KAMRUP LNDUSTRLAL GASES LTD.versusUNION OF INDIA

                        [2017] 3 S.C.R. 345


                KAMRUP lNDUSTRlAL GASES LTD.                            A
                           v.
                        UNION OF INDIA
                   (Civil Appeal No. 4249 of2007)
                          APRlL 11, 2017                                B
                [JAGDISH SINGH KHEHAR, CJI,
                 DR. D.Y. CHANDRACHUD AND
                  SANJAY KISHAN KAUL, JJ.j
       Arbitration Act,1940 - ss. 29, 30, 33 and 39 - Contract
between appellant and respondent requiring the respondent to lift       C
a minimum quantity of oxygen and acetylene gas, per month - As
per the contract if the respondent could not lift the minimum
postulated quantity, the appellant would sell the unutilized balance
amount of gas in the open market - Howeve1; if the appellant could
not sell the said unutilized gas, it would blow off the same and
recover the proceeds thereoffrom the respondent -Appellant alleged      D
short lifting of gases by respondent and claimed payment for the
gases allegedly blown off - Plea of respondent that in terms of the
contract the appellant had to inform the respondent before blowing
off the gases, however, no such intimation was ever extended to it -
Appellants claim allowed by arbitrator - Jn appeal by respondent,       E
Single Judge of High Court upheld the award - Appeal by
respondent allowed by Division Bench - On appeal, held: In terms
of the .findings recorded by the m:bitrator based on the evidence
adduced by appellant, it is clear that on each occasion, before the
shortfall of the gases were blown off, the appellant duly informed
the respondent - Relevant bills were duly furnished to the respondent   F
indicating payments claimable by the appellant - The bills raised
also denoted the amounts deducted on account of the sale proceeds
of the gases which the appellant sold in the open market - There
was no rebuttal from respondent to these assertions made by
appellant before the arbitrator - Award passed by the arbitrator        G
affirmed-Appellant entitled to interest@ 9% on the awarded amount
from the date the award was decreed.
      Allowing the appeal, the Court
     HELD: 1.1 Having perused the documents furnished by
the appellant, at the asking of the respondent, and the findings        H
                                 345
346           SUPREME COURT REPORTS                     [2017] 3 S.C.R.


A recorded with reference to the statement made by appellant's
  witness before the Arbitrator it is clear, that on each occasion,
  before the shortfall of the gases were blown off, the appellant
  duly informed the respondent, and in that view of the matter, it is
  not possible to concur with the findings recorded by the High
  Court, that due intimation was not furnished by the appellant to
B
  the respondent - before carrying on the exercise of emptying
  their cylinders, by blowing off the unlifted gases. It is also relevant
  in this behalf to make a reference to the determination recorded
  by the Arbitrator, again based on the statement of the appellant's
  witness that on different occasion, relevant bills were raised by
C the appellant indicating payments claimable by the appellant. The
  bills raised also denoted the amounts deducted on account of the
  sale proceeds of the gases which the appellant could sell in the
  open market. According to appellant's witness, all the bills were
  duly furnished to the respondent. Interestingly, there was no
D rebuttal to the said assertions made by the appellant before the
  learned arbitrator. [Para 13][353-E-H; 355-BI
         1.2 Accordingly, the determination recorded by the
   Arbitrator in his award, is affirmed. The list of dates reveal, that
   on 1.9.2006 the Calcutta High Court decreed the award dated
   18.4.2004. In consonance with Section 29of the Arbitration Act,
 E 1940,the appellant is awarded post decretal interest at the rate
   of 9%, on the awarded amount with effect from 1.9.2006. [Para
   15) [355-B-D]
           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4249
      of2007.
 F
           From the Judgment and Order dated 27.04.2007 of the Division
      Bench of the High Court at Calcutta in A. P. 0. No. 257 of 2005 in
      Award Case No. 12 of2004 in G. A. No. 53 of2005.
          Gourab Banerji, Sr. Adv., Kaushik Mandal, Sahil Tagotra,
 G Debojyoti Bhatacharya, Subhro Mukherji, ChiraranjanAddey, Advs. for
   the Appellant.
           R. S. Suri, Sr. Adv., Ms. Vimla Sinha, Ms. Sushma Verma, Ravi
      Shankar, Raj Bahadur Yadav, (For Mrs. Anil Katiyar), Advs. for the
      Respondent.
H
    KAMRUP INDUSTRIAL GASES LTD. v. UNION OF INDIA                             347


