At the outset, it may be mentioned that the objection to
the maintainability of the appeal on account of non-payment/
deposit of the admitted liability to the extent of Rs.3.35 Crores,
cannot be accepted. Rule 1(3) of Order XLI of C.P.C. only says
that where the appeal is against the decree for payment of money,
the appellant shall, within such time as the Appellate Court may
allow, deposit the amount disputed in the appeal or furnish such
security in respect thereof as the Court may think fit. It is difficult
to understand as to how on the basis of this provision, it can be
inferred that unless and until the appellants deposit the amount,
which may, in a given case, be admitted or undisputed, the appeal
cannot be entertained. In the case of Kayamuddin
Shamsudduin Khan Vs. State Bank of India, reported in
(1998)8 SCC 676, while considering the provisions of Order XLI,
Rule 1(3) of C.P.C.(as per the Bombay amendment and Rule 5(5)),
it has been held that non-compliance with the direction given
under Rule 1(3) to deposit the amount, cannot result into
dismissal of the appeal. It is held that it can only result into
dismissal of an application for stay of the execution. In the
present case, there is no direction to deposit any such amount.
Even where there is such a direction which if not complied, will
not result into dismissal of the appeal as such. In view of this, the
objection raised to the maintainability of the appeal has to be
refuted.
IN THE HIGH COURT OF BOMBAY AT GOA
APPEAL UNDER ARBITRATION ACT NO.1 OF 2015
M/S. TRIMURTI EXPORTS,
V/s
M/S. MODELAMA EXPORTS LIMITED
CORAM :- C. V. BHADANG, J.
Pronounced on : 7thAugust, 2015
Citation:2016(4) ALLMR216
Admit. Learned Counsel for the respondent waives
service. Heard finally with consent of the learned Counsel for the
parties.
2. By this appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (the Act, for short), the appellants (original
respondents before the Arbitrator) are challenging the judgment
and order dated 24/09/2014 passed by the Principal District and
Sessions Judge, Panaji, by which, the application under Section 34
of the Act, filed by the appellants, has been dismissed, confirming
the award passed by the Arbitrator on 18/04/2013.
3. The brief facts, necessary for the disposal of the
appeal, may be stated thus :
M/s. Madelama Exports Limited, (claimant before the
Arbitrator), is a Company incorporated under the Companies Act,
engaged in the business of manufacturing and export of garments.
The appellant no.1, M/s. Trimurti Exports, ( respondent no.1
before the Arbitrator), is a partnership firm, of which the appellant
nos.2 to 4 are the partners. There was a mining concession of Iron
ore and Manganese ore known as Aili Vagurbem Mines, situated at
Sancordem, Sanguem Taluka of South Goa, admeasuring 100
Hectares (Concession Property 1/1937) granted by erstwhile
Portuguese Government. The appellants were holding rights in
respect of the said mining concession/ lease. The respondent and
the appellants entered into an agreement dated 17/07/2009,
wherein the respondent had agreed to advance an amount of Rs.9
Crores to the appellants towards purchase of 3 Lakhs Metric
Tones of Iron ore from the said mining lease as the sole and
exclusive buyer. The appellants had agreed to sell the Iron ore on
the terms and conditions as contained in the said agreement. The
said agreement which contained an arbitration clause, provides
that the appellants shall repay the amount of Rs.9 Crores in six
instalments of Rs.1.5 Crores each. In addition to this, the
appellants had agreed to pay an amount at the rate of 4 $ per
Metric Tone to the respondent by way of interest/ profit from the
sale of the Iron ore. The appellants had also agreed to arrange
for the overseas buyers, securing their irrevocable and
unconditional letter of credit in favour of the respondent. By the
said agreement, the appellants professed to have exclusive rights
over the said mines in view of the agreement entered into between
the appellants and the mine owners/ concessionaires. The Iron ore
was to be exported in six shipments or more. This agreement
was to be performed within a period of 10 months or till the
amount of 9 crores along with the amount at the rate of 4 $ per
Metric Tone of Iron ore was paid to the respondent. Indisputably,
the respondent had paid an amount of Rs 1 Crore by way of an
advance to the appellants and the appellants had passed four
post dated cheques of Rs.1 Crore each in favour of the respondent
as a security. The remaining amount of Rs. 8 Crores was to be
advanced by the respondent on obtaining a letter of credit of the
overseas buyers.
4. The parties entered into a supplementary agreement
on 01/09/2009, whereby the appellants had acknowledged the
receipt of the remaining amount of Rs.8 Crores. The appellants,
by way of security, issued 32 post dated cheques of Rs. 1 Crore
each to the respondent as an additional security.
5. It appears that on 29/05/2010, the parties entered into
a third agreement styled as additional agreement. The recitals of
the said agreement would show that the appellants had
acknowledged that it has neither been able to sell the Iron ore to
the overseas buyer nor has been able to repay fully the amount
due and payable to the respondent under the agreement dated
17/07/2009. It also acknowledges that an amount of Rs.14.76
Crores (comprising of Rs. 9 Crores towards the principal sum and
remaining towards interest/ profit) was due and payable to the
respondent. The agreement also recites that the appellants have
paid and the respondent had received an amount of Rs.2.50 Crores
out of Rs. 14.76 Crores, leaving a balance of Rs.12.26 Crores
payable to the respondent as on 29/05/2010. It appears that by
the said additional agreement, the parties had kept two options
open namely either to perform the obligations (to sell Iron ore to
overseas buyers) under the sale agreement and the supplementary
agreement or to pay an amount of Rs.12.26 Crores on or before
31/12/2010 along with interest at the rate of 36 % p.a. with effect
from 01/06/2010. It appears that by the additional agreement, the
parties had ratified and reaffirmed their commitments made in the
sale agreement and in the supplementary agreement dated
17/07/2009 and 01/09/2009 respectively. By the additional
agreement, the appellants had also furnished a security of
property known as Acamol near Cuncolim Industrial Estate, village
Ambaulim of Quepem Taluka. It, however, appears that in spite of
the execution of additional agreement, the appellants were not
able to perform either of the commitments. Hence, the
respondent issued a notice on 10/03/2012 to the appellants,
intimating that the cheques furnished by way of security, have
been dishonoured. By the said notice, the appellants were called
upon to pay a sum of Rs.19.71 Crores as on March 9, 2012 with
interest at the rate of 36 % p.a. The appellants issued a reply on
March 22, 2012, claiming that a sum of Rs.5.65 Crores has already
been repaid to the respondent. The appellants also disputed the
rate of interest, being illegal. As the parties were unable to
resolve the dispute, the matter was referred to the sole arbitrator.
The respondent filed a statement of claim in which, a claim of
Rs.21,01,67,539/- along with interest @ 3 % per month was made,
along with Rs. 35 Lakh, being legal expenses and costs of
litigation.
6. The appellants filed their reply, opposing the claim.
7. On the basis of the rival pleadings, the learned
Arbitrator framed the following issues :
“(a) Whether the Agreements dated 17/9/2009 &
1/9/2009 are void as alleged by the respondent in its
reply ?
