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PETITIONER: M/S. AROSAN ENTERPRISES LTD.

       Vs.

RESPONDENT: UNION OF INDIA & ANR.

DATE OF JUDGMENT:       16/09/1999

BENCH: B.N.Kirpal, Umesh C. Banerjee

JUDGMENT:

BANERJEE,J.

     These  two  Appeals by the grant of Special Leave  and arising  out  of the Judgment of the Delhi High Court  focus two singularly singular questions pertaining to (i) the time being  the essence of the contract and (ii) authority of the High  Court  in the matter of interference with an  Arbitral Award  under the Repealed Act of 1940 (The Arbitration  Act, 1940).   For  effectual  disposal of  these  two  questions, noticed  above, reference to certain factual details in this judgment is inevitable and adverting thereto it appears that on  October 4, 1989 Union of India floated an invitation  to tender  for purchase of sugar to meet the urgent requirement of  anticipated  scarcity  in the Indian market  during  the Dussehra  and  Diwali  festivals  in  November,  1989  which however, and without much of a factual narration, culminated in  an  Agreement  dated 24th/25th October, 1989  with  M/s. Arosan  Enterprises,  being the Appellants herein,  for  the supply  of  58000 metric tonnes of sugar.  The  Contract  as above  inter  alia contained the following terms:  (a)  That the  claimant shall supply 58,000 M.T.  of sugar (net weight plus  minus  5% at sellers option).  (b) That  the  claimant shall  arrange shipment of entire quantity of the contracted sugar  so  as  to  reach Indian Ports not  later  than  31st October,  1989;   shipment  within the  contracted  delivery period  was  to be the essence of the contract.  In case  of delay  the  seller  was to be deemed to  be  in  contractual default  with  a right to the buyer to cancel the  contract. The  buyer  could  however extend the delivery period  at  a discount as may be mutually agreed between the buyer and the seller.   (c) That price payable was to be U.S.  Dollar  480 per  metric tonne.  (d) That the seller had to establish  an unconditional irrevocable performance guarantee in favour of the  buyer by any Indian Nationalised Bank at New Delhi  for 10%  of  the total contract value of the maximum  guaranteed quantity  to be shipped, within 7 days of the contract.  (e) That the payment was to be made to the seller by irrevocable letter  of credit (L/C) covering 100% value of the  contract quantity.  The L/C was to be established by the buyer within seven  days of the receipt of an acceptable performance Bank Guarantee.   (f) The performance Bank guarantee (PBG) was to be  by any Indian Nationalised Bank at New Delhi and was  to be kept valid for a minimum period of ninety days beyond the last  date  of contract shipment period." The factual  score further  depicts  that  on 24th October,  1989,  itself  the

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appellant  did  furnish a performance bank guarantee  for  $ 29,28,000  and  upon  bank guarantee  being  furnished,  the Government  of  India  assigned  the contract  to  the  Food Corporation of India (FCI) under clause 20 of the Agreement. FCI  also in its turn opened a Letter of Credit for the full value of the contract though, however, as the records depict that  while on 26th October, 1989, the Letter of Credit  was opened by FCI but its authentication was not effected within the  delivery  date i.e.  31st October, 1989.  Be  it  noted that  in terms of the payment clause, the payment was to  be made  by  the buyer by way of irrevocable letter  of  credit covering  100% of the contract quantity and letter of credit was  to  be established by the buyer within seven days  from the  receipt  of performance bank guarantee and it  is  upon completion  of  the  period  of  7 days  from  the  date  of acceptance  of  the  performance guarantee,  the  letter  of credit  should  have been authenticated and that was  to  be effected  by  about 31st October, 1989.  In  the  contextual facts  the authenticated bank guarantee was effected only on 2nd November, 1989 i.e.  after the expiry of the date of the delivery  -  It is on this score detailed  submissions  have been  made by both Mr.  Rohtagi appearing in support of  the       appeal  and  Mr.  Dholakia appearing for FCI  and  Mr. Rawal, the learned Addl.  Solicitor General for the Union of India  and  it  is  in   K.N.   of  some  assistance.   this perspective  certain  further factual details would  be  The telex messages from Food Corporation of India dated 3rd, 7th and 8th November, 1989 go to show that in fact there was the anxiety  of the buyer to obtain the goods and it is on these anxious  inquiries, Mr.  Rohtagi contended that the time for delivery  obviously  stands extended and the essence of  the contract  been given a go-by.  The facts further depict that while  the  correspondence were had between the  parties  as regards  the  delivery  schedule, Government of India  by  a letter  dated  8th November transmitted an intimation  which was despatched on 9th November, 1989, canceling the contract at the risk and cost of the appellant herein.  Subsequently, however,  on  11th November, 1989, the Government  of  India unilaterally   by   its  letter   withdrew  the  letter   of cancellation  and  on  15th  November,  1989  the  appellant informed  the  FCI that by reason of the  cancellation,  the cargo  arranged already, has gone out of control and that  a new  cargo  was  being arranged by reason wherefor  FCI  was asked  to  fix  a new delivery date and  consequently  steps would  be taken in regard thereto.  Needless to refer  here, that  the letter of withdrawal of cancellation, however, did not  contain any fixed date or new date of delivery.   There was, however, as the records depict, total silence from FCI, and  consequently, the appellants on 24th and 30th November, 1989  further  reminded the cooperation to fix the  delivery date  and  take necessary steps to effect the payment  under the  law of trading.  Significantly, both FCI and Government of  India  maintained a total silence in regard  thereto  in spite  thereof.   On the factual matrix it  further  appears that  subsequently a meeting was held between the  claimants and  the Union Minister for Food and Civil Supplies  wherein it  was  agreed that on the claimants paying a sum  of  Rs.5 lacks  towards  the expenses incurred by the  Government  in opening  the  letter of credit and claimants giving  up  any claim  for damages, the performance bank guarantee would  be released  - this aspect of the matter has however been  very emphatically  disputed  by respondents and both the  learned senior  Advocates  appearing  on behalf of  the  respondents contended that the Court would not be justified in assessing this  aspect  of  the matter to be of any relevance  in  the

