Arbitration = An agreement dated 30.08.2001 was entered into between the respondent-Central Warehousing Corporation and the appellant for a period of two years from 28.08.2001 to 27.08.2003 for carrying out the work of Handling and Transportation at Inland Clearance Depot (ICD), Varanasi. The respondent-Corporation terminated the contract on 21.02.2002 under Clause X(A) and X(B) of the agreement due to appellant’s poor performance as Handling and Transportation Contractor and deterioration of the situation at the Inland Clearance Depot. The security deposit furnished by the appellant upto the date of termination was also forfeited = The learned Arbitrator and the Courts below have recorded the concurrent findings that the appellant Contractor has failed in carrying out the work as per the terms and conditions of the contract and the learned Arbitrator has rightly allowed the detention and forfeiture of the equipments of the contractor and disallowed the counter claim No.4 of the appellant. Similarly, the counter claim No.5 which was for the damages for the alleged detention and use of hand trolleys has been rejected and thus, the counter claim Nos.4 and 5 have been rightly disallowed by the learned Arbitrator. We do not find any reason warranting interference with the award passed by the Arbitrator and the impugned judgment and this appeal is liable to be dismissed.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.655 OF 2016
M/S VIJAY TRADING AND TRANSPORT
COMPANY …Appellant
VERSUS
CENTRAL WAREHOUSING CORPORATION …Respondent
J U D G M E N T
R. BANUMATHI, J.
This appeal arises out of the impugned judgment dated
19.07.2010 passed by the High Court of Delhi in FAO(OS) No.435
of 2010 in and by which the High Court dismissed the appeal filed
by the appellant thereby upholding the judgment of the learned
Single Judge thereby affirming the dismissal of the objections filed
under Section 34 of the Arbitration and Conciliation Act, 1996
against the arbitral award dated 18.03.2005.

  1. Brief facts which led to filing of this appeal are as under:-
    An agreement dated 30.08.2001 was entered into between
    the respondent-Central Warehousing Corporation and the appellant
    for a period of two years from 28.08.2001 to 27.08.2003 for carrying
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    out the work of Handling and Transportation at Inland Clearance
    Depot (ICD), Varanasi. The respondent-Corporation terminated the
    contract on 21.02.2002 under Clause X(A) and X(B) of the
    agreement due to appellant’s poor performance as Handling and
    Transportation Contractor and deterioration of the situation at the
    Inland Clearance Depot. The security deposit furnished by the
    appellant upto the date of termination was also forfeited.
  2. Dispute arose between the parties which led to the
    appointment of an arbitrator vide reference order dated 23.09.2002.
    The respondent-Corporation claimed a sum of Rs.98,06,000/- with
    interest @ 18% thereon. It was contended by the respondentCorporation that the performance of the appellant was not found
    satisfactory particularly, in regard to Export loaded Container
    No.TRIU-4991702×40’, which was illegally detained by the appellant
    and the appellant failed to transport the container to the Port at Navi
    Mumbai. The said container was handed over to the appellant on
    06.11.2001 from the Inland Clearance Depot, Varanasi and did not
    reach its destination, JNP, Navi Mumbai within the stipulated time
    period i.e. upto 16.11.2001. When the exporter, M/s Bhola Nath
    Industries pressed for early recovery of the container and also
    raised claims towards compensation for loss of the container, the
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    respondent-Corporation started inquiries and issued several notices
    to the appellant for recovery of the container and non-performance
    of contractual obligations. Only after intervention of the Courts, the
    container was located and recovered at Ghaziabad and received
    back at ICD, Varanasi on 23.05.2003. But by then, the said
    container missed the export schedule. The exporter initially
    declared that the cargo stuffed in the container was of no use to
    him; but subsequently, reprocessed the same to make it usable.
  3. The appellant filed counter claims under various heads
    claiming Rs.52,00,000/- with interest @ 18% thereon. It was
    submitted by the appellant that the container in question was
    illegally detained by M/s ODC Roadways to whom the container
    was entrusted for transportation to Port, Navi Mumbai. According to
    the appellant, it had taken all possible steps including approaching
    the High Court for speedy recovery of the container and in spite of
    all the efforts taken by the appellant, respondent-Corporation
    terminated the contract illegally.
  4. Taking into consideration the claim and grounds for
    termination and also the reply filed by the appellant, the Arbitrator
    vide award dated 18.03.2005 upheld the termination of the contract
    as valid and decided certain claims of the respondent in its favour.