      The Judgment of the Court was delivered by                               A
        JAGDISH SINGH KHEHAR, CJI 1. An agreement dated
21.04.1965 was executed between the appellant-Kammp Industrial Gases
Ltd., and the respondent-Diesel Locomotive Works, Varanasi, for setting
up a plant for manufacture of Oxygen gas and Acetylene gas, at the site
of the Diesel Locomotive Works, at Varanasi. It is not a matter of B
dispute, that the aforesaid contract required the Diesel Locomotive Works,
to lift a minimum ofl 8,000 cubic meters of Oxygen gas, and 2,500 cubic
meters of Acetylene gas, per month. The obligation being, that even if
the minimum quantity of the gases was not lifted, payment for the
minimum postulated quantity, would have to be made, by Diesel
Locomotive Works. The contractual agreement also envisaged, that in C
case Diesel Locomotive Works could not lift the aforesaid minimum
postulated quantity, Kammp Industrial Gases Ltd., would assist it for the
disposal of the balance, which could not be lifted. However, ifthe appellant
remained unsuccessful in the sale of the deficit amount of gas, Kammp
Industrial Gases Ltd., would have the liberty to empty their cylinders on D
buyer's account, namely, the appellant- Kammp Industrial Gases Ltd.,
would blow off the unutilized balance, and recover the proceeds thereof,
from Diesel Locomotive Works.
       2. The appellant before this Court, raised an arbitral dispute,
claiming payment/consideration, on account of non-lifting of the minimum       E
quantum of gases, by Diesel Locomotive Works. By an order dated
13 .08.1976, the Calcutta High Court appointed an arbitrator, in the matter.
Various orders were passed by the Calcutta High Court thereafter,
appointing different arbitrators. Eventually Shri D.P. Mukherji, was
appointed (by the High Court, vide its order dated 22.09.1988) as the
sole arbitrator, to adjudicate upon the dispute raised by the appellant-       F
Kammp Industrial Gases Ltd. The arbitral proceedings continued from
1982 to 2004. The arbitral award was finally rendered on 18.04.2004.
The operative part of the arbitral award is extracted hereunder:
        "Having regard to my findings on the issues settled in these
       proceedings as recorded in the preceding paragraphs hereof; I G
       now give my award on the claims raised by the claimant.
       (1) As regards Claim No.l, I award Rs.8,72,235.16P (Rupees
       Eight Lakhs Seventy Two Thousand Two Hundred Thirty Five
       and paise sixteen) to the claimant;
                                                                               H
348            SUPREME COURT REPORTS                            [2017] 3 S.C.R.