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contextual  facts.   We  shall refer to this aspect  of  the matter  later  more fully in this judgment, but to  complete the factual score, it appears that on 25th January, 1990 the Government of India canceled the contract on the ground that the seller had failed to fulfill its contractual obligations within stipulated time which was mentioned to be on 31.10.89 and the performance bank guarantee of the claimants was also forfeited  by  FCI.  It is by reason of such  a  forfeiture, however,  that  the  matter was referred to  arbitration  in terms of the arbitration clause in the agreement between the parties.   There  being however, no dispute, as regards  the arbitration clause, we deem it convenient not to set out the same in extenso and suffice it would be further to note that Sri  Justice S.N.  Shankar, the former Chief Justice of  the High Court of Orissa and Sri K.  C.  Diwan, an Advocate were appointed as Arbitrators in terms therewith and who in their turn  made and published their award to the effect that  the claimants  were  entitled to the refund of  the  performance bank  guarantee  amount  of $ 29,28,000.  The claim  of  the claimant-appellant  herein, however, on account of  interest was  rejected.   It  is  this   Arbitral  award  which   was challenged  before  High Court and the learned Single  Judge found  that  FCI’s letter dated 8th November,  1989  clearly depicted  that they were still interested in taking delivery of  the  goods and therefore the claimant was  justified  in asking  for fixation of a fresh delivery date.  The  learned Single  Judge  further  found  that   the  findings  of  the Arbitrators  in  regard to extention of the delivery  period and  failure to fix the fresh date has resulted in breach of the  contract  on  the part of the Government and  the  same being  purely based on appreciation of materials on  record, question  of interference therewith would not arise since by no  stretch it can be termed to be an error apparent on  the face  of the record.  The award, therefore, was sustained by the  learned Single Judge.  In an appeal therefrom  however, the  finding of the Single Judge was reversed and the  Bench of  the Delhi High Court dealing with the Appeal in question recorded  that the buyer, being the Appellant herein, had in fact  impliedly  accepted 14/15th November, 1989 as the  new date  of  delivery by which the seller was bound to  deliver and  the  failure of the seller to supply by the  said  date constituted a breach of contract justifying the cancellation and  thus  set aside the judgment and order of  the  learned Single  Judge as also the arbitral award.  The Bench further ordered  that the findings of the Arbitrators to the  effect that  the  buyer was obliged to fix fresh dates of  delivery was  an  error of law on the face of the record and as  such there  was a breach committed by the seller.  It is  against this  order  of the Division Bench of the High Court that  a Special  Leave Petition was filed before this Court and this Court  by an order dated 4th September, 1995 granted special leave in pursuance whereof this matter has come up for final disposal before this Bench.  Turning now on to the issues as noticed  above  namely, whether time was the essence of  the contract or not, it would be convenient to note the relevant extracts  of  the Arbitral award pertaining to the issue  in question.   The  Arbitrators,  inter   alia,  found:    "The withdrawal  of the letter of cancellation (vide Ex.A.21) had the  effect  of reviving the original contract  dated  24/25 October, 1989 with all its terms except that sugar had to be delivered  by 31 October, 1989.  Stipulation in clause 3  of the  contract that shipment with contract delivery period is of  the essence of the contract" also stood revived.  Letter of  Credit had been established on the basis of the original contract  which stipulated a fixed time for delivery but  as

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no time for delivery was fixed in the letter withdrawing the cancellation  (Ex.A-  21),  the   claimants  naturally  felt concerned  and repeatedly requested the respondent to do the needful.

     ...........

     Evidence   adduced  thus  clearly   shows   that   the Respondents  sent  no reply whatever to the request  of  the claimants  asking for specification of the delivery time and for  the needful being done in regard to L/C in the  changed circumstances   after  the  withdrawal  of  the  letter   of cancellation.   On  the  contrary,  all  of  a  sudden  they canceled  the  contract again by the letter dated  25.1.1990 Ex.A36.   In  our view, this conduct of the respondents  was unjustified and illegal in the facts of this case.

     ..........

     Then  again  it  would  be seen  that  the  ground  of cancellation  taken  in  the letter of  second  cancellation Ex.A36  is  the  same as had been taken  earlier  in  letter Ex.A17, namely failure to fulfill the contractual obligation within  the  stipulated  time of 31st  October,  1989.   The respondents  had  already  waived this  ground.   They  were precluded  from  canceling the contract on the  same  ground again after its revival.  The cancellation by Ex.A36 thus on a non-existent ground and illegal."

     .......

     The Arbitrators further held that

     "We  further  find that L/C opened by the  respondents was  with reference to the contract which stipulated a fixed time  for  delivery  (namely 31st October, 1989)  but  after revival of the contract the position had changed materially. The   original   contract  had   been  canceled   and   this cancellation  had  been withdrawn and in the  contract  that stood  after  withdrawal  of the cancellation  no  time  for delivery   was   stipulated.   It   was  incumbent  on   the respondents  to  apprise this position to the Bank and  make suitable  changes  in the L/C.  The claimants could  receive from  the Bank, the amount secured by L/C for their  benefit only  after  satisfying the bank, that they had shipped  the contracted  sugar  in  accordance  with  the  terms  of  the contract.   There is nothing on the record to show that  the respondents took any steps to inform the Bank of the changed position  so  that  shipping   documents  presented  by  the claimants  after 31st October, 1989 could be examined by the bank in the light of the new situation."

     .........

     The  argument is without merits.  If the contract  was revived  on  the  understanding  why   was  not  this   fact communicated  to the claimants in reply to their  persistent queries  about the date of delivery and why was the L/C  not suitably  modified  and  the bank issuing the  L/C  informed accordingly.   In  fact,  there  is  no  foundation  in  the pleadings for such a plan.

     .........

     Admittedly  in spite of these requests of the claimant

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for  extension of delivery period no fresh delivery date was notified by the respondents.  Thus the extension of delivery period   was   never   granted    nor   intimated   to   the supplier/claimant."

     ........

     The  Arbitrators  therefore came to a conclusion  that there  is  a  breach  of   the  contract  committed  by  the respondents  herein  and  consequently   forfeiture  of  the performance  bank guarantee was illegal and not sustainable. The  learned  Single  Judge in the application  for  setting aside the award was pleased to record:  "The cancellation of the  contract  on 25.1.1990 on the basis of non-delivery  of material  by  31st October, 1989 was  usually  misconceived, untenable  and  illegal  because   31st  October,  1989  had admittedly ceased to be delivery date........It appears that the argument that 14th November, 1989 or 15th November, 1989 were  the fresh delivery dates is an after-thought.  If  the respondents  believed  that these were the  delivery  dates, nothing  prevented them from saying so at the relevant time. The  claimant  repeatedly asked them to fix  fresh  delivery date.  Respondents could reply that these were the dates."