(b) Whether the agreement dated 29/5/2010 is not
enforceable in eyes of law as alleged by the
respondent in its reply ?
(c) Whether the relief prayed in the Statement of
Claim cannot be granted in view of clause 17 of the
agreement dated 17/7/2009 as alleged by the
respondent ?
(d) Whether the claimant is entitled to recover the
amount as claimed ?
(e) Whether the Claimant is entitled to recover the
cost of legal proceedings as prayed ?”
8. Thereafter, the Director of the respondent filed an
affidavit in lieu of Chief-Examination. It is, at this stage, that on
17/10/2012, the respondent filed an application, with a prayer to
pass an award based on the admissions and acknowledgment
made by the appellants in the following documents, which were
not disputed :
(a) Sale Agreement, Supplementary Agreement and
Additional Agreement.
(b) Reply of the appellants to the application of the
respondent under Section 9 of the Act, being CMA
No.60/2012 before the learned District Judge, Goa.
(c) Petition filed by the appellants before the Delhi High
Court under Section 482 of the Code of Criminal Procedure,
for quashing of the complaint under Section 138 of the N. I.
Act, 1881.
9. The appellants filed a reply, opposing the application.
10. The learned Arbitrator, on hearing the parties, passed
an award on 18/04/2013, with an addendum to the award dated
18/04/2013. The learned Arbitrator held that the respondent was
entitled to Rs.14.76 Crores. The learned Arbitrator, however,
refused to award interest at the rate of 36 % p.a., finding that the
rate was in the nature of threat in terrorem and thus reduced the
interest to 8 % p.a. with effect from 31/12/2010 until realisation.
Feeling aggrieved, the appellants challenged the award in an
application under Section 34 of the Act, in Arbitration Petition
No.10/2013. The appellants filed Arbitration Petition No.9/2013,
taking exception to the grant of interest at the rate of 8 % p.a.,
claiming that it should have been awarded at the rate of 36 % p.a.
as agreed. The learned District Judge has dismissed both these
applications. Feeling aggrieved, the original respondents are
before this Court. The respondent has not persisted further, in
claiming interest at the rate of 36 % p.a., as they appear to be
content with the grant of interest at the rate of 8 % p.a..
11. I have heard Shri Sardessai, the learned Senior
Counsel appearing for the appellants and Shri Wadhwa, the
learned Counsel appearing for the respondent (original claimant).
With the assistance of the learned Counsel for the parties, I have
perused the record.
12. It is submitted by Shri Sardessai, the learned Senior
Counsel for the appellants that the additional agreement cannot
be said to be a standalone agreement. It is submitted that the
additional agreement has to be read along with the sale
agreement and the supplementary agreement. The learned Senior
Counsel has referred to the contents of the additional agreement,
in order to submit that it makes profuse reference to the sale
agreement as well as the supplementary agreement and thus, the
additional agreement cannot be read in isolation. It is submitted
that the mine is situated in the midst of a reserved/ protected
forest and required permissions from forest/ environmental
authorities. The parties had no reason to believe or even to
suspect that a separate permission would be required for using
the forest road for carrying the Iron ore from the mine. It is
submitted that the parties were all along under a belief that such a
permission to use the forest road is implicit in the permission to
conduct the mining operations. He submitted that thus, both the
parties to the agreement were labouring under a common mistake
of fact as to the necessity of the permission to use the forest road.
It is submitted that on account of the absence of such a
permission, the contract became unenforceable and not capable of
being performed. The learned Senior Counsel has then placed
reliance on clause 17 of the sale agreement, which incorporates a
term in the nature of Force Majeure, in which the parties had
agreed that if the obligation becomes unenforceable on account of
Force Majeure or the act of God/ natural calamity, etc., the
aggrieved party shall have no claims whatsoever against the other
party for breach of the agreement. It is submitted that the
appellants were unable to perform the obligation under the
agreement regarding sale of Iron ore, on account of the reasons
beyond their own control and thus, clause 17 stood attracted. It is
submitted that the finding by the learned District Judge (in para
118) to the effect that the additional agreement being silent about
Force Majeure clause, it was the intention of the parties not to
enforce clause no.17 of the original agreement, is clearly
misconceived, in as much as, the additional agreement has to be
read along with the earlier two agreements. It is submitted that
thus, both the Arbitrator as well as the learned District Judge fell
into error while appreciating the terms of the agreement. It is
submitted that the Force Majeure clause, would come into play
and no liability would arise against the appellants.
13. It is next submitted that the Hon'ble Supreme Court
had appointed a committee under the Chairmanship of Justice M.
B. Shah (better known as Shah Commission) with the following
terms of reference :
“2. The terms of reference of the Commission shall be-
(i) to inquire into and determine the nature and extent
of mining and trade and transportation, done illegally
or without lawful authority, of iron ore and manganese
ore, and the losses therefrom; and to identify, as far as
possible, the persons, firms, companies and others
that are engaged in such mining, trade and
transportation of iron ore and manganese ore, done
illegally or without lawful authority;
(ii) to inquire into and determine the extent to which
the management, regulatory and monitoring systems
have failed to deter, prevent, detect and punish
offences relating to mining, storage, transportation,
trade and export of such ore, done illegally or without
lawful authority, and the persons responsible for the
same;
(iii) to inquire into the tampering of official records,
including records relating to land and boundaries, to
facilitate illegal mining and identify, as far as possible,
the persons responsible for such tampering; and
(iv) to inquire into the overall impact of such mining,
trade transportation and export done illegally or
without lawful authority, in terms of destruction of
forest wealth, damage to the environment, prejudice
to the livelihood and other rights of tribal people,
forest dwellers and other persons in the mined areas,
and the financial losses caused to the Central and
State Governments.””
14. It is submitted that the Commission had accordingly
submitted its interim report on 15/03/2012. Shah Commission,
inter alia, had recommended the prohibition of all mining
activities after 2007. The report was submitted to the Hon'ble
Supreme Court. In the case of Goa Foundation Vs. Union of
India, reported in (2014)6 SCC 590, the Hon'ble Apex Court had
held in para 87 as under :
“87. In the result, we declare that:
87.1 The deemed mining leases of the lessees in Goa
expired on 22.11.1987 and the maximum of 20 years
renewal period of the deemed mining leases in Goa
expired on 22.11.2007 and consequently mining by
the lessees after 22.11.2007 was illegal and hence
the impugned order dated 10.09.2012 of Government
of Goa and the impugned order dated 14.09.2012 of
the MoEF, Government of India are not liable to be
quashed.”