A           (2) With regard to claim No.2, the claim ofRs.1,50,000/- is rejected;
            (3) With regard to Claim No.3, the claim of Rs.1,50,000/- is rejected;
            (4) As regards Claim No.4, the claimant is entitled to a sum of
            Rs.3,23,581.59P (Rupees Three Lakhs Twenty Three Thousand
            Five Hundred Eighty One and paise fifty nine) on account of
B
            interest on the unpaid bills of the claimant upto 15'h November,
            1976;                                  .
            (5) As regards Claim No.5, the claimant is entitled to interest at
            the rate of 3% (Three Percent) per annum on the unpaid bills,
 c          being sum of Rs. 8, 72,23 5. l 6P as pendente lite interest from March
            6, 1989 till the deed of this Award.
            The claimant shall also be entitled to further interest at the rate of
            6% (Six Percent) per annum on the said sum of Rs.8,72,235.16P
            from the date of the Award till the date of decree or realization
 o          whichever is earlier;
            (6) As regards Claim No.6, the claimant will be entitled to
            Rs.4,00,000/- (Rupees Four Lakhs) as costs of and incidental to
            these proceedings."
             3. The Diesel Locomotive Works being dissatisfied with the award,
 E    approached the Calcutta High Court (hereinafter referred to as the High
      Court), under Sections 30 and 33 of the Arbitration Act, 1940. By an
      order, dated 19 .04.2005, a learned Single Judge of the High Court, upheld
      the award, dated 18.04.2004.
          4. Dissatisfied with the impugned award, dated 18.04.2004, as
 F well as, the order passed by the learned Single Judge, dated 19.04.2005,
   the Diesel Locomotive Works preferred a further appeal under Section
   39 of the Arbitration Act, 1940. A Division Bench of the High Court, by
   an order dated 27.04.2007, accepted the appeal (preferred by Diesel
   Locomotive Works). Aggrieved by the same, the appellant has
 G approached this Court, through the instant civil appeal.
             5. During the course of hearing it emerged, that the main reason
      for the Division Bench of the High Court in accepting the appeal was,
      that the appellant did not produce vital documents called for by the Diesel
      Locomotive Works, before the Arbitrator. The aforesaid documents,
 H
   KAMRUP INDUSTRIAL GASES LTD. v. UNION OF INDIA                               349
             [JAGDISH SINGH KHEHAR, CJI]

were in the exclusive custody of the appellant herein- Kamrup Industrial        A
Gases Ltd., and since the same were not produced before the arbitrator,
an adverse inference was drawn by the High Court. The details of the
documents sought from the appellant, have been described in the
impugned order (dated 27.04.2007), which are as under:
      "i) Statement of daily production of Oxygen and D.A. Gas at               B
         their DLW Township Factory.
      ii) Statement showing the purchase of Carbide month wife during
         the period in question.
      iii) Actual Sale documents/Books for all sales to paiiies as well as
          to DLW during the period in question.                                 C
      iv) Profit and Loss Account and balance sheet for the period in
         question for their DLW Plant.
      v) Excise Inspector's reports for duty on such excisable
        commodities for the period in question."                                D
      6. With reference to the aforesaid documents, the High Court
recorded its findings as under :
      "It is not in dispute that the aforesaid documents called for by the
      Buyer by its counter-statement were never produced before the
      learned Arbitrator. There is nothing in the award to show that            E
      any attempt whatsoever was made by the learned Arbitrator to
      have these documents produced before him."
                                                     (emphasis is ours)
      A pernsal of the reasons recorded by the High Court, leads to the
                                                                                F
inference, as if, the position recorded by the High Court was
acknowledged even by the Kamrup Industrial Gases Ltd.
       7. The aforesaid findings recorded by the High Court, constitute
the first c:hallenge raised by the appellant, before this Court. It was the
vehement contention of the, learned counsel for the appellant, that as a
matter of fact, it emerges from the proceedings conducted before the            G
Arbitrator, that all the aforesaid documents were actually produced by
the appellant before the Arbitrator, during the course of its sitting held on
16.08.1989. In order to demonstrate the factual position, our attention
has been drawn to the above proceedings, wherein it is inter alia recorded
as unde:r:                                                                      H
350           SUPREME COURT REPORTS                          [2017] 3 S.C.R.