     .........

     These  show  that  the original delivery date  of  the contract  had  become part of the letter of credit.   Unless the  same  was  modified  and the  modified  date  had  been notified  to the banks, the banks would be paying under  the credit  at their own risk.  No bank would be willing to take such a risk.  The result that follows is that the payment to the supplier/claimant would have been in jeopardy unless the letter of credit was amended.  The intention in the original contract  was that the supplier should get immediate payment through  irrevocable letter of credit.  Without amendment of the  letter  of credit, the said intention of  the  contract could  not  be  fulfilled.  The supplier  was  justified  in ensuring  that  he  would get the payment for  the  material supplied by him before the supplies were made."

     In  the  facts of the matter under  consideration  the learned  Single Judge found that FCI by its letter dated 8th November,  1989 clearly depicted in no uncertain terms  that they  were still interested in taking delivery of the  goods and  which  as  a matter of fact according  to  the  learned Single  Judge  changed the entire complexion of the  matter. The  other  issue in which the learned Single  Judge  delved into  is in regard to the Court’s authority of  interference vis--vis  the  award - this aspect of the matter  would  be dealt  with  later  in this judgment  alongwith  the  second issue,  as such we refrain ourselves from making any comment thereon at this juncture.  Turning attention on to the first issue, the Division Bench of the High Court proceeded mainly on  certain presumptions to wit:  (i) the telex message from the seller dated 8.11.89 was sent to the buyer after receipt of  the  cancellation and thus constituted a  representation against  the  cancellation  and  it  was  pursuant  to  this representation  that  the buyer had issued the letter  dated 11th  November, 1989 withdrawing the letter of cancellation. (ii)  the presumption of the High Court went also on to  the effect   that  the  buyer   had  therefore  impliedly  fixed 14th/15th  November,  1989  as the new date of  delivery  by which  time, the seller was bound to deliver and the failure

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of  the  seller to supply by the said date  constituted  the breach  of contract justifying the cancellation in  January, 1990  These  presumptions of the High Court in our view  are wholly  unwarranted in the contextual facts for the  reasons detailed below but before so doing it is to be noted that in the  event the time is the essence of the contract, question of  their  being  any presumption or presumed  extension  or presumed  acceptance of a renewed date would not arise.  The extension   if  there  be  any,   should  and  ought  to  be categorical  in  nature  rather than being vague or  in  the anvil  of presumptions.  In the event the parties  knowingly give  a  go by to the stipulation as regards the time -  the same  may  have  two several effects:  (a)  parties  name  a future  specific date for delivery and (b) parties may  also agree  to  the abandonment of the contract - as regards  (a) above,  there must be a specific date within which  delivery has  to  be  effected  and in the event  there  is  no  such specific  date  available  in the course of conduct  of  the parties,  then  and in that event, the courts are  not  left with  any  other conclusion but a finding that  the  parties themselves  by  their  conduct  have given a go  by  to  the original  term of the contract as regards the time being the essence  of the contract.  Be it recorded that in the  event the  contract  comes  within the ambit of  Section  55,  the remedy  is  also  provided ther ein.  For  convenience  sake Section 55 reads as below:  "55.  When a party to a contract promises  to  do  a certain thing at or before  a  specified time,  or  certain things at or before specified times,  and fails  to do any such thing at or before the specified time, the  contract,  or so much of it as has not been  performed, becomes  voidable  at  the option of the  promisee,  if  the intention  of  the  parties was that time should be  of  the essence of the contract.

     If  it was not the intention of the parties that  time should  be of the essence of the contract, the contract does not  become  voidable by the failure to do such thing at  or before  the specified time;  but the promisee is entitled to compensation  from  the promisor for any loss occasioned  to him  by such failure.  If, in case of a contract voidable on account  of the promisor’s failure to perform his promise at the  time  agreed, the promisee accepts performance of  such promise  at  any time other than that agreed,  the  promisee cannot  claim  compensation for any loss occasioned  by  the non-performance  of the promise at the time agreed,  unless, at  the  time  of such acceptance, he gives  notice  to  the promisor of his intention to do so."

     Incidentally  the law is well settled on this score on which  no  further dilation is required in this judgment  to the  effect  that  when  the contract  itself  provides  for extension  of  time,  the same cannot be termed  to  be  the essence  of the contract and default however, in such a case does  not  make  the contract voidable either.   It  becomes voidable  provided the matter in issue can be brought within the  ambit  of the first paragraph of Section 55 and  it  is only  in that event that the Government would be entitled to claim  damages  and  not otherwise.  In  Pollock  &  Mulla’s Indian  Contract & Specific Relief Acts, three several cases have  been very lucidly discussed, where time can be  termed to  be the essence of contract:  "1.  Where the parties have expressly  stipulated in their contract that the time  fixed for  performance  must be exactly complied with.  2.   Where the  circumstances  of  the contract or the  nature  of  the subject  matter indicate that the fixed date must be exactly

