MANU/WB/0277/2020

IN THE HIGH COURT OF CALCUTTA

A.P. 296 of 2009
Decided On: 21.02.2020
Appellants: Indian Drug and Pharmaceutical Ltd.
Vs.
Respondent: Arundhati Manna
Hon'ble Judges/Coram:
Moushumi Bhattacharya, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Tapas Kumar Dey, Adv.
For Respondents/Defendant: Noelle Banerjee and Someswar Chakrabarti, Advs.
DECISION
Moushumi Bhattacharya, J.
1. The Award under challenge in this application under section 34 of The Arbitration
and Conciliation Act, 1996 is of 21st January, 2009. By the impugned Award, the
petitioner has been directed to pay to the respondent/claimant Rs. 31,29,060/- (Rs.
7,00,000/- + Rs. 10,85,000/- + Rs. 13,44,060/-) with 15% simple interest on and
from 06.08.2004 till actual realisation within 45 days from the date of receipt of a
signed copy of the Award, along with a sum of Rs. 2,17,000/- towards the cost of
arbitration proceedings. The award is based on a finding that the petitioner was
contractually obligated to repay an amount of Rs. 7 lakhs to the respondent in terms
of Clause 28A of an Agreement entered into between the petitioner and the
respondent. The said agreement dated 24th January, 1995 was for supply of the
petitioner's goods to the respondent as the Special Stockist is accordance with certain
clauses which form the basis of the rights and obligations claimed by the parties
herein.
2. The first point taken by Mr. Tapas Kumar Dey, learned counsel appearing for the
petitioner is that the arbitration proceeding has not been properly invoked as a result
of which the impugned award is required to be set aside. Counsel disputes the
manner of invocation of the arbitration through the letter of the respondent dated 2nd
July 2004 on the ground that the said letter gave the petitioner only 15 days to act in
terms thereof. According to counsel, under section 11 (5) of The Arbitration and
Conciliation Act, 1996 (the Act) the parties are given 30 days to agree to the
appointment of a sole arbitrator, whereas in this case the period mentioned in the
letter of 2nd July 2004 is 15 days. Counsel relies on a decision of a learned Judge of
this court in Deepak Gidra Vs. Dr. PB's Health and Glow Clinic Private Limited on the
procedure for appointment of arbitrators under section 11 of the 1996 Act. The
second ground of challenge to the impugned award is that it suffers from perversity.
According to counsel, the Arbitrator despite holding that the respondent could not
prove her case, proceeded to award compensation for an amount of Rs. 33,46,060/-
(Rs. 31,29,060/- + Rs. 2,17,000/-) to the respondent. Union of India Vs. Ajabul
Biswas reported in MANU/WB/0339/2007 : 2008 (1) CHN 16 is relied on in relation
as to what would be the marker for perversity.
3 . The next point is that the claim of the respondent/claimant before the arbitrator