A          "Mr. Debal Banerjee, Counsel appearing for the Claimant, submits
           that the following set of documents have been formally disclosed
           on behalf of the Claimant and filed before the Learned Arbitrator
           on 10.8.89 :-
           1) Statement for Production and Sale of Oxygen and DA Gas at
 B         IGL, Varanasi Branch during 1973, 1974, 1975.
            2)-Do- Certified by Auditors
            3) Certificate from Inspector of Central Excise for Oxygen Gas
            cleared to IGL, Varanasi Branch on payment of Excise Duty for
            the Year 1973, 1974, 1975.
 c
            4) Annual Report & Profit & Loss Ne of IGL the years 1973,
            1974, 1975.
            5) Plant Reports showing daily production, Sale and Blow off of
            Oxygen and DA gas in IGL, Varanasi during July and August,
 D          1973.
            6) Letter written by IGL to DLW for upliftment of ox:1gen and
            DA gas and blow off of balance quantities of gases during the
            years 1973, 1974 and 1975.
            7) Statement of Procurement, invoices, Performa invoices, store
 E          receipts etc. for purchase of Calcium Carbide by IGL, Varanasi
            Branch during 1973, 1974and1975.
            Mr. Banerjee further submits that the Xerox copies of the same
            set of documents have been served on Mr. L.K. Chatterjee Central
            Government Advocate, which was received by his office on
 F          11.8.89."
          Based on the above record, of the proceedings, it was the
   submission of learned counsel for the appellant, that not only were the
   required documents produced before the arbitrator, they were also handed
   over and served upon the Central Government Advocate, representing
 G the Diesel Locomotive Works, before the Arbitrator.
             8. We find substance in the contention advanced at the hands of
      the learned counsel for the appellant, more particularly because learned .
      counsel for the respondent, could not dispute the factual position recorded
      in the proceedings conducted before the Arbitrator, on 16.08.1989. We
 H
   KAMRUP INDUSTRIAL GASES LTD. v. UNION OF INDIA                                 351
             [JAGDISH SINGH KHEHAR, CJI]

therefore, hereby set aside the finding recorded by the High Court, to            A
the effect, that the documents sought for by the buyer- Diesel Locomotive
Works, were neither produced before the Arbitrator, nor provided to the
respondent.
       9. The next question, that arises for consideration is, whether the
appellant was entitled to payment on account of short lifting of gases by         B
the Diesel Locomotive Works. In this behalf, it has already been noticed
hereinabove, that the Diesel Locomotive Works, would lift a minimum
of 12,900 cubic meters of Oxygen gas, and a minimum of 2,500 cubic
meters of Acetylene gas, per month. And whether or not they lifted the
minimum quantity, the appellant herein - Kamrup Industrial Gases Ltd.,
would be entitled to payment for the same. Be that as it may, it is               C
imperative to determine, before the appellant can be held to be entitled
to claim the right of such payment, that the appellant - Karruup Industrial
Gases Ltd., had actually produced the gases in terms of the stated
minimum quantum, and further, the appellant was not able to sell the
shortfall, in the open market. The question of payment to the appellant           D
would arise only if, there was a subsisting shortfall, after the steps referred
to above were followed. This could be done by adding the amount of
gases lifted by the Diesel Locomotive Works, and the amount of gases
sold by the appellant in the open market. Pay111ent for the shortfall
would emerge, "only" if the shortfall of gases thus established, were
                                                                                  E
shown to have been blown off, as has been claimed by the appellant
before the Arbitrator, and before the High Court.
       10. During the course of hearing, learned counsel for the appellant
invited this Court's attention to the following observations, recorded in
the impugned order, wherein, the High Court observed as under:
                                                                                  F
       "The learned Arbitrator in the l 901h Sitting appears to have framed
       the following amongst other issues.
       "Did the claimant blow off the gases on DLW's account as alleged
       in their statement of facts?
       Surprisingly there is no such case made out by the Supplier in its         G
       Statement of Facts. Mr. Dasgupta, learned Advocate appearing
       for the Supplier was given time to find out the necessary pleading.
       He candidly confessed that no such pleading is there in the
       Statement of Facts."
                                                                                  H
352            SUPREME COURT REPORTS                         [2017] 3 S.C.R.