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complied  with and 3.  Where time was not originally of  the essence  of  the contract, but one party has been guilty  of undue  delay,  the  other party may  give  notice  requiring contract  to be performed within reasonable time and what is reasonable   time  is  dependant  on   the  nature  of   the transaction  and  on proper reading of the contract  in  its entirety."  In  the  contextual facts,  the  Division  Bench relied  on  the  Telex messages of the  seller,  as  noticed above, as a representation against cancellation but the fact remains  that  there  was in fact a definite  indication  of expression  of  stand  of  the  Government  as  regards  the withdrawal  of the letter of cancellation.  The issue arises as to the true effect of the withdrawal of the cancellation. Incidentally  on  the  factual score it appears  that  after withdrawal   of  the  first   letter  of  cancellation   the Government  again for the second time canceled the Agreement by  a  letter  dated  25th January, 1990  to  the  following effect:   1.   "Your  attention is invited to  the  contract mentioned  above for supply of 58000 MTs of imported  sugar, Clause  3  whereof stipulates that the seller shall  arrange shipment of the entire quantity so as to reach Indian ports, basis  coast  as  per Clause 4(1) ibid not later  than  31st October,  1989  2.   As  you   have  failed  to  fulfil  the contractual  obligation within stipulated time and the  time being  the  essence of the contract, the contract is  hereby cancelled  at  your risk and cost 3.  The  performance  Bank Guarantee  tendered with reference to the above contract  is also  forfeited  for the reasons mentioned above." There  is therefore,  a cancellation of an agreement which once  stood canceled and withdrawn:  can it be termed to be an otherwise valid   termination  after  recalling  of  the   letter   of cancellation in the month of November, 1989.  The High Court has  dealt with the entire correspondence in extenso between the  parties  during this interegnum and as such we  refrain ourselves  from dealing with the same in detail, suffice  it to  record  that  as  a  matter of fact  from  the  date  of recalling  of the cancellation letter, there were consistent reminders  about the dispatch instruction, about the arrival of  vessels and as to the port of landing which were for the Respondents  herein,  to fix, in terms of the Agreement  but there  was  a  total  silence  from  the  Respondent’s  end. Admittedly and there cannot possibly be any doubt as regards the  cancellation of Agreement on the expiry of the time  if the  time is treated to be the essence of the contract,  but in  the contextual facts when as a matter of fact, there was a  letter  of  cancellation  in terms of  the  contract  and assuming by reason of failure to supply as per the Agreement between   the  parties  -   but  that  cancellation   stands withdrawn.   There is, therefore, a waiver of the breach  if there  be  any, as regards non- performance of the  contract and  it is on this score that the High Court has gone  wrong on  the issue of duty to speak and it is on this score  that the  presumption  of the High Court to the effect  that  the cancellation  was  on the representation of the  seller,  is totally   unwarranted.   Fixation  of  a  future   date   of performance  in the absence of any evidence by the Appellate Court,  is not only unjustified but wholly untenable in law. Court  cannot possibly fix a date on its own for performance of  the contract.  It is thus necessary to detail out herein below the observations of the Appellate Court on this count. The Appellate Court in paragraph 29 of the judgment observed as  below:   "29.  The delivery was to be effected  by  31st October,  1989.   On  the representation of  the  seller  as contained  in their messages dated 8th and 9th November 1989 the cancellation was withdrawn.  That is the only conclusion

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possible.   Any  other conclusion will be wholly  erroneous. We   therefore,  cannot  accept   the  submission  that  the withdrawal  of cancellation was not on the representation of the  seller.  On this view the respondents were bound in law to  accept delivery if effected by 14th/15th November, 1989. It  is  implicit  that  the buyers  had  consented  to  take delivery  by  14th/15th November, 1989.  The  contention  of learned  counsel  for  the seller that the mention  of  31st October,  1989  by  the  respondents in  letter  dated  25th January, 1990- also shows that the respondents did not treat 14th/15th  November,  1989  as the  extended  delivery  date cannot be accepted.  Since delivery was not made at all, the mention  of 31st October, 1989 in the letter of cancellation (25th January, 1990) by itself would not show that the buyer did not treat 14th/15th November, 1989 as delivery date.  It thus   cannot  be  said  that   the  cancellation   was   on non-existent grounds.  The contract also stipulates that the buyer may extend the delivery period at a discount as may be mutually  agreed to between buyer and seller.  In this state of  affairs the further contention that the supply could not be  made  by  14th/15th  November, 1989 on  account  of  non amendment  of  the delivery period in the contract  and  non amendment of letter of credit cannot be accepted.  This plea is  clearly  an after thought.  Our attention has  not  been drawn  to  any legal proposition which casts an  obligation, under  these circumstances, on the buyer to fix a fresh date of  delivery.  The effect of accepting the contention of the seller  would  be that prior to 8th November, 1989,  on  the facts  and circumstances of the present case, the breach was on the part of the seller but the buyer having withdrawn the cancellation  and  not  having specified the fresh  date  of delivery,  31st  October,  1989 having already  passed,  the breach would be on the part of the buyer.  The contention on the face of it is fallicious.  It has to be rejected."

     In  paragraph  30 of the judgment the Bench  observed: "30.   Apart  from  the  urgent need for  supply  of  sugar, otherwise  too, in commercial transaction of this nature, in law, ordinarily time is of essence (See:  M/s.  China Cotton Exporters  Vs.   Beharilal Ramcharan Cotton Mills Ltd.,  AIR 1961  SC 1295).  Further, in the present case, the  contract itself  stipulates  that  the supply within  the  contracted delivery  period was to be the essence of the contract.   In this  view,  the  delivery  of  sugar  firstly  before  31st October,  1989 and later by 14th/15th November, 1989 was  of essence  and non supply within the aforesaid periods by  the seller  would  show  that  the seller is in  breach  of  the contract.   The  buyer having withdrawn the cancellation  of the  contract  on seller’s representation that the  delivery will  be  made  by 14th/15th November 1989  could  not  have refused  to  accept delivery within the said period.  It  is also  not possible for us to accept the contention that  the cancellation  was not withdrawn on the representation of the seller.   On  account  of  non-supply   of  sugar  upto  8th November,  1989  and  even failure to  supply  the  shipping particulars  the  contract  was   cancelled  by  the  buyer. Thereupon  the seller supplied the shipping particulars  and made  a  representation that the supply would be made on  or before  14th/15th November, 1989.  Under these circumstances the  cancellation of the contract was withdrawn.  The letter dated  11th  November,  1989  withdrawing  the  cancellation states   that   on  reconsideration  of   the   matter   the cancellation  is  withdrawn.   In   the  letter  dated  11th November,  1989  the  absence of specific reference  to  the representation of the seller that the delivery would be made