15. On the basis of the judgment in the case of Goa
Foundation (supra), it is submitted that all the mining activities
after 2007 became illegal. Thus, the agreement entered into by
the parties in the year 2009 would be void. The learned Senior
Counsel would submit that in such circumstances, no award could
have been passed on the basis of any such agreement as the very
purpose/ object of the agreement was rendered illegal. The
learned Senior Counsel fairly submitted that in terms of Section 65
of the Contract Act, 1872, the appellants would be liable to
restore the advantage, which the appellants have received. It is
submitted that the appellants have admittedly received Rs.9
Crores out of which, an amount of Rs.5.65 Crores has been repaid.
It is submitted that thus, the appellants would be liable to pay an
amount of Rs.3.35 Crores along with interest at the rate of 8 %
p.a. from the commencement of the Arbitration Proceedings. It is
submitted that the obligation to restore advantage under a void
agreement would only extend to the refund of the balance amount
of the original consideration and cannot extend to the claim of
profits/ interest. It is submitted that the provisions of Section 65
envisage two situations, which are disjunctive in nature. It is
submitted that the person is either liable to restore the advantage
or to make compensation for it. It is submitted that the later part
of Section 65 to make compensation can only come into play, when
the advantage as such cannot be ascertained or restored. The
learned Senior Counsel was at pains to point out that Section 65
employs the word 'or', which would show the liability to restore
advantage or to make compensation is disjunctive. The learned
Senior Counsel would submit that even so far as the interest is
concerned, the same can be granted pendente lite i.e. from the
date of initiation of the Arbitration Proceedings. Reliance in this
regard is placed on the decision of the Hon'ble Supreme Court in
the case of The Life Insurance Corporation of India Vs.
Rajmata Saheb Chowhanji and others, reported in (1978)3
SCC 244 and a decision of the Allahabad High Court in Mt. Rani
Kunwar Vs. Mahbub Baksh, reported in AIR 1930 All 252. He,
therefore submitted that the impugned award to the extent it
directs payment of Rs.9.11 Crores along with interest from
31/12/2010 is illegal and deserves to be set aside.
16. On the contrary, it is submitted by Shri Wadhwa, the
learned Counsel for the respondent that the appeal would not be
maintainable in the absence of the appellants depositing the part
of the amount, which the appellants do not dispute. In other
words, it is submitted that unless and until the appellants deposit
the amount of Rs.3.35 Crores which they admit, the appeal cannot
be entertained.
17. It is next submitted that the Arbitration Act envisages
minimum supervisory role to the Court over the umpire chosen by
the parties consensually. It is submitted that under Section 28(3)
of the Act, the Arbitral Tribunal shall be bound by the contract.
Under Section 28(2), the Arbitral Tribunal shall decide ex aequo
et bono or as amiable compositeur only if the parties have
expressly authorised it to do so. In this case, there is no
agreement to show that the parties had authorised the Arbitrator
to decide as an amiable compositeur. It is submitted that the view
taken by the Arbitrator is a plausible view, which has been
confirmed by the learned District Judge. It is submitted that the
scope of interference available under Section 34 of the Act is
limited and would be further restricted in an appeal under Section
37 of the Act.
18. It is next submitted that this would be a case of
novation of the contract under Section 62 of the Contract Act in as
much as the parties had substituted the additional agreement in
the place of the earlier two agreements. It is submitted that thus,
the additional agreement would prevail. It is submitted that the
appellants have paid a further amount of Rs.3.15 Crores in terms
of the said additional agreement. Thus, the appellants having
acted in furtherance of the said additional agreement, cannot now
turn around and claim that the agreement is unenforceable or has
become void on account of any Force Majeure or the prohibition /
ban on mining. It is submitted that the decision in the case of Goa
Foundation (supra), came after the award was passed by the
Arbitrator. However, the ground based on the said decision, was
not raised before the District Judge. It is next submitted that this
was a case, in which the appellants had practised fraud and deceit
in as much as the appellants had no rights in respect of the mining
concession. The learned Counsel has referred to an agreement
between M/s. Elray Minerals, which is the Concessionaire and
M/s. Ambika Minerals, to submit that the mining rights were with
M/s. Ambika Minerals. He, therefore, submitted that the
impugned judgment, which is based on the admission of the
appellants of the liability to pay Rs.12.26 Crores along with
interest, cannot be faulted on any count.
19. At the outset, it may be mentioned that the objection to
the maintainability of the appeal on account of non-payment/
deposit of the admitted liability to the extent of Rs.3.35 Crores,
cannot be accepted. Rule 1(3) of Order XLI of C.P.C. only says
that where the appeal is against the decree for payment of money,
the appellant shall, within such time as the Appellate Court may
allow, deposit the amount disputed in the appeal or furnish such
security in respect thereof as the Court may think fit. It is difficult
to understand as to how on the basis of this provision, it can be
inferred that unless and until the appellants deposit the amount,
which may, in a given case, be admitted or undisputed, the appeal
cannot be entertained. In the case of Kayamuddin
Shamsudduin Khan Vs. State Bank of India, reported in
(1998)8 SCC 676, while considering the provisions of Order XLI,
Rule 1(3) of C.P.C.(as per the Bombay amendment and Rule 5(5)),
it has been held that non-compliance with the direction given
under Rule 1(3) to deposit the amount, cannot result into
dismissal of the appeal. It is held that it can only result into
dismissal of an application for stay of the execution. In the
present case, there is no direction to deposit any such amount.
Even where there is such a direction which if not complied, will
not result into dismissal of the appeal as such. In view of this, the
objection raised to the maintainability of the appeal has to be
refuted.
20. Coming to the merits, the execution of three
agreements is not in dispute. It is also not in dispute that the
respondent has paid an amount of Rs.9 Crores to the appellants
and as per the terms, the said amount was repayable in six
instalments along with an amount at the rate of 4 $ per Metric
Tone towards the interest/ profits. It is further undisputed that
the concerned mine, in respect of which, the appellants were
holding the mining rights, is situated in the midst of a forest and
requires permission/ clearance from the Forest Authorities. It is
further undisputed that the Forest Authorities had insisted for
permission to use the road, which is passing through forest, for
carrying the Iron ore. It is further an admitted position that no
mining activity was carried out and eventually that part of the
contract, which envisages sell of 3 Lakhs Metric Tones of Iron or
to overseas buyers never materialised. The parties had entered
into the additional agreement on 29/05/2010, in which the parties
had kept both the options open, namely a situation, where the
appellants had agreed to perform their part under the sale
agreement and the supplementary agreement and/ or to pay an
amount of Rs.12.26 Crores to the respondents on or before
31/12/2010. It is true that the additional agreement refers to the
sale agreement and the supplementary agreement and clause (g)
thereof also says that none of the rights of the respondent under
the sale agreement and the supplementary agreement are in any
way affected. However, it has to be appreciated in the context of
the overall recitals in the additional agreement, which would show
that the parties had kept either of the options open. As stated
earlier, the reason for inability to perform their part of the
contract by the appellants, is that none of the parties visualised
that a separate permission from the Forest Department for use of
the road to carry the Iron ore would be required. The parties had
kept the option open, possibly with the hope that the permission
may come through. The intention appears to be loud and clear. In
the event the parties are able to abide by the original contract, the
same would be open. Otherwise, the appellants would pay the
amount of Rs.12.26 Crores, which comprises of the original
consideration of Rs.9 Crores and an amount towards profit/
interest.