    3
    Certain counter claims of the appellant were also allowed by the
    learned Arbitrator. Other claims including counter claim No.3 (claim
    of Rs.4,30,284/- towards refund of security deposit) and counter
    claim No.4 (claim of Rs.15,75,484/- including interest of
    Rs.4,64,815/- towards illegal detention of the fork lift) were decided
    against the appellant. It was held by the Arbitrator that the
    termination of the contract is legal and justified and in view thereof,
    the respondent had the right to forfeit the security deposit. As to the
    claim of the appellant towards alleged detention of the fork lift and
    hand trolleys, the Arbitrator held that the detention of the
    equipments is right and justified. The Arbitrator held that it is seen
    from Clause 5(g) of the tender conditions of the contract that the
    respondent has the right to demand the balance due when sufficient
    sum is not available to cover the full amount recoverable from
    security deposit and other dues. In view of the heavy claim amount
    of M/s Bhola Nath Industries and Customs/Excise Department and
    others, the learned Arbitrator concluded that there is no illegality in
    the action on the part of the claimant in detaining the equipments
    like fork lift and hand trolleys as security.
  5. The appellant filed objections under Section 34 of the
    Arbitration and Conciliation Act contending that the order of
    4
    termination whereby the security deposit was also forfeited does not
    record any reason for forfeiture of the security deposit. Similarly, no
    reason has been given by the Arbitrator for rejecting the counter
    claim No.3. In support of its counter claim No.4, the appellant
    averred that for successful executing of the contract, it had
    employed one fork lift and four hand trolleys at Inland Clearance
    Depot, Varanasi, which were owned by them and the same have
    been illegally detained by the respondent. On behalf of the
    respondent-Corporation, it was contended that the forfeiture of the
    security deposit was justified on the following reasons – firstly in
    view of the heavy claim raised by M/s Bhola Nath Industries before
    the Consumer Forum, Lucknow and secondly, on account of bank
    guarantee to sum of rupees ten lakhs furnished by the respondent
    for release of the container. The respondent submitted that a claim
    of rupees forty lakhs was lodged by M/s Bhola Nath Industries Ltd.
    Accordingly, it was decided not only to withhold the payment due to
    the appellant, but also to forfeit all the equipments in use.
  6. Considering the objections of the appellant and the claim of
    the respondent-Corporation, the learned Single Judge of the High
    Court found no infirmity in the reason recorded by the learned
    Arbitrator while rejecting counter claim No.4. Counter claim No.3
    5
    was allowed to the extent that in case the bank guarantee furnished
    by the respondent-Corporation is discharged, the appellant would
    be entitled to refund the security deposit in the sum of
    Rs.4,30,284/-. The appeal filed by the appellant under Section 37 of
    the Arbitration and Conciliation Act was dismissed vide the
    impugned judgment affirming the order of the learned Single Judge.
  7. Before the Supreme Court, the appellant has only pressed
    counter claim Nos.3 and 4. Mr. Aniket Jain, learned counsel for the
    appellant has contended that the courts below erred in not
    appreciating the fact that the appellant exercised due diligence and
    has taken efforts for the recovery of illegally detained container
    including lodging of FIR and initiating legal proceedings. It was
    submitted that the courts below failed to appreciate that the
    conditions imposed regarding the refund of security deposit is
    beyond the terms of the agreement between the parties as well as
    the terms of reference made to the arbitrator and the order of the
    learned Single Judge to replace the bank guarantee is untenable
    and prayed for allowing of the appeal.
  8. Insofar as the forfeiture of security deposit is concerned,
    Mr. K.K. Tyagi, learned counsel for the respondent-Corporation has
    submitted that M/s Bhola Nath Industries, whose containers
    6
    remained missing for a long time on account of the conduct of the
    appellant had lodged a claim against the respondent for a sum of
    rupees forty lakhs and though the same has been dismissed for
    non-prosecution, the same may be restored at any time at the
    instance of the complainant M/s Bhola Nath Industries Ltd. It was
    therefore, contended that the forfeiture of the security amount and
    fork lift cannot be said to be arbitrary or unjustified and in
    accordance with the terms of the contract. Learned counsel further
    submitted that the respondent Corporation had to furnish a bank
    guarantee of rupees ten lakhs to get the container released in view
    of the suit filed by the third party-M/s ODC against the appellant for
    retaining the container till their dues are paid by the appellant and
    the case is still pending and therefore, the learned Arbitrator has
    rightly upheld the act of the respondent-Corporation in forfeiting the
    security deposit.
  9. We have carefully considered the contentions of both the
    parties and perused the impugned judgment and the award passed
    by the learned Arbitrator and the order of the learned Single Judge
    and other materials on record.