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by  14th/15th November, 1989.  Under these circumstances, is of  no  consequence.  As already noticed above,  the  letter dated  11th November, 1989 was personally handed over to the representative of the seller.  On receipt of that letter the seller  did not write to the buyer to specify the fresh date of delivery or to ask for amendment of the letter of credit. The  next  letter thereafter is dated 15th  November,  1989. The  seller did not say in this letter that pursuant to what had  been  stated by it in message dated 8th November,  1989 the  Ships  had entered Indian waters and as such the  buyer should  incorporate  fresh  date of delivery and  amend  the letter  of  credit  so  that  shipping  documents  could  be furnished  by  seller  to the buyer and that  without  these amendments  the  bank may not pay the amount covered by  the letter  of  credit.   On the other hand, the seller  in  the letter  dated 15th November, 1989 stated that the cargo  had gone  out  of its control and fresh cargo would be  arranged which  will  be arriving at Indian port within a  few  days. The  seller  asked  for minimum 15 days time to  supply  the cargo  and requested for delivery period being extended upto 30th  November,  1989 with consequential amendments  in  the letter of credit for acceptance of the documents.  The buyer was  not obliged in law to extend the delivery period.   The silence on the part of the buyer by not sending reply to the letter  dated  15th November, 1989 and also not sending  any reply  to the subsequent letters dated 20th November,  1989, 24th  November, 1989, 4th December, 1989 and 20th  December, 1989  only  shows that the buyer was not willing  to  extend delivery  period  after 15th November, 1989.  The sugar  was required for the urgent need of Dussehra/Diwali festivals of November,  1989  and  the supply not having been  made  till 14th/15th  November,  1989 the buyer was jus tified  in  not extending the delivery period.

     Turning  now on to the issue of duty to speak, can  it be  said  that  silence  on the part of  the  buyer  in  not replying  to  the  letters dated 15th November,  1989,  20th November,  1989, 24th November, 1989, 4th December, 1989 and 20th  December,  1989  only  shows that the  buyer  was  not willing  to extend the delivery period after 15th  November, 1989  - the answer cannot but be in the negative, more so by reason  of the fact that fixation of a second delivery dated by  the Appellate Bench of the High Court as noticed  above, cannot  be  termed to be in accordance with the law.   There was,  in  fact, a duty to speak and failure to  speak  would forfeit  all  the  rights  of  the buyer  in  terms  of  the Agreement.  Failure to speak would not, as a matter of fact, jeopardise  the  sellers  interest neither  the  same  would authorise  the  buyer to cancel the contract when there  has been  repeated requests for acting in terms of the agreement between  the parties by the seller to that effect more so by reason  of  a  definite anxiety expressed by  the  buyer  as evidenced  in the intimation dated 8th November, 1989 and as found  by  the Arbitrator as also the Learned Single  Judge. As noticed above, the entire judgment of the Appellate Bench proceeds on the basis of certain presumptions, we are afraid however  that  reliance thereon cannot but be termed  to  be fallacious  for  inter  alia the  reasons  mentioned  herein below:  (a) The first letter of cancellation of contract was received  by the seller on 9th November, 1989 after issuance of  both the seller’s telex dated 8.11.89 and 9.11.89 to the buyer   and  therefore  the  same   could  not   amount   to representations against the cancellation as is being held by the  Appellate Court.  (b) The observation of the  Appellate Bench  pertaining  to the amendment of the delivery date  in

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the  letter  of credit (i.e.  upto 29th January, 1990)  does seem  to be erroneous in the contextual facts of the  matter under  consideration.  The date of delivery was specific  in the letter of credit itself and in the event of non-delivery within  the period, there might be some complications and as such  request for extension of delivery date was made though however, without any response from the buyer’s end, when, in fact,  the  conduct itself shows that the delivery  date  as mentioned in the letter of credit was not adhered to and the parties  were  ad-idem on the score of extension.   (c)  The letter  of withdrawal of cancellation in any event does  not refer  to any representation and nor does it fix any date of delivery  as has been so thought of by the High Court.   The Appellate  Court’s  presumption  as to the fixation  of  the delivery  date being 14th/15th November, 1989 in the  normal course of event and had it been so, there would have been an express  intimation  from  the  buyer  of  such  a  specific extension.   (d)  Diverse intimations as noticed above  from the  seller’s end to the buyer, went unattended and not  one letter  was  sent  in reply thereto recording  therein  that 14th/15th  November,  1989  ought to be the  fresh  date  of delivery.   (e)  When the contract was finally cancelled  on 25th  January,  1990,  the Respondents stand  was  that  the delivery  date  breached by the claimant was  31st  October, 1989  and not 14th/15th November, 1989 as has now been fixed by the Appellate Bench of the High Court.  (f) The Appellate Bench,  in  fact,  has  not  been  able  to  appreciate  the importance  of the date of delivery in the letter of  credit specially  in  an international commercial  contract,  since without  the date of delivery being altered in the letter of credit  itself  and  the bank  being  informed  accordingly, question  of  release of any amount to the seller  by  their bank  would not arise.  (g) The Appellate Bench as a  matter of fact has gravely erred in having an implied delivery date when  the parties in fact did not stipulate at any point  of time such a date.  Let us now at this juncture consider this aspect  of  the  matter  in slightly  greater  detail.   The irrevocable  letter  of  credit  was issued  by  the  Indian Overseas  Bank, Janpath favouring the Appellant herein for $ 27,840,000  drawn on applicants for credit at site for  100% invoice  value covering shipment of 58000 million tonnes net weight, plus/minus 5% to be packed in Polylined jute bags of 50  kgs net weight ‘accompanied by the following documents". The  letter of credit by itself records that the name of the Indian  Port would be advised by the Government by means  of an  amendment to the credit and it further records that  the credit  is valid for negotiation upto three months from  the date  of  letter of credit subject to negotiation within  21 days  from the date of report of Independent/Joint  Surveyor referred  to in clause 5 of the documents.  These  documents include   inter  alia  the   following:    (a)   Beneficiary certificate  to the effect that all the terms and conditions of  the  contract dated October, 24, 1989 and its  annexures between  beneficiary and the applicants for the credit, have been fully complied with - one original and two copies.  (b) Certificates of inspection of quality, weight and packing in original and 5 copies;  at the ports of discharge signed and issued  by the applicants for the credit at the cost of  the beneficiary,  based on minimum 5 random sampling and 5 check weightment  certifying  (a) quality.  (c) Photocopy  of  the signed  contract between beneficiary and applicants for  the credit   (d)  Documents  with   discrepency  should  not  be negotiated  without banks prior approval.  Incidentally,  be it noted that the contract itself envisaged appointment of a Surveyor.    Clause  9  of   the  Agreement  provides:   "9.