21. The submissions on behalf of the appellants before the
Arbitrator were essentially based on clause 17 of the agreement
dated 17/07/2009 which reads thus :
“17. In the event both or either of the parties is
unable to fulfill the terms and conditions of this
Agreement due to force majeure or acts of God/
natural calamity or by reason of any Civil Commotion,
riots, local agitations, combination of workmen, war
or by reason of strikes or lockouts affecting the
establishments of the SELLER or his Contractor(s) or
due to non-availability or restrictions of supplies of
fuels, oils, lubricants, explosives and such other
supplies and materials, insubordination and usurped
power or due to any statutory or Government
Restrictions, Court Orders including the results of
the Special Leave Petition filed before the Supreme
Court of India against the judgment and order dated
20/06/1997 passed in writ petition No.171 of 1990 by
the High Court of Bombay, Panaji Bench, any lawful/
legal claim made by any person including by a holder
or surface rights, or on account of any fault of the
SELLER arising on account of any act of omission or
commission on the part of the SELLER, the aggrieved
party shall have no claim whatsoever against the
other party for breach of this Agreement and if
through force majeure or for any reasons herein
stated in this clause, the fulfillment by either party of
any or all the terms and conditions of this Agreement
be delayed, then the terms of this Agreement shall
be automatically extended to the extent of such
delayed period subject to the BUYER having the right
to forthwith demand back and recover the amount
remaining unpaid. It is specifically understood that
under these circumstances this Agreement will not
come to an end but however, subject to the Right of
the BUYER, the reciprocal obligations and acts
hereunder shall remain suspended during the period
of such condition of force majeur including the
conditions listed above, continue to exist.”
22. It is submitted that clause 17 has to be read into the
additional agreement, as the additional agreement cannot be said
to be a standalone agreement. I would tend to disagree. In this
regard, the learned Arbitrator in paragraph 25(a) of the award has
held thus :
“25(a). Though, the Additional Agreement may
not be a standalone agreement, but it will prevail to
the extent it makes a departure from the earlier
agreements and sets out a date for either payment of
the amount or accomplishing the task of extraction of
the iron ore, sale thereof to the Claimant, and
thereafter its export to the foreign buyer after
arranging a Letter of Credit in favour of the Claimant.
Either of the obligations were to be performed by
December, 31, 2010. Since the later part of the
obligation was not fulfilled by the Respondents,
therefore they were bound to pay the outstanding
amount that admittedly remained due and remained
unpaid by the aforesaid date. As already pointed out
according to the Additional Agreement a sum of
Rs.12.26 Crore was outstanding from the
Respondents and admitted to be due from them to the
claimant. Subsequently, a sum of Rs.3.56 Crore was
paid by the Respondents to the Claimant, leaving a
balance of Rs.8.70 Crore as unpaid.”
23. The learned Arbitrator has also negatived the
contention on behalf of the appellants that this was a case of
common mistake of fact as to the permission of the Forest
Department for using the forest road. It has been found in
paragraph 23 of the award that the appellants before entering into
the additional agreement must have known that the road, namely
'Durgini Sangod road' cannot be used for transportation, as it
passes through forest/ Government land. The learned Arbitrator
has referred to a letter dated 08/03/2010 of Tukaram Prabhu, a
Constituted Attorney of M/s. Elray Minerals and Company, the
concessionaire and partner of M/s. Ambika Minerals to the Deputy
Conservator of Forests, North Goa, Forest Division in which, a
permission was sought to transport the Iron ore from the road,
claiming that it was away from human settlement and could be
used, without causing any disturbance to anybody. Thus, in my
considered view, the arguments based on any common mistake of
fact, cannot be accepted. It has rightly been held by the learned
Arbitrator that even though the additional agreement may not be a
standalone agreement, it will prevail to the extent it makes
departure from the earlier agreements and sets out a date for
either payment of the amount or performing the contract as
agreed, namely extraction, export and sale of the Iron ore to
overseas buyers. From the perusal of the award of the Arbitrator
and the judgment of the learned District Judge, it does not appear
that the provisions of Section 65 of the Contract Act were pressed
into service. In my considered view, the same cannot be allowed
at this stage. Secondly, because the additional agreement
envisages both the situations, namely the sale agreement and the
supplementary agreement being performed as per the terms
agreed or payment of an amount of Rs.12.26 Crores and interest.
In this regard, it may be mentioned that the learned Arbitrator has
referred to a tripartite agreement dated 27/10/2009 between M/s.
Elray Minerals, M/s. Ambika Minerals and the appellants, in which
the appellants had claimed that they have mining rights. Although
this agreement was relied upon to counter the case of fraud and
deceit set up by the appellants, the fact remains that the
constituted attorney of M/s. Elray Minerals and M/s. Ambika
Minerals, with whom the respondent has tripartite agreement of
mining, had sought permission from the Forest Department to use
the road for carrying of the Iron ore. At any rate, when the
additional agreement was entered into, it cannot be said that the
parties were labouring under any common mistake of fact. As
noticed earlier, the appellants are not disputing the liability to pay
an amount of Rs.3.35 Crores as admittedly, they have repaid
Rs.5.65 Crores out of Rs.9 Crores advanced. It is submitted on the
basis of Section 65 of the Contract Act that the contract being
void, the appellants would only be liable to restore the benefits
and not to any interest or profit. Once it is held that there was no
common mistake of fact, which can be inferred when the
additional agreement came to be executed, the provisions of
Section 65 would not be attracted. Thus, reliance placed on the
decision of the The Life Insurance Corporation of India and
Mt. Rani Kunwar (supra), would not come to the aid of the
appellants.
24. This takes me to the ground based on the decision of
the Hon'ble Supreme Court in the case of Goa Foundation
(supra). At the outset, it needs to be mentioned that this ground is
for the first time raised before this Court. The decision of the
Hon'ble Supreme Court in the case of Goa Foundation (supra)
came on 21/04/2014 when the application under Section 34 was
pending before the learned District Judge. As noticed earlier, the
additional agreement envisages two options namely of
enforcement of the contract as originally agreed or payment of
Rs.12.26 Crores. The second part about agreement to pay
Rs.12.26 Crores with interest is clearly segregated even assuming
that the first part becomes unenforceable on account of the mining
ban. The Arbitrator has also noticed that the appellants have paid
an amount of Rs.3.15 Crores in pursuance of the additional
agreement and has thus, arrived at a figure of Rs.9.11 Crores,
which is due and payable. Thus, the view taken by the learned
Arbitrator appears to be a plausible view.
25. With the limited scope of interference available in an
appeal under Section 37 of the Act, I do not find that any case for
interference is made out. In the result, the appeal is hereby
dismissed, with no order as to costs.