  10. The Export loaded Container No.TRIU-4991702×40’ was
    handed over by the Manager, ICD, Varanasi to the appellant on
    7
    06.11.2001 for delivery of the container at JNP, Navi Mumbai; but
    the appellant had failed to transport the container to the destination
    port and only with the intervention of the Court, the container was
    located and recovered at Ghaziabad and received back at ICD,
    Varanasi on 23.05.2003. But by then, the said container already
    missed the export schedule. When the Export loaded Container
    No.TRIU-4991702×40’ was entrusted to the appellant, the appellant
    ought to have transported the container to the port of destination
    with due diligence. The respondent- Corporation has justified the
    forfeiture of the security deposit on two counts:- firstly, in view of the
    heavy claim raised by M/s Bhola Nath Industries Ltd. for which they
    have filed a claim of rupees forty lakhs before the Consumer Forum,
    Lucknow and secondly, on account of bank guarantee in the sum of
    rupees ten lakhs furnished by the respondent-Corporation for
    release of the container. The learned Arbitrator and the Courts
    below have recorded the concurrent findings by holding the
    termination of the contract legal and levy of forfeiture of the security
    amount of Rs.4,30,284/- and the levy of fork lift is justified.
  11. The container handed over to the appellant was detained by
    the third party-M/s ODC Roadways represented by Sh. Prabhu Nath
    Sing, who filed a Civil Suit No.1127 of 2001 against the appellant
    8
    stating that his dues had not been cleared by the appellant. The
    respondent-Corporation had filed an application in the said suit for
    release of the container which was rejected by the Civil Court,
    Ghaziabad on 28.11.2002 and the respondent had to file a Civil
    Revision Petition No.180 of 2002 before the High Court of
    Allahabad in which a direction was issued to the trial court to
    dispose of the application afresh. It was thereafter, the trial court
    released the container on furnishing a bank guarantee of rupees ten
    lakhs by the respondent-Corporation. The trial court released the
    container only on furnishing of bank guarantee of rupees ten lakhs.
    It is stated that the said civil suit is still pending in the Ghaziabad
    Court and is at the stage of recording evidence.
  12. Insofar as the allegation of detention of fork lift and hand
    trolleys, the respondent-Corporation has stated that after finalisation
    of the arbitration case between the respondent-Corporation and the
    appellant, all the dues as per the order of the Arbitrator has been
    paid to the contractor; but the appellant did not approach the
    respondent-Corporation for lifting their equipments and as such the
    same were lying at ICD, Bhadohi occupying valuable space.
    According to the respondent-Corporation, for the space occupied by
    the equipments, the total rent for the period up to 31.05.2007 works
    9
    out to Rs.41,746/- and Rs.89,049/- for fork lift and hand trolleys
    respectively. Be that as it may, according to the respondentCorporation, the detention of the equipments were made as per the
    terms of the agreement at Clause 5(g) and the same was
    accepted by the arbitrator. As held by the learned Arbitrator, the
    appellant was given a contract to assist in smooth running of
    international business of import and export and to have the time
    management on top priority. Failure to transport the container to the
    Port at Navi Mumbai resulted in missing of the export schedule.
    Taking into consideration the failure of the appellant to deliver the
    container at the Port at Navi Mumbai and the time taken in recovery
    of the container and the expenditure incurred by the respondentCorporation in particular, furnishing of bank guarantee of rupees ten
    lakhs, the detention of the equipments cannot be said to be arbitrary
    or beyond the terms of the agreement.
  13. It is pertinent to note that the appellant has received an
    amount of Rs.11,06,598/- as the amount allowed by the Arbitrator
    vide award dated 18.03.2005 by DD No.079915 dated 03.09.2005.
    Thus, even before filing of the objection petition under Section 34 of
    the Act, the appellant has received the full payment due and
    payable to him as per the arbitral award dated 18.03.2005.
    10
    According to the respondent-Corporation, the appellant has not
    disclosed the receipt of the money at the time of filing the petition
    under Section 34 of the Act.
  14. The learned Arbitrator and the Courts below have recorded
    the concurrent findings that the appellant Contractor has failed in
    carrying out the work as per the terms and conditions of the contract
    and the learned Arbitrator has rightly allowed the detention and
    forfeiture of the equipments of the contractor and disallowed the
    counter claim No.4 of the appellant. Similarly, the counter claim
    No.5 which was for the damages for the alleged detention and use
    of hand trolleys has been rejected and thus, the counter claim
    Nos.4 and 5 have been rightly disallowed by the learned Arbitrator.
    We do not find any reason warranting interference with the award
    passed by the Arbitrator and the impugned judgment and this
    appeal is liable to be dismissed.
  15. In the result, the impugned judgment dated 19.07.2010
    passed by the High Court in FAO(OS) No.435 of 2010 is affirmed
    and this appeal is dismissed. No costs.
    …………………….J.
    [R. BANUMATHI]
    …………………….J.
    11
    [A.S. BOPANNA]
    …………………….J.
    [HRISHIKSH ROY]
    New Delhi;
    November 07, 2019
    12