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Inspection/survey  at load port(s) The quality, quantity and packing  at  the  load  port(s)   shall  be  supervised  and certified  by independent surveyors ominated by the Buyer at Sellers  cost.  The certificate of such nominated  surveyors based  on  not  less  than 5 random  sampling  and  5  check weightment  shall  be final.  The report of  such  surveyors shall,  inter-alia,  cover  the following.  "Load  ports  in Clause  9  above  was subsequently amended to  the  port  of discharge,  the clause however, envisages the appointment of an  independent  Surveyor  nominated  by the  buyer  at  the sellers  cost and report of the surveyor is of  considerable importance  since  the contract itself provides the  far  of activities  of  the  Surveyors and the  coverage  under  the Certificate and the same are:  i) Cleanliness and fitness of the   holds  of  vessel  for   receiving  sugar   prior   to commencement  of  loading;  ii) Quality and  specifications; iii)  Weight gross and net;  iv) Packing v) Total number  of bags;   vi) Arkings vii) Date of commencement and completion of  leading viii) Radioactivity-free certificate ix) Current crop  of  country of origin, mentioning crop years  x)  Load Rate  xi)  LOA/BEAM  and xii) Arival Draft"  Whilst  on  the subject  of documentary evidence and the presumption of  the Appellate Bench as regards the fixation of date of delivery, it  would  be convenient to note the Shipment as also  Price Clause  in  the  Agreement.  The Shipment  Clause  reads  as below:   "3.   Shipment  Period:    Sellers  shall   arrange shipment quantity so as to reach Indian Ports basis coast as per  Clause 4(i) not later than 31st October, 1989.  Date of tendering  notice  of readiness of the vessel as per  clause 13(vii)  here  of  shall  be the date  of  delivery  period. Shipment  within contract delivery period is of the  essence of  this  contract.   In case of any delay in  reaching  the shipments  before the delivery period at Indian Port, it  is clearly  understood  that  except for the reasons  of  force majeure,  the  seller  will be deemed to be  in  contractual default/  and  the  buyer will have the  absolute  right  to cancel  the contract at the cost and risk and responsibility of the seller and claim for damages, costs, losses, expenses to  from  the  seller.  The Buyer, may however,  extend  the delivery  period  at a discount as may be mutually agree  to between   the   Buyer  and   the  Seller.   Any   cargo(es), under-loading/afloat  on the date of this contract cannot be supplied."  The Price Clause reads as below:  "4.  Price  I. In  polylined jute bags, per metric tonne net weight,  cost, insurance  and  freight, free out, one safe Indian  port  at Buyer’s  option.   US  480.00 PMT (US DOLLARS  FOUR  HUNDRED EIGHTY ONLY) PER M.T.  In case sugar is shipped in Polylined polypropylene  bags,  the above price will be subject  to  a discount  of  US  2.00 per metric tonne net weight  of  full cargo.   The  above price is based on discharge at one  safe Indian  port  at  Buyer’s option, on the west Coast  if  the vessel  carrying sugar is coming from the West of India,  or on the East Coastal vessel carrying sugar is coming from the East  of  India  for  this   purpose.   Tuticorin  will   be considered as a West Coast Indian port.  II.  Opposite Coast Discharge The Buyer has the option to discharge the sugar at a port on the coast other than the basis coast as per Clause 4(1)  above  by paying additional charges @ US$ 1.50 on  the net  weight  of  the full cargo.  III.  Two  Port  Discharge Buyer  has the option to discharge the sugar at two ports on any  one  coast  for which the Buyer  shall  pay  additional charges  US $ 1.50 PMS on the net weight of full cargo.   In case  the  second discharge port is Calcutta or Haldia,  the Buyer  shall pay additional charges US $ 2.00 PMS on the net weight  of  full  cargo  instead  of US  $  1.50  PMS.   For

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discharge  at  two ports on the coast other than  the  basis coast  as  per Clause No.4(1) above, the additional  charges for  two  port discharge payable under this clause shall  be over and above that payable under Clause No.4(ii) above." It needs  to be noted here that the Clause as regards any cargo being  under-loading/afloat on the date of the contract  has been subsequently deleted.  The contract term as regards the shipment  period  expressly provide thus that  the  Shipment should  reach Indian ports not later than 31st October, 1989 but  the  issue is whether in the contextual facts time  was the  essence of the contract and in the event the answer  is in the affirmative, then and in that event whether there was subsequent  extension  of  time  and   what  is  the  effect therefor.   Herein  before in this judgment we did refer  to the effect of subsequent extension, but the issue as regards the factum of the time being the essence of the contract was left  to  be dealt with at the later stage and as  such,  it would  be  convenient  to note the same  at  this  juncture. Clause  3  of  the  Agreement  namely  the  Shipment  period expressly  records  that Shipment within  contract  delivery period was of the essence of the contract and it was clearly understood  between  the parties that except for reasons  of force  majeure  the Seller would be deemed to be in  default and  buyer  would  have  the absolute right  to  cancel  the contract at the cost, risk and responsibility of the seller. This  particular  clause  however itself provided  that  the buyer  may however extend the delivery period at a  discount to  be mutually agreed to between the buyer and the  seller: the  contract therefore, envisaged specifically an extension of  the period on a mutually agreed term.  The Price  Clause also  is of some relevance in the matter of appreciation  of the  Agreement  between  the  parties  vis--vis  the  time. Clause  4  (ii)  records that the buyer had  the  option  to discharge  the sugar at a port on the coast, other than  the basic  coast  by  paying additional charge and in  terms  of Clause  4(iii)  the  buyer had the option to  discharge  the sugar at two ports upon payment of additional charge.  It is therefore,  apparent that different rates have been provided for  different ports and specific naming of the port is thus required  before delivery is expected in the matter.  On the wake  of this factual detail as appears from the record  and by  reason  of non-fulfilment of the buyers’ obligations  in terms of the agreement, can it be said that the time was the essence of the contract?  In our view the answer to this all important  question is in the negative.  The contract itself provides   reciprocal  obligations  and  in  the  event   of non-fulfilment  of  some such obligations and which  have  a direct  bearing  onto  them - strict adherence of  the  time schedule  or  question of continuing with the notion of  the time being the essence of the contract would not arise.  The obligations  are  mutual and the terms of the agreement  are inter-dependent  on each other.  Incidentally, paragraph 761 of  Halsbury"s Laws of England (4th Ed:  Vol.41) seems to be very  apposite in this context.  The passage reads as below: "761.   Place  of  Delivery uncertain.  Where the  place  of delivery  is  not indicated by the contract , and is  within the option of the seller or of the buyer respectively, it is a  condition  precedent to the liability of the buyer or  of the  seller  respectively to accept or to deliver the  goods that he should receive notice of the place of delivery."