C. V. BHADANG, J.
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the maintainability of the appeal on account of non-payment/
deposit of the admitted liability to the extent of Rs.3.35 Crores,
cannot be accepted. Rule 1(3) of Order XLI of C.P.C. only says
that where the appeal is against the decree for payment of money,
the appellant shall, within such time as the Appellate Court may
allow, deposit the amount disputed in the appeal or furnish such
security in respect thereof as the Court may think fit. It is difficult
to understand as to how on the basis of this provision, it can be
inferred that unless and until the appellants deposit the amount,
which may, in a given case, be admitted or undisputed, the appeal
cannot be entertained. In the case of Kayamuddin
Shamsudduin Khan Vs. State Bank of India, reported in
(1998)8 SCC 676, while considering the provisions of Order XLI,
Rule 1(3) of C.P.C.(as per the Bombay amendment and Rule 5(5)),
it has been held that non-compliance with the direction given
under Rule 1(3) to deposit the amount, cannot result into
dismissal of the appeal. It is held that it can only result into
dismissal of an application for stay of the execution. In the
present case, there is no direction to deposit any such amount.
Even where there is such a direction which if not complied, will
not result into dismissal of the appeal as such. In view of this, the
objection raised to the maintainability of the appeal has to be
refuted.
IN THE HIGH COURT OF BOMBAY AT GOA
APPEAL UNDER ARBITRATION ACT NO.1 OF 2015
M/S. TRIMURTI EXPORTS,
V/s
M/S. MODELAMA EXPORTS LIMITED
CORAM :- C. V. BHADANG, J.
Pronounced on : 7thAugust, 2015
Citation:2016(4) ALLMR216
Admit. Learned Counsel for the respondent waives
service. Heard finally with consent of the learned Counsel for the
parties.
2. By this appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (the Act, for short), the appellants (original
respondents before the Arbitrator) are challenging the judgment
and order dated 24/09/2014 passed by the Principal District and
Sessions Judge, Panaji, by which, the application under Section 34
of the Act, filed by the appellants, has been dismissed, confirming
the award passed by the Arbitrator on 18/04/2013.
3. The brief facts, necessary for the disposal of the
appeal, may be stated thus :
M/s. Madelama Exports Limited, (claimant before the
Arbitrator), is a Company incorporated under the Companies Act,
engaged in the business of manufacturing and export of garments.
The appellant no.1, M/s. Trimurti Exports, ( respondent no.1
before the Arbitrator), is a partnership firm, of which the appellant
nos.2 to 4 are the partners. There was a mining concession of Iron
ore and Manganese ore known as Aili Vagurbem Mines, situated at
Sancordem, Sanguem Taluka of South Goa, admeasuring 100
Hectares (Concession Property 1/1937) granted by erstwhile
Portuguese Government. The appellants were holding rights in
respect of the said mining concession/ lease. The respondent and
the appellants entered into an agreement dated 17/07/2009,
wherein the respondent had agreed to advance an amount of Rs.9
Crores to the appellants towards purchase of 3 Lakhs Metric
Tones of Iron ore from the said mining lease as the sole and
exclusive buyer. The appellants had agreed to sell the Iron ore on
the terms and conditions as contained in the said agreement. The
said agreement which contained an arbitration clause, provides
that the appellants shall repay the amount of Rs.9 Crores in six
instalments of Rs.1.5 Crores each. In addition to this, the
appellants had agreed to pay an amount at the rate of 4 $ per
Metric Tone to the respondent by way of interest/ profit from the
sale of the Iron ore. The appellants had also agreed to arrange
for the overseas buyers, securing their irrevocable and
unconditional letter of credit in favour of the respondent. By the
said agreement, the appellants professed to have exclusive rights
over the said mines in view of the agreement entered into between
the appellants and the mine owners/ concessionaires. The Iron ore
was to be exported in six shipments or more. This agreement
was to be performed within a period of 10 months or till the
amount of 9 crores along with the amount at the rate of 4 $ per
Metric Tone of Iron ore was paid to the respondent. Indisputably,
the respondent had paid an amount of Rs 1 Crore by way of an
advance to the appellants and the appellants had passed four
post dated cheques of Rs.1 Crore each in favour of the respondent
as a security. The remaining amount of Rs. 8 Crores was to be
advanced by the respondent on obtaining a letter of credit of the
overseas buyers.
4. The parties entered into a supplementary agreement
on 01/09/2009, whereby the appellants had acknowledged the
receipt of the remaining amount of Rs.8 Crores. The appellants,
by way of security, issued 32 post dated cheques of Rs. 1 Crore
each to the respondent as an additional security.
5. It appears that on 29/05/2010, the parties entered into
a third agreement styled as additional agreement. The recitals of
the said agreement would show that the appellants had
acknowledged that it has neither been able to sell the Iron ore to
the overseas buyer nor has been able to repay fully the amount
due and payable to the respondent under the agreement dated
17/07/2009. It also acknowledges that an amount of Rs.14.76
Crores (comprising of Rs. 9 Crores towards the principal sum and
remaining towards interest/ profit) was due and payable to the
respondent. The agreement also recites that the appellants have
paid and the respondent had received an amount of Rs.2.50 Crores
out of Rs. 14.76 Crores, leaving a balance of Rs.12.26 Crores
payable to the respondent as on 29/05/2010. It appears that by
the said additional agreement, the parties had kept two options
open namely either to perform the obligations (to sell Iron ore to
overseas buyers) under the sale agreement and the supplementary
agreement or to pay an amount of Rs.12.26 Crores on or before
31/12/2010 along with interest at the rate of 36 % p.a. with effect
from 01/06/2010. It appears that by the additional agreement, the
parties had ratified and reaffirmed their commitments made in the
sale agreement and in the supplementary agreement dated
17/07/2009 and 01/09/2009 respectively. By the additional
agreement, the appellants had also furnished a security of
property known as Acamol near Cuncolim Industrial Estate, village
Ambaulim of Quepem Taluka. It, however, appears that in spite of
the execution of additional agreement, the appellants were not
able to perform either of the commitments. Hence, the
respondent issued a notice on 10/03/2012 to the appellants,
intimating that the cheques furnished by way of security, have
been dishonoured. By the said notice, the appellants were called
upon to pay a sum of Rs.19.71 Crores as on March 9, 2012 with
interest at the rate of 36 % p.a. The appellants issued a reply on
March 22, 2012, claiming that a sum of Rs.5.65 Crores has already
been repaid to the respondent. The appellants also disputed the
rate of interest, being illegal. As the parties were unable to
resolve the dispute, the matter was referred to the sole arbitrator.
The respondent filed a statement of claim in which, a claim of
Rs.21,01,67,539/- along with interest @ 3 % per month was made,
along with Rs. 35 Lakh, being legal expenses and costs of
litigation.
6. The appellants filed their reply, opposing the claim.
7. On the basis of the rival pleadings, the learned
Arbitrator framed the following issues :
“(a) Whether the Agreements dated 17/9/2009 &
1/9/2009 are void as alleged by the respondent in its
reply ?
