, as per Annexure-II and make them availalbe to the employees on on average of about 1500 persons of the company and service timings notified below.

(ii) In Clause 33, it is stated like thus:

"33. The caterer shall collect coupons of appropriate denominations/specifications from the employees or other authorized persons of the company printed and issued by the Company for foodstuffs/eatables served by the caterer. He is responsible for collecting, accounting and rendering accounts to the company in accordance with company's procedure. All such coupons collected by the Caterer shall be submitted to the company along with a statement of account every day."(iii) In Clause No.34, it is stated like thus:

"The Company reserves the right to issue coupons to employees and others in any manner, the methodology of which will be intimated to be Caterer as and when there is a change. The Caterer shall follow such methodology, collect the coupons and surrender the same as mentioned in Clause-33 of the agreement.

(iv) In Clause No.41, it is stated to the effect that the Caterer shall submit his bills every week on the following Monday towards the cost of foodstuffs served to employees and other authorized persons of the company. The company shall endeavour to pay 90% of the amount of such bills within seven days from the date of submission of the bills and the balance 10% after 30 days and after counting and verification of the redeemed coupons and also after verification of proof of payments submitted by the catering contractor towards PF/ESI and other statutory dues."

10. From a conjoint reading of the terms mentioned in the contract, it is made clear that an average of 1500 persons has been fixed per day. But, at the same time, food items should be served only on the basis of issuance of coupons and the appellant/first respondent is entitled to receive cost of food items only on the basis of submission of coupons to the first respondent/petitioner. To put it in short, the appellant/first respondent at the most can claim the cost of food items actually supplied to the employees of the first respondent/petitioner on the basis of coupons. But the appellant/first respondent cannot claim cost of food items on the basis of average mentioned in the contract.

11. The learned Single Judge, after considering the vital terms of the contract has given a specific finding to the effect that the appellant/first respondent is entitled to claim cost of food items which have been actually supplied.

12. On the side of the appellant/first respondent, the following decisions are relied upon:

(i) In (2015) 5 SCC 698 (Navodaya Mass Entertainment Limited v. J.M.Combines), wherein at paragraph No.8, the Hon'ble Supreme Court has observed as follows:

"In our opinion, the scope of interference of the court is very limited. The court would not be justified in reappraising the material on record and substituting its own view in place of the arbitrator's view. Where there is an error apparent on the face of the record or the arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the arbitrator. Once the arbitrator has applied his mind to the matter before him, the court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the arbitrator would prevail."

(ii) In (2012) 5 SCC 306 (Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran), it is observed as follows:

"Assuming that Clause 9.3 is capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator."

(iii) In (2010) 11 SCC 296 (Sumitomo Heavy Industries Limited v. Oil and Natural Gas Corporation Limited, it is held that 'the arbitrator is entitled to take legitimate view which he holds to be correct'.

(iv) In (2009) 10 SCC 63 (Steel Authority of India Limited vs. Gupta Brother Steel Tubes Limited), the Hon'ble Supreme Court has held that "the legal position is no more res integra that the arbitrator having been made the final arbiter of resolution of disputes between the parties, the award is not open to challenge on the ground that arbitrator has reached at a wrong conclusion. The courts do not interfere with the conclusion of the arbitrator even with regard to construction of a contract, if it is a possible view of the matter."

(v) In (2009) 5 SCC 142 (Kwality Manufacturing Corporation vs. Central Warehousing Corporation), the Hon'ble Supreme Court has held as follows:

"The scope of interference by courts in regard to arbitral awards is limited. A court considering an application under Section 30 or 33 of the Arbitration Act, 1940 does not sit in appeal over the findings and decision of the arbitrator. Nor can it reassess or reappreciate evidence or examine the sufficiency or otherwise of the evidence. The award of the arbitrator is final and the only grounds on which it can be challenged are those mentioned in Sections 30 and 33 of the 1940 Act. Therefore, the only question that arose for consideration before the High Court was whether there was any error apparent on the face of the award and whether the arbitrator misconducted himself or the proceedings."

(vi) In (2008) 14 SCC 785, (Satna Stone and Lime Company Limited, Madhya Pradesh and others vs. Union of India and another), the Hon'ble Supreme Court has held as follows:

"The scope of interference of the Court with the award is limited and the court would not be justified in reappreciating the material on record and substituting its own view in place of the arbitrator's view. Where there is an error apparent on the face of record or where the arbitrator has not followed the statutory legal position, the court would be justified in interfering with the award of the arbitrator."