     If  any  credence  is to be given to the  above  noted passage  in  Halsbury’s Laws of England being read with  the terms  of the contract, we do not find any justification for the  Appellate  Bench  of  the  High  Court  to  come  to  a

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conclusion  that  in  fact  time  was  the  essence  of  the contract,  since  the  condition precedent has not  yet  had taken  place,  neither  the requirement  of  appointment  of Surveyor  has been complied with:  the contract ought to  be read  with  the time clause but subject however  to  certain other  conditions.   The essential point is that the  seller must  be  instructed  in accordance with the  terms  of  the contract  as to the way in which he can perform his duty  in terms  of  the agreement and effect delivery upon the  goods being  put on board - In the event the Port of Discharge  is not  named -can the goods be put on board or can the  seller be  made  responsible  for his failure to put the  goods  on board?   The  answer cannot but be in the negative.  In  the contextual  facts, the goods were on the high seas and to be diverted  to the Ports of India, shortly, as such nomination of  the port, was an essential requirement, in order to make the seller liable for breach and entitlement of the buyer to claim  damages.   In this context a passage from  Benjamin’s Sale  of  Goods  Act  (4th   Edition)  seems  to  be  rather appropriate:   Paragraph  20-040  reads   as  below:    "The essential  point  is that the seller must be instructed,  in accordance  with  any relevant terms of the contract, as  to the way in which he can perform his duty to put the goods on board.   If  no  shipping  instructions  are  given,  or  if shipping  instructions are not given within the time allowed by  the  contract, the seller is not liable in  damages  for non-delivery;   and  the  buyer  is liable  in  damages  for non-acceptance."

     Mere  fixation  of a period of delivery or a  time  in regard  thereto  does  not by itself make the  time  as  the essence  of the contract, but the agreement shall have to be considered in its entirety and on proper appreciation of the intent and purport of the clauses incorporated therein.  The state of facts and the relevant terms of the Agreement ought to  be noticed in its proper perspective so as to assess the intent  of  the  parties.  The Agreement must be read  as  a whole with corresponding obligations of the parties so as to ascertain  the  true intent of the parties.  In the  instant case,  the Port of Discharge has not been named neither  the Surveyor  is appointed - without whose certificate, question of  any payment would not arise - can it still be said  that time was the essence of the contract, in our view the answer cannot  but be a positive ‘No’.  Mr.  Dholakia, the  learned Senior  Advocate as also Mr.  Rawal, the learned  Additional Solicitor  General,  appearing  for FCI and Union  of  India respectively,  strongly contended that the express words  to the  effect  that the delivery ought to be effected by  31st October, 1989 ought to be taken with proper sanctity and the party  be held responsible for not effecting delivery within the  time  stipulated in the Agreement and in  this  context strong  reliance was placed on the decision of this Court in the  case of China Cotton Exporters vs.  Biharilal Ramcharan Cotton  Mills  Ltd.   (AIR  1961 SC 1295).   We  are  afraid however,  that  reliance  on the decision of this  Court  in China  Cotton Case (supra) is totally misplaced.  This Court in  the above noted decision was considering the true effect of  the word "therefore", which is totally absent here.  For convenience  sake  however, paragraph 6 of the  judgment  is noted  herein  below:  "6.  We find thus that  whatever  may have  been  said  earlier  in the  printed  portion  of  the contract   the   parties  took    care,   after   specifying "October/November,  1950" as the date of shipment to make  a definite  condition in the remarks column, on the  important

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question  whether the shipment date was being guaranteed  or not  and  if  so,  to what extent.  The  words  are:   "This contract  is  subject to import licence, and  therefore  the shipment  date is not guaranteed." Remembering, as we  must, that  in  commercial  contracts, time is ordinarily  of  the essence  of the contract and giving the word "therefore" its natural,  grammatical  meaning, we must hold that  what  the parties  intended  was  that  to the extent  that  delay  in shipment  stands in the way of keeping to the shipment  date October/November,   1950,  this  shipment   date   was   not guaranteed;     but    with     this   exception    shipment October/November,  1950,  was  guaranteed.    It  has   been strenuously  contended by the learned Attorney-General, that the  parties  were mentioning only one of the  many  reasons which  might  cause  delay in shipment and  the  conjunction "therefore" was used only to show the connection between one of  the many reasons - by way of illustration and a  general agreement  that the shipment date was not guaranteed.  We do not  consider  this  explanation of the use  of  "therefore" acceptable.   If the parties intended that quite apart  from delay  in  obtaining import licence, shipment date  was  not guaranteed,  the natural way of expressing such intention  - an  intention contrary to the usual intention in  commercial contracts  of treating time as the essence of the contract - would  be  to  say:   "This contract is  subject  to  import licence  and  the  shipment date is not  guaranteed."  There might be other ways of expressing the same intention, but it is  only  reasonable  to expect that anybody  following  the ordinary  rules of grammar would not use "therefore" in such a  context except to mean that only to the extent that delay was  due to delay in obtaining import licence shipment  time was not guaranteed.