(b) Whether the agreement dated 29/5/2010 is not
enforceable in eyes of law as alleged by the
respondent in its reply ?
(c) Whether the relief prayed in the Statement of
Claim cannot be granted in view of clause 17 of the
agreement dated 17/7/2009 as alleged by the
respondent ?
(d) Whether the claimant is entitled to recover the
amount as claimed ?
(e) Whether the Claimant is entitled to recover the
cost of legal proceedings as prayed ?”
8. Thereafter, the Director of the respondent filed an
affidavit in lieu of Chief-Examination. It is, at this stage, that on
17/10/2012, the respondent filed an application, with a prayer to
pass an award based on the admissions and acknowledgment
made by the appellants in the following documents, which were
not disputed :
(a) Sale Agreement, Supplementary Agreement and
Additional Agreement.
(b) Reply of the appellants to the application of the
respondent under Section 9 of the Act, being CMA
No.60/2012 before the learned District Judge, Goa.
(c) Petition filed by the appellants before the Delhi High
Court under Section 482 of the Code of Criminal Procedure,
for quashing of the complaint under Section 138 of the N. I.
Act, 1881.
9. The appellants filed a reply, opposing the application.
10. The learned Arbitrator, on hearing the parties, passed
an award on 18/04/2013, with an addendum to the award dated
18/04/2013. The learned Arbitrator held that the respondent was
entitled to Rs.14.76 Crores. The learned Arbitrator, however,
refused to award interest at the rate of 36 % p.a., finding that the
rate was in the nature of threat in terrorem and thus reduced the
interest to 8 % p.a. with effect from 31/12/2010 until realisation.
Feeling aggrieved, the appellants challenged the award in an
application under Section 34 of the Act, in Arbitration Petition
No.10/2013. The appellants filed Arbitration Petition No.9/2013,
taking exception to the grant of interest at the rate of 8 % p.a.,
claiming that it should have been awarded at the rate of 36 % p.a.
as agreed. The learned District Judge has dismissed both these
applications. Feeling aggrieved, the original respondents are
before this Court. The respondent has not persisted further, in
claiming interest at the rate of 36 % p.a., as they appear to be
content with the grant of interest at the rate of 8 % p.a..
11. I have heard Shri Sardessai, the learned Senior
Counsel appearing for the appellants and Shri Wadhwa, the
learned Counsel appearing for the respondent (original claimant).
With the assistance of the learned Counsel for the parties, I have
perused the record.
12. It is submitted by Shri Sardessai, the learned Senior
Counsel for the appellants that the additional agreement cannot
be said to be a standalone agreement. It is submitted that the
additional agreement has to be read along with the sale
agreement and the supplementary agreement. The learned Senior
Counsel has referred to the contents of the additional agreement,
in order to submit that it makes profuse reference to the sale
agreement as well as the supplementary agreement and thus, the
additional agreement cannot be read in isolation. It is submitted
that the mine is situated in the midst of a reserved/ protected
forest and required permissions from forest/ environmental
authorities. The parties had no reason to believe or even to
suspect that a separate permission would be required for using
the forest road for carrying the Iron ore from the mine. It is
submitted that the parties were all along under a belief that such a
permission to use the forest road is implicit in the permission to
conduct the mining operations. He submitted that thus, both the
parties to the agreement were labouring under a common mistake
of fact as to the necessity of the permission to use the forest road.
It is submitted that on account of the absence of such a
permission, the contract became unenforceable and not capable of
being performed. The learned Senior Counsel has then placed
reliance on clause 17 of the sale agreement, which incorporates a
term in the nature of Force Majeure, in which the parties had
agreed that if the obligation becomes unenforceable on account of
Force Majeure or the act of God/ natural calamity, etc., the
aggrieved party shall have no claims whatsoever against the other
party for breach of the agreement. It is submitted that the
appellants were unable to perform the obligation under the
agreement regarding sale of Iron ore, on account of the reasons
beyond their own control and thus, clause 17 stood attracted. It is
submitted that the finding by the learned District Judge (in para
118) to the effect that the additional agreement being silent about
Force Majeure clause, it was the intention of the parties not to
enforce clause no.17 of the original agreement, is clearly
misconceived, in as much as, the additional agreement has to be
read along with the earlier two agreements. It is submitted that
thus, both the Arbitrator as well as the learned District Judge fell
into error while appreciating the terms of the agreement. It is
submitted that the Force Majeure clause, would come into play
and no liability would arise against the appellants.
13. It is next submitted that the Hon'ble Supreme Court
had appointed a committee under the Chairmanship of Justice M.
B. Shah (better known as Shah Commission) with the following
terms of reference :
“2. The terms of reference of the Commission shall be-
(i) to inquire into and determine the nature and extent
of mining and trade and transportation, done illegally
or without lawful authority, of iron ore and manganese
ore, and the losses therefrom; and to identify, as far as
possible, the persons, firms, companies and others
that are engaged in such mining, trade and
transportation of iron ore and manganese ore, done
illegally or without lawful authority;
(ii) to inquire into and determine the extent to which
the management, regulatory and monitoring systems
have failed to deter, prevent, detect and punish
offences relating to mining, storage, transportation,
trade and export of such ore, done illegally or without
lawful authority, and the persons responsible for the
same;
(iii) to inquire into the tampering of official records,
including records relating to land and boundaries, to
facilitate illegal mining and identify, as far as possible,
the persons responsible for such tampering; and
(iv) to inquire into the overall impact of such mining,
trade transportation and export done illegally or
without lawful authority, in terms of destruction of
forest wealth, damage to the environment, prejudice
to the livelihood and other rights of tribal people,
forest dwellers and other persons in the mined areas,
and the financial losses caused to the Central and
State Governments.””
14. It is submitted that the Commission had accordingly
submitted its interim report on 15/03/2012. Shah Commission,
inter alia, had recommended the prohibition of all mining
activities after 2007. The report was submitted to the Hon'ble
Supreme Court. In the case of Goa Foundation Vs. Union of
India, reported in (2014)6 SCC 590, the Hon'ble Apex Court had
held in para 87 as under :
“87. In the result, we declare that:
87.1 The deemed mining leases of the lessees in Goa
expired on 22.11.1987 and the maximum of 20 years
renewal period of the deemed mining leases in Goa
expired on 22.11.2007 and consequently mining by
the lessees after 22.11.2007 was illegal and hence
the impugned order dated 10.09.2012 of Government
of Goa and the impugned order dated 14.09.2012 of
the MoEF, Government of India are not liable to be
quashed.”