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 was barred by limitation. The factual context to this is that there were no dealings
between the parties from February 1997 and hence the respondent's demand notice
of July 2004 after eight years is time-barred. Counsel submits that the
respondent/stockist did not take any steps pursuant to the agreement resulting in the
petitioner suffering monetary loss and that the petitioner was constrained to
discontinue the arrangement with the respondent stockist which was duly
communicated to the respondent.
4. Ms Noelle Banerjee, learned counsel for the respondent, relies on specific dates to
counter the point of the invocation of arbitration proceedings being contrary to the
1996 Act. According to counsel, the invocation letter dated 2nd July 2004 was
received by the petitioner on 7th July 2004. Since the petitioner however failed to
appoint an arbitrator within 30 days of receipt, i.e. by 6th August 2004, the
respondent applied under section 11 of the Act on 12th August 2004. The Court
appointed the arbitrator by an order dated 23rd September 2004. Counsel further
points out that the objection as to the invocation being defective was rejected by the
Arbitrator by an order dated 24th August 2005 and that this issue was not pressed by
the petitioner at the time of arguments. On the issue of limitation, counsel submits
that business relations ceased between the parties only upon termination of the
contract by the respondent in 2003. Counsel refers to at least three letters written by
the respondent to the petitioner on 25.1.1999, 25.3.1999 and 9.12.1999 for supply
of medicines as well as the petitioner's letter of 9.1.1997 referring the matter to its
Head Office from which it would be evident that the petitioner had not put the
contract to an end, as alleged by it. Counsel urges that the award for loss of profit
was calculated by the learned Arbitrator on the annual turnover of the respondent on
the basis of the statements disclosed and further that the arbitrator did not award
amounts for all the claims made by the respondent (claimant in the arbitration
proceedings). Counsel relies on The State of Jharkhand vs HSS Integrated SDN
reported in MANU/SC/1438/2019 : (2019) 9 SCC 798 on the point that where a
plausible view has been taken by the arbitrator or when two views are possible, such
view should not be interfered with in a proceeding under section 34 of the 1996 Act.
5. This court is of the view that the objection raised on behalf of the petitioner with
regard to the defect in the notice of invocation and the reliance on Section 11(5) for
that purpose is misplaced since (4), (5) and (6) of section 11 of the 1996 Act
provides for the time given to the parties to the arbitration to agree on the
appointment of the Arbitrator from the time of receipt of a request by one party from
the other party. Failing an agreement, the Arbitrator shall be appointed by the
Supreme Court or the High Court or any person or institution designated by such
court upon a request of a party to the arbitration. In this case, the invocation letter
dated 2nd July, 2004 was received by the petitioner on 7th July, 2004. The petitioner
failed to reply to the invocation letter and also failed to appoint an Arbitrator by 6th
August, 2004 that is within 30 days by reason of which the respondent filed an
application under Section 11 of the Act on 12th August, 2004 and the Arbitrator was
appointed by an order dated 23rd September, 2004. It may be mentioned that this
objection had been taken by the petitioner in an application made before the
Arbitrator which was rejected by the Arbitrator by an order dated 24th August, 2005.
The petitioner did not challenge the said order.
6 . With regard to the issue of the respondent's claim being time-barred on the
ground of the parties not having done business since 1996, this court finds that the
learned Arbitrator has given comprehensive reasons for rejecting the petitioner's
objection on this count. In the segment of the Award with the heading "Findings With
Reasons", the bases of the decision of the Arbitrator finds support from the
documentary evidence and the relevant clauses of the contract. The Arbitrator has