(vii). In (2001) 5 SCC 691 (Indu Engineering and Textiles Ltd., v. Delhi Development Authority), the Hon'ble Supreme Court has held that the arbitral award can be set aside on the following grounds:

(a) Violation of principles of natural justice in passing the award.

(b) error apparent on the face of the award

(c) the arbitrator has ignored or deliberately violated a clause in the agreement prohibiting dispute of the nature entertained.

13. From a cumulative reading of the decisions mentioned supra, it is made clear that an arbitral award can be set aside on the grounds of violation of principles of natural justice or error apparent on the face of the record or the arbitrator has ignored or deliberately violated the terms of contract.

14. In order to controvert the contentions put forth on the side of the appellant/first respondent, the learned counsel appearing for the first respondent/petitioner has relied upon the following decisions:

(i) In (2013) 8 SCC 131 (Satya Jain (Dead) through legal heirs and others vs. Anis Ahmed Rushdie (Dead) through LRs and others, wherein the Hon'ble Supreme Court has held that "principles of business efficacy can be invoked to ascertain intended meaning of parties only when terms of agreement/contract are ambiguous or are not clear."

(ii) In (2007) 4 CTC 257 (Jyotsna K.Valia vs. T.S.Parekh and Co.), the Full Bench of Bombay High Court has held that implied terms of contract can be decided on the basis of intention of the parties, as collected from words of agreement and surrounding circumstances.

(iii) In (2007) 13 SCC 434 (ONGC Limited vs. Garware Shipping Corporation Limited), the Hon'ble Supreme Court has held that if an award of an arbitrator containing perverse conclusions and founded on wrong basis, is liable to be set aside.

(iv) In (2003) 5 SCC 705 (Oil and Natural Gas Corporation Ltd., vs.Saw Pipes Limited), the Hon'ble Supreme Court has held that an award should be in accordance with terms of the contract, otherwise the same is liable to be set aside.

15. In the instant case, it has already been pointed out that in the agreement dated 20.3.2003, it has been specifically stipulated to the effect that the appellant/first respondent has to supply footstuffs to the employees of the first respondent/petitioner only on the basis of coupons issued by the first respondent/petitioner and the appellant/first respondent is entitled to collect the price of foodstufs only on the basis of coupons. If really the first respondent/petitioner has agreed to give cost of foodstuffs to be supplied to 1500 persons per day, coupon system would not have been introduced. Further, in the agreement dated 20.3.2003, it is clearly stipulated to the effect that the appellant/first respondent is entitled to get the price of foodstuffs to the first respondent once in a week by way of presenting all the coupons received by it. Therefore, even from a plain reading of the vital terms of the contract dated 20.3.2003, no agreement has become emerged among the appellant/first respondent and the first respondent/petitioner to pay cost of foodstuff on the basis of average of 1500 persons per day. Therefore, it is quite clear that the appellant/first respondent is entitled to get cost of the foodstuffs which have been actually supplied by it and that too only on the basis of coupons given by the first respondent/petitioner. The arbitrator, without considering the further terms of the contract, has simply accepted to the effect that the first respondent/petitioner has agreed to give cost of foodstuffs to be supplied to 1500 persons per day. The conclusion arrived at by the arbitrator is totally against the terms of contract. It is a settled principle of law that if an error is apparent on the face of the award or the finding of the arbitrator is perverse in nature, the arbitral award in question is liable to be set aside.

16. As adverted to earlier, there is no agreement to the effect that the first respondent herein has agreed to give cost of foodstuffs to be supplied to 1500 persons per day. Even at the risk of repetition, the Court would like to point out that if there is an agreement to that effect, further terms of the contract would not say about the coupon system and also mode of payment to the appellant/first respondent on the basis of submission of coupons. Therefore, it is needless to say that the arbitrator has passed the award totally against the terms of the contract. To put it in short, the arbitrator has misunderstood the vital terms of the contract.

17. The learned Single Judge, after considering the terms of the contract, has rightly found that the arbitrator has passed the award against the terms of the contract. In view of the discussions made earlier, this Court has not found any force in the contentions put forth on the side of the appellant/first respondent and therefore, the Original Side Appeal deserves to be dismissed.

In fine, this Original Side Appeal is dismissed with cost. The order dated 12.2.2010 passed by the learned Single Judge in Original Petition No.186 of 2007 is confirmed.