15. On the basis of the judgment in the case of Goa
Foundation (supra), it is submitted that all the mining activities
after 2007 became illegal. Thus, the agreement entered into by
the parties in the year 2009 would be void. The learned Senior
Counsel would submit that in such circumstances, no award could
have been passed on the basis of any such agreement as the very
purpose/ object of the agreement was rendered illegal. The
learned Senior Counsel fairly submitted that in terms of Section 65
of the Contract Act, 1872, the appellants would be liable to
restore the advantage, which the appellants have received. It is
submitted that the appellants have admittedly received Rs.9
Crores out of which, an amount of Rs.5.65 Crores has been repaid.
It is submitted that thus, the appellants would be liable to pay an
amount of Rs.3.35 Crores along with interest at the rate of 8 %
p.a. from the commencement of the Arbitration Proceedings. It is
submitted that the obligation to restore advantage under a void
agreement would only extend to the refund of the balance amount
of the original consideration and cannot extend to the claim of
profits/ interest. It is submitted that the provisions of Section 65
envisage two situations, which are disjunctive in nature. It is
submitted that the person is either liable to restore the advantage
or to make compensation for it. It is submitted that the later part
of Section 65 to make compensation can only come into play, when
the advantage as such cannot be ascertained or restored. The
learned Senior Counsel was at pains to point out that Section 65
employs the word 'or', which would show the liability to restore
advantage or to make compensation is disjunctive. The learned
Senior Counsel would submit that even so far as the interest is
concerned, the same can be granted pendente lite i.e. from the
date of initiation of the Arbitration Proceedings. Reliance in this
regard is placed on the decision of the Hon'ble Supreme Court in
the case of The Life Insurance Corporation of India Vs.
Rajmata Saheb Chowhanji and others, reported in (1978)3
SCC 244 and a decision of the Allahabad High Court in Mt. Rani
Kunwar Vs. Mahbub Baksh, reported in AIR 1930 All 252. He,
therefore submitted that the impugned award to the extent it
directs payment of Rs.9.11 Crores along with interest from
31/12/2010 is illegal and deserves to be set aside.
16. On the contrary, it is submitted by Shri Wadhwa, the
learned Counsel for the respondent that the appeal would not be
maintainable in the absence of the appellants depositing the part
of the amount, which the appellants do not dispute. In other
words, it is submitted that unless and until the appellants deposit
the amount of Rs.3.35 Crores which they admit, the appeal cannot
be entertained.
17. It is next submitted that the Arbitration Act envisages
minimum supervisory role to the Court over the umpire chosen by
the parties consensually. It is submitted that under Section 28(3)
of the Act, the Arbitral Tribunal shall be bound by the contract.
Under Section 28(2), the Arbitral Tribunal shall decide ex aequo
et bono or as amiable compositeur only if the parties have
expressly authorised it to do so. In this case, there is no
agreement to show that the parties had authorised the Arbitrator
to decide as an amiable compositeur. It is submitted that the view
taken by the Arbitrator is a plausible view, which has been
confirmed by the learned District Judge. It is submitted that the
scope of interference available under Section 34 of the Act is
limited and would be further restricted in an appeal under Section
37 of the Act.
18. It is next submitted that this would be a case of
novation of the contract under Section 62 of the Contract Act in as
much as the parties had substituted the additional agreement in
the place of the earlier two agreements. It is submitted that thus,
the additional agreement would prevail. It is submitted that the
appellants have paid a further amount of Rs.3.15 Crores in terms
of the said additional agreement. Thus, the appellants having
acted in furtherance of the said additional agreement, cannot now
turn around and claim that the agreement is unenforceable or has
become void on account of any Force Majeure or the prohibition /
ban on mining. It is submitted that the decision in the case of Goa
Foundation (supra), came after the award was passed by the
Arbitrator. However, the ground based on the said decision, was
not raised before the District Judge. It is next submitted that this
was a case, in which the appellants had practised fraud and deceit
in as much as the appellants had no rights in respect of the mining
concession. The learned Counsel has referred to an agreement
between M/s. Elray Minerals, which is the Concessionaire and
M/s. Ambika Minerals, to submit that the mining rights were with
M/s. Ambika Minerals. He, therefore, submitted that the
impugned judgment, which is based on the admission of the
appellants of the liability to pay Rs.12.26 Crores along with
interest, cannot be faulted on any count.
19. At the outset, it may be mentioned that the objection to
the maintainability of the appeal on account of non-payment/
deposit of the admitted liability to the extent of Rs.3.35 Crores,
cannot be accepted. Rule 1(3) of Order XLI of C.P.C. only says
that where the appeal is against the decree for payment of money,
the appellant shall, within such time as the Appellate Court may
allow, deposit the amount disputed in the appeal or furnish such
security in respect thereof as the Court may think fit. It is difficult
to understand as to how on the basis of this provision, it can be
inferred that unless and until the appellants deposit the amount,
which may, in a given case, be admitted or undisputed, the appeal
cannot be entertained. In the case of Kayamuddin
Shamsudduin Khan Vs. State Bank of India, reported in
(1998)8 SCC 676, while considering the provisions of Order XLI,
Rule 1(3) of C.P.C.(as per the Bombay amendment and Rule 5(5)),
it has been held that non-compliance with the direction given
under Rule 1(3) to deposit the amount, cannot result into
dismissal of the appeal. It is held that it can only result into
dismissal of an application for stay of the execution. In the
present case, there is no direction to deposit any such amount.
Even where there is such a direction which if not complied, will
not result into dismissal of the appeal as such. In view of this, the
objection raised to the maintainability of the appeal has to be
refuted.
20. Coming to the merits, the execution of three
agreements is not in dispute. It is also not in dispute that the
respondent has paid an amount of Rs.9 Crores to the appellants
and as per the terms, the said amount was repayable in six
instalments along with an amount at the rate of 4 $ per Metric
Tone towards the interest/ profits. It is further undisputed that
the concerned mine, in respect of which, the appellants were
holding the mining rights, is situated in the midst of a forest and
requires permission/ clearance from the Forest Authorities. It is
further undisputed that the Forest Authorities had insisted for
permission to use the road, which is passing through forest, for
carrying the Iron ore. It is further an admitted position that no
mining activity was carried out and eventually that part of the
contract, which envisages sell of 3 Lakhs Metric Tones of Iron or
to overseas buyers never materialised. The parties had entered
into the additional agreement on 29/05/2010, in which the parties
had kept both the options open, namely a situation, where the
appellants had agreed to perform their part under the sale
agreement and the supplementary agreement and/ or to pay an
amount of Rs.12.26 Crores to the respondents on or before
31/12/2010. It is true that the additional agreement refers to the
sale agreement and the supplementary agreement and clause (g)
thereof also says that none of the rights of the respondent under
the sale agreement and the supplementary agreement are in any
way affected. However, it has to be appreciated in the context of
the overall recitals in the additional agreement, which would show
that the parties had kept either of the options open. As stated
earlier, the reason for inability to perform their part of the
contract by the appellants, is that none of the parties visualised
that a separate permission from the Forest Department for use of
the road to carry the Iron ore would be required. The parties had
kept the option open, possibly with the hope that the permission
may come through. The intention appears to be loud and clear. In
the event the parties are able to abide by the original contract, the
same would be open. Otherwise, the appellants would pay the
amount of Rs.12.26 Crores, which comprises of the original
consideration of Rs.9 Crores and an amount towards profit/
interest.