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 come to several findings, including that Clause 28 of the contract contemplates that
the contract can be terminated by either of the parties by giving 30 days notice in
writing. The Arbitrator found that there was no documentary evidence to show that
the petitioner terminated the contract. The Arbitrator also referred to a letter dated
9th January, 1997 written by the petitioner to the respondent relating to supply of
medicines against adjustment of cash discount in which the petitioner stated that the
respondent's requests have been referred to the Head Office of the petitioner at Delhi
for clarification. This letter showed that the petitioner expressed its regret for the
delay in supplying medicines/stocks to the respondent. The Arbitrator, in fact, has
taken note of five letters in this connection to show that the respondent had
complained of non-adjustment of cash discount against non-rotating advance and the
petitioner's failure to supply medicines from January 1997 till March 2003. The
Arbitrator further came to the conclusion that the correspondence between the parties
would show that instead of terminating the contract, the petitioner kept it under
suspended animation till the respondent terminated the contract by a letter dated
19th March, 2003 under Clause 28 of the agreement.
7. Eight issues together with one additional issue were framed by the Arbitrator and
each of the issues has been answered upon considering the relevant documents
which the parties had relied upon in the arbitration proceedings. According to learned
counsel for the petitioner, the loss of profit component has been calculated without
referring to any documents. This ground would be belied from the impugned Award.
Issue nos. 6 to 9 relating to whether the claimant (respondent herein) was entitled to
any compensation for loss of business, loss of goodwill, etc. have been specifically
considered by the learned Arbitrator with reference to the Schedule to the statement
of claim where the respondent claimed various amounts together with interest
including for loss of profit of Rs. 17,20,397/- on the basis of its annual business
turnover of Rs. 60 lakhs. The Arbitrator referred to the evidence of the respondent
whereby the respondent had relied on the original statement of accounts duly signed
by the chartered accountant which had been filed in relevant government offices.
These copies were filed in the arbitration proceedings. The Arbitrator took into
account the cross-examination of the respondent in this connection from where it was
evident that the respondent had more than 60 lakhs of business with the company for
the accounting year ending 31.02.96 which reduced in the following accounting year
due to the shortage of stock lying with the petitioner company. This evidence was not
disproved by the petitioner. The Arbitrator allowed loss of profit to be calculated on
the monthly turnover of Rs. 3,73,350/- for 75 months at the rate of 4.8 per cent
which amounts to Rs. 13,44,060/-. The Award also shows that the Arbitrator made
detailed calculations of the amounts payable by the petitioner to the respondent on
account of non-rotating advance with monthly cash discount and the start-time and
end-time for the said calculations. The respondent's claim for loss of goodwill has
been rejected by the learned Arbitrator in the absence of documentary evidence
before him.
8 . On a careful consideration of the Award, it cannot be said that the learned
Arbitrator has glossed over the facts or arrived at findings without supporting reasons
or even at amounts which are not buttressed by factual and documentary evidence.
The view of the Arbitrator that the respondent/claimant has a right to be
compensated for loss of business and for the non-rotating advance with monthly cash
discount at the rate of 2 per cent from November 1996 to 18th April, 2003 (after the
expiry of 30 days from the notice of termination of the agreement) is squarely based
on the terms of the agreement and the way the parties thereof always understood the
terms.
9 . In Deepak Gidra Vs. Dr. PB's Health and Glow Clinic Private Limited decided in

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 A.P. No. 43 of 2010, the petitioner had not made a demand for a reference for
appointment of a sole Arbitrator at all before making a request under Section 11 of
the 1996 Act. In this case, the invocation letter/letter of demand dated 2nd July,
2004 sent by the respondent to the petitioner clearly states in paragraph 8 of the said
letter that the petitioner was being called upon to appoint an arbitrator under the
1996 Act. In Union of India Vs. Ajabul Biswas in A.P.O. No. 397 of 2007, the word
"perverse" was defined as something which is contrary to what is to be expected
against the weight of evidence. In that case, the Award while granting the claim on
account of idle labour in the arbitration proceeding had not taken into account the
number of personnel or the rate at which such personnel were paid and a Division
Bench of this court thus found that allowing of such claim to be without any
evidence. The matter was accordingly remanded to the Arbitral Tribunal for
eliminating the grounds for setting aside of the Award. In HSS Integrated SDN Vs.
State of Jharkhand, the Supreme Court held that where a finding of fact recorded by
an Arbitral Tribunal on appreciation of evidence contained a plausible view or where
two views were possible, such findings should not be interfered with by a court
sitting in a Section 34 jurisdiction. This well-settled legal position has been reiterated
in a number of decisions of the Supreme Court including in Associate Builders Vs.
DDA reported in MANU/SC/1076/2014 : (2015) 3 SCC 49 and in Maharashtra State
Electricity Distribution Company Limited Vs. Datar Switchgear Limited reported in
MANU/SC/0017/2018 : (2018)3 SCC 133. This court sees no reason for taking a
contrary view particularly in connection with the reasons contained in the Award
which is under challenge.
10. For the reasons as stated above, A.P. No. 296 of 2009 is dismissed without any
order as to costs.
Urgent Photostat certified copy of this Judgment, if applied for, be supplied to the
parties upon compliance of all requisite formalities.
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