A          11. The above factual finding of the High Court, has also been
   assailed by the appellant. We may notice, that it was also the submission
   of learned counsel for the Diesel Locomotive Works, that based on the
   agreement executed between the parties, the appellant had to inform
   the Diesel Locomotive Works, before Kammp industrial Gases Ltd.,
 B exercised the choice of emptying its cylinders (by blowing off the gases).
   ln this behalf, it was the submission ofleamed counsel for the respondent-
   Diesel Locomotive Works, that no such intimation was ever extended to
   the Diesel Locomotive Works, and as such, no remuneration could be
   claimed by the appellant, for the gases allegedly blown off (to empty its
   cylinders).
 c          12. Insofar as the instant aspect of the matter (referred to in the
      preceding paragraph), is concerned, learned counsel for the appellant
      pointedly invited our attention to the following observations recorded by
      the Arbitrator (in the award dated 18.4.2004), wherein the evidence
      produced by the appellant was dealt with, as under:
 D          "The evidence adduced by the claimant on this topic is the ev :dence
            of their witness, A.N. Jha (Os.195 to 225) wherein the said A.N.
            Jha has proved that the claimant had given intimation to the
            respondent about the balance guantitv of gases that remained with
            the claimant unrealized and called upon the respondent to take
 E          supply of the same. otherwise, the claimant would blow off the
            said gases. The said statements are tendered herein as
            Exts.LLLLLLL, MMMMMMM and NNNNNNN. The saidA.N.
            Jha was cross-examined by the respondent's Counsel, but his
            evidence on this topic has remained unshaken. Reference is made
            to Qs. 1044 to 1047 and Qs. 1370 to 1411 in cross-examination,
 F          put to the said A.N. Jha. The said A.N. Jha has proved that the
            said Blown off statements had been delivered by him personally
            to the responent's employees at the General Manager's Office.
            The saidA.N. Jhahasalso deposed that the people at the General
            Manager's Office of the respondent refused to acknowledge
 G          receipt of the said statements on the copies of the Statements
            produced by the claimant and the copies of the said Statements
            were kept in the office of the claimant which they have produced
             in this Reference and which have been exhibited herein as
             mentioned before. The claimant has also produced in this
             Reference their Plant Reports and proved the same through their
 H
   KAMRUP INDUSTRIAL GASES LTD. v. UNION OF INDIA                            353
             [JAGDISH SINGH KHEHAR, CJI]

      witness. A.N. Jha (Qs. 244 to 265 in examination-in-chief). The        A
      Plant Reports were exhibited in these proceedings as Exhibit
      PPPPPPP series. The said A.N. Jha has deposed that the said
      Plant Reports were prepared by the Foreman on duty of the
      respondent on the basis of the production and sale of Oxygen and
      D.A. Gases during the relevant periods. The said Plant Reports         B
      were prepared under his supervision. The Plant Reports have
      entries regarding production, available gases lifted by DLW, Sales
      to other customers, Blown Off Statement and Closing Stock of
      the Claimant-Company. The Plant Reports are internal documents
      of the claimant, produced and proved by A.N. Jha in these
      proceedings. The other documents on which the claimant relies          C
      with regard to their case of blowing off of the gases are various
      bills submitted by the claimant in respect of the gases, both lifted
      and unlifted quantitites, made on the respondent. The claimant's
      Counsel has contended that though these bills were duly served
      on the respondent in accordance with Clause 7 ~f the Agreement,        D
      no objections were raised regarding the accuracy and/or contents
      of the said bills."
                                                      (emphasis is ours)
       13. Having perused the documents furnished by the appellant; at
the asking of the Diesel Locomotive Works, and _having perused the E
findings recorded with reference to the statement made by Shri A.N.
Jha, before the Arbitrator (extracted above), we are satisfied, that on
each occasion, before the shortfall of the gases were blown off, the
appellant duly informed the Diesel Locomotive Works, and in that view
of the matter, it is not possible forus to concur with the findings recorded .
by the High Court, that due intimation was notfurnished by the appellant F .
- Kamrup Industrial Gases Ltd., to the respondent - Diesel Locomotive
Works, before carrying on the exercise of emptying their cylinders, by·
blowing off the unlifted gases. It is also relevant in this behalf to make
a reference to the determination recorded by the Arbitrator, again based
on the statement of the aforesaid Shri A.N. Jha, that on different occasion, G
relevant bills were raised by the appellant - Kamrup Industrial Gases
Ltd., indicating payments claimable by the appellant. The bills raised
also denoted the amounts deducted on account of the sale proceeds of
the gases which the appellant could sell in the open market. According
to ShriA.N. Jha, all the bills were duly furnished to the Diesel Locomotive
                                                                             H
354            SUPREME COURT REPORTS                          [2017] 3 S.C.R.