21. The submissions on behalf of the appellants before the
Arbitrator were essentially based on clause 17 of the agreement
dated 17/07/2009 which reads thus :
“17. In the event both or either of the parties is
unable to fulfill the terms and conditions of this
Agreement due to force majeure or acts of God/
natural calamity or by reason of any Civil Commotion,
riots, local agitations, combination of workmen, war
or by reason of strikes or lockouts affecting the
establishments of the SELLER or his Contractor(s) or
due to non-availability or restrictions of supplies of
fuels, oils, lubricants, explosives and such other
supplies and materials, insubordination and usurped
power or due to any statutory or Government
Restrictions, Court Orders including the results of
the Special Leave Petition filed before the Supreme
Court of India against the judgment and order dated
20/06/1997 passed in writ petition No.171 of 1990 by
the High Court of Bombay, Panaji Bench, any lawful/
legal claim made by any person including by a holder
or surface rights, or on account of any fault of the
SELLER arising on account of any act of omission or
commission on the part of the SELLER, the aggrieved
party shall have no claim whatsoever against the
other party for breach of this Agreement and if
through force majeure or for any reasons herein
stated in this clause, the fulfillment by either party of
any or all the terms and conditions of this Agreement
be delayed, then the terms of this Agreement shall
be automatically extended to the extent of such
delayed period subject to the BUYER having the right
to forthwith demand back and recover the amount
remaining unpaid. It is specifically understood that
under these circumstances this Agreement will not
come to an end but however, subject to the Right of
the BUYER, the reciprocal obligations and acts
hereunder shall remain suspended during the period
of such condition of force majeur including the
conditions listed above, continue to exist.”
22. It is submitted that clause 17 has to be read into the
additional agreement, as the additional agreement cannot be said
to be a standalone agreement. I would tend to disagree. In this
regard, the learned Arbitrator in paragraph 25(a) of the award has
held thus :
“25(a). Though, the Additional Agreement may
not be a standalone agreement, but it will prevail to
the extent it makes a departure from the earlier
agreements and sets out a date for either payment of
the amount or accomplishing the task of extraction of
the iron ore, sale thereof to the Claimant, and
thereafter its export to the foreign buyer after
arranging a Letter of Credit in favour of the Claimant.
Either of the obligations were to be performed by
December, 31, 2010. Since the later part of the
obligation was not fulfilled by the Respondents,
therefore they were bound to pay the outstanding
amount that admittedly remained due and remained
unpaid by the aforesaid date. As already pointed out
according to the Additional Agreement a sum of
Rs.12.26 Crore was outstanding from the
Respondents and admitted to be due from them to the
claimant. Subsequently, a sum of Rs.3.56 Crore was
paid by the Respondents to the Claimant, leaving a
balance of Rs.8.70 Crore as unpaid.”
23. The learned Arbitrator has also negatived the
contention on behalf of the appellants that this was a case of
common mistake of fact as to the permission of the Forest
Department for using the forest road. It has been found in
paragraph 23 of the award that the appellants before entering into
the additional agreement must have known that the road, namely
'Durgini Sangod road' cannot be used for transportation, as it
passes through forest/ Government land. The learned Arbitrator
has referred to a letter dated 08/03/2010 of Tukaram Prabhu, a
Constituted Attorney of M/s. Elray Minerals and Company, the
concessionaire and partner of M/s. Ambika Minerals to the Deputy
Conservator of Forests, North Goa, Forest Division in which, a
permission was sought to transport the Iron ore from the road,
claiming that it was away from human settlement and could be
used, without causing any disturbance to anybody. Thus, in my
considered view, the arguments based on any common mistake of
fact, cannot be accepted. It has rightly been held by the learned
Arbitrator that even though the additional agreement may not be a
standalone agreement, it will prevail to the extent it makes
departure from the earlier agreements and sets out a date for
either payment of the amount or performing the contract as
agreed, namely extraction, export and sale of the Iron ore to
overseas buyers. From the perusal of the award of the Arbitrator
and the judgment of the learned District Judge, it does not appear
that the provisions of Section 65 of the Contract Act were pressed
into service. In my considered view, the same cannot be allowed
at this stage. Secondly, because the additional agreement
envisages both the situations, namely the sale agreement and the
supplementary agreement being performed as per the terms
agreed or payment of an amount of Rs.12.26 Crores and interest.
In this regard, it may be mentioned that the learned Arbitrator has
referred to a tripartite agreement dated 27/10/2009 between M/s.
Elray Minerals, M/s. Ambika Minerals and the appellants, in which
the appellants had claimed that they have mining rights. Although
this agreement was relied upon to counter the case of fraud and
deceit set up by the appellants, the fact remains that the
constituted attorney of M/s. Elray Minerals and M/s. Ambika
Minerals, with whom the respondent has tripartite agreement of
mining, had sought permission from the Forest Department to use
the road for carrying of the Iron ore. At any rate, when the
additional agreement was entered into, it cannot be said that the
parties were labouring under any common mistake of fact. As
noticed earlier, the appellants are not disputing the liability to pay
an amount of Rs.3.35 Crores as admittedly, they have repaid
Rs.5.65 Crores out of Rs.9 Crores advanced. It is submitted on the
basis of Section 65 of the Contract Act that the contract being
void, the appellants would only be liable to restore the benefits
and not to any interest or profit. Once it is held that there was no
common mistake of fact, which can be inferred when the
additional agreement came to be executed, the provisions of
Section 65 would not be attracted. Thus, reliance placed on the
decision of the The Life Insurance Corporation of India and
Mt. Rani Kunwar (supra), would not come to the aid of the
appellants.
24. This takes me to the ground based on the decision of
the Hon'ble Supreme Court in the case of Goa Foundation
(supra). At the outset, it needs to be mentioned that this ground is
for the first time raised before this Court. The decision of the
Hon'ble Supreme Court in the case of Goa Foundation (supra)
came on 21/04/2014 when the application under Section 34 was
pending before the learned District Judge. As noticed earlier, the
additional agreement envisages two options namely of
enforcement of the contract as originally agreed or payment of
Rs.12.26 Crores. The second part about agreement to pay
Rs.12.26 Crores with interest is clearly segregated even assuming
that the first part becomes unenforceable on account of the mining
ban. The Arbitrator has also noticed that the appellants have paid
an amount of Rs.3.15 Crores in pursuance of the additional
agreement and has thus, arrived at a figure of Rs.9.11 Crores,
which is due and payable. Thus, the view taken by the learned
Arbitrator appears to be a plausible view.
25. With the limited scope of interference available in an
appeal under Section 37 of the Act, I do not find that any case for
interference is made out. In the result, the appeal is hereby
dismissed, with no order as to costs.
C. V. BHADANG, J.
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