A     Works. Details in this behalf are extracted below:
            "The claimant had called one A.N. Jha (full name Amar Nath
            Jha) as witness. Jha was the Office Superintendent of the
            Claimant-Company in 1971 and was appointed as the Assistant
            Manager in 1972 and was posted at the claimant's factory at
B           Varanasi during the relevant time. Jha had deposed that all the
            relevant bills with covering letters from the claimant were served
            on the respondent at the F.A. & C.0. Department of DLW at
            Varanasi by him personally and the receipt of the said bills were
            acknowledged by various officers of the said F.A. & C.O.
            Department of the respondent on the copy of the said bills Cvide
 c          Qs. 32 to 75 in Examination-in-chief). The evidence of Jha in this
            respect had not been shaken in cross-examination by the learned
            Counsel for the respondent. With respect to bills for uplifted
            quantity of gas, the respondent's case is that they made part
            payments for the gas supplies at the contract rate but withheld
 D          payment of escalation charges relating to rise in the price of
            Carbide mentioned in the said bills. Receipt of the said bills was
            not denied by the respondent. In respect of bills for the price of
            unup!ifted quantities of gas, the respondent's Counsel put Qs.1470
             to 1497 to the said Jha in cross-examination. Jha maintained that
             he personally served the said bills at the Office of the F.A. &
 E           C.O. of the respondent and obtained acknowledgements by the
             people working at F.A. & C.O. Department of the respondent of
             the receipt of the said bills on the copies of the said bills. which
             are tendered in evidence in these proceedings.
               The respondents on their part called one M. Singh as their only
 F           witness. The said M. Singh was the Senior Clerk working in the
             Stores Department of the respondent at the relevant time. He did
             not belong to the F.A. & C.O. Department of the respondent and
             had no knowledge of affairs of the said F.A. & C.0. Department.
             No one from the said F.A. & C.O. Department or the General
 G           ,Manager's Office has been called by the respondent to contradict
             the deposition of Jha. Further, the respondent did not produce
             Receipt Register from the F.A. & C.0. Department to controvert
             the evidence of Jha although the respondent's witness, the said
             M. Singh, deposed that the respondent maintained Receipt
             Registers at the relevant time. The respondent has adduced no
 H
   KAMRUP INDUSTRIAL GASES LTD. v. UNION OF INDIA                               355
             [JAGDISH SINGH KHEHAR, CJI]

      evidence to rebut the testimony of Jha that the bills had been            A
      served on the respondent. I accept the evidence of Jha on this
      point."
                                                       (emphasis is ours)
      Interestingly, there was no rebuttal to the assertions made by Shri
A.N. Jha, before the learned Arbitrator.                                        B
       14. For the reasons recorded above, we are satisfied, that the
impugned order passed by the High Court deserves to be set aside. The
same is accordingly set aside. We hereby affirm the determination
recorded by the Arbitrator in his award, dated 18.4.2004. The civil appeal
is allowed, in the above terms.                                                 C
       15. The list of dates reveals, that on 1. 9.2006 the Calcutta High
Court decreed the award dated 18.4.2004 (in Award Case No. 12/2004).
The said factual position is not disputed in the counter affidavit filed on
behalf of the respondent. We therefore accept that the arbitral award
on 1.9.2006 was decreed. In consonance with Section 29 of the                   D
Arbitration Act, 1940, we hereby award to the appellant post decretal
interest at the rate of 9%, on the awarded amount, with effect from
1.9.2006.
        Allowed, in the above terms.
                                                                                E

Divya Pandey                                                  Appeal allowed.