     The decision in China Cotton Exporter’s (supra) cannot possibly thus lend any assistance in the contextual facts of the matter in issue.  The facts being, totally different and is  thus  clearly  distinguishable.   Further  reliance  was placed  by  the Respondent in the decision of this Court  in the  case  of  I.T.C.  Ltd.  vs.   Debt  Recovery  Appellate Tribunal  and  Others (1998 (2) SCC 70) wherein  this  Court relying upon the decision in the case of U.P.  Co- operative Federation  Ltd.  v.  Singh Consultants & Engineers (P) Ltd. (1988 (1) SCC 174) observed in paragraph 17 of the report as below:   "17.   It  is now well settled  that  the  question whether  goods were supplied by the appellant or not is  not for  the  Bank.  This point has already been decided by  the decision  of  this  Court  in  U.P.Coop.   Federation   case referred to above.  In that case it was stated (at p.193) by Jagannatha Shetty, J.  as follows:  (SCC para 45)

     "The  bank must pay if the documents are in order  and the  terms of credit are satisfied.  The bank, however,  was not  allowed  to determine whether the seller  had  actually shipped  the  goods  or whether the goods conformed  to  the requirements of the contract.  Any dispute between the buyer and  the  seller  must be settled between  themselves.   The courts,  however,  carved out an exception to this  rule  of absolute  independence.   The courts held that if there  has been  ‘fraud  in the transaction’ the bank  could  dishonour beneficiary’s demand for payment.  The courts have generally permitted  dishonour  only on the fraud of the  beneficiary, not the fraud of somebody else." (emphasis supplied)

     It  will  be  noticed from the  italicised  underlined portion  in the above passage that there will be no cause of

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action  in favour of the bank in cases where the seller  has not  shipped the goods or where the goods have not conformed to  the  requirements  of the contract.  The  Bank,  in  the present  case  before us, could not, by merely stating  that there  was  non-supply  of goods by the appellant,  use  the words  "fraud  or misrepresentation" for purposes of  coming under  the exception.  The dispute as to non-supply of goods was  a  matter between the seller and buyer and did not,  as stated  in  the above decision, provide any cause of  action for the Bank against the seller."

     Reliance  was  also  placed  to the  Law  of  Bankers’ Commercial  Credits  by  Gutteridge and Megrah  wherein  the authors  stated  that:  "Banks issuing  irrevocable  credits subject  to  the Uniform Customs are not concerned with  the sales  contract  or the goods;  if it were otherwise  credit business  would  be impossible.  In law the credit  contract stands  by itself and is not to be interpreted to the  point of amendment or augmentation by reference to the contract of sale  or to any external document." The authors further laid emphasis  on the General Provision c of the Uniform  Customs which  states  that:   "(c) Credits, by  their  nature,  are separate  transactions from the sales or other contracts  on which  they  may be based and banks are in no way  concerned with or bound by such contracts."

     Further  emphasis was also laid by authors on  Article 8(a)  which  provides  that::  "(a)  In  documentary  credit operations  all parties concerned deal in documents and  not in  goods." Relying on the above, it was contended that  the plea  as  raised by the Appellant that the amendment to  the letter of credit is a requirement in order to obtain payment cannot  but  be termed to a myth and as such should  not  be relied  upon  -  while  it is true  that  the  documents  by themselves  make  and create a separate agreement  with  the Bank,  and  the  Bank cannot possibly raise any  dispute  in regard  thereto  as to whether the goods are  actually  been supplied  or  not, but two factors ought to be kept in  mind apart  from  what  we  have stated  herein  before  in  this judgment.   The  first  being, to facilitate payment  it  is better  to have the extended delivery date on the letter  of credit  itself  by way of an amendment, so as to  avoid  any future  complication.   This  is  not a rule  of  law  or  a requirement  of  law but a matter of prudence.   The  second aspect  is  the counter guarantee of the Nova  Scotia  Bank. The  counter guarantee also stipulates the delivery date and in  the event of some queries raised in regard thereto,  the party  in whose favour such a letter of credit stands, would be  put to unnecessary and frivolous litigation for no fault of   the  beneficiary.   As  noticed   above  it  is  not  a requirement  of law but a matter of prudence.  No  exception can  possibly be taken to the views expressed by this  Court in  ITC’s  case  or  the statement in the  Law  of  Bankers’ Commercial  Credits.  Be it further noted that substance  of both  citations  noticed above is the enforceability of  the letter  of  credit by way of a separate transaction, in  any event,  that would mean and imply litigation in the event of there being any issue raised as regards the delivery period. Parties  ought  not  to  be   allowed  to  be  plunged  into litigation,  as  such  both the citations do  not  have  any relevance  apropos  the  submission made by  the  Appellants herein.   Apart therefrom and in any event in the matter  of compliance  of the terms and conditions of letter of credit, reference  of  a  delivery date is a requirement  since  the original contract stood incorporated in the letter of credit

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itself  and  the delivery date being shown therein  as  31st October,  1989.   The  requirement  of  a  certificate  that original  contract  has been fully complied with,  makes  it necessary  that the delivery for the purpose of the contract had  to  be  extended since the original date by  reason  of efflux  of time has lapsed.  The learned Single Judge of the High  Court looked at the matter from another point of  view as well and he observed:  "Looking at it from another angle, if  amendment in the letter of credit was not necessary, the respondents should say so in reply to the various letters of the claimants in this connection...."

     Whether  the Respondents should have said it or not as observed  by the learned Single Judge, but the fact  remains that there was total silence and nothing prevented them from stating  that  such  an  endorsement either  is  or  is  not required  but  as noticed above, the Respondents herein  has maintained  delightful  silence  on   that  score.   In  the premises it would thus be safe to conclude that by reason of the  non-fulfillment of the three conditions as noted above, question of time being the essence of the contract would not arise  and  as  such delivery was to be  expected  within  a reasonable  time  but  before the expiry of  the  reasonable time,  diverse letters were sent asking for details but  the buyer  maintained  total  silence when there was a  duty  to speak  as  noted above.  The Appellate Court’s finding  that the  contract  stood extended upto 14th/15th  October,  1989 does  not  have  any  factual support and  as  such  totally unwarranted  and  thus cannot be sustained.  For the self  - same  reason  the finding of the Appellate Court as  regards the  issue of law, warranting intervention of the High Court vis--vis  the  award,  cannot also be sustained.   This  is apart  from the fact that it is a factual issue upon  proper reading  of the material documents on record.  In any  event upon  coming  to a conclusion that facts detail out  in  the judgment  (under Appeal) unmistakably record that a new date of  delivery  is available on record - Question of the  same being  an  issue of law does not arise in the facts  of  the matter under consideration.  The letter of the Government of India  dated 11.11.89 stated that the matter has since  been reconsidered and the letter of cancellation stands withdrawn though  however, without prejudice to rights and contentions of  the  Government  but  there was as  a  matter  of  fact, reconsideration  of the entire issue and it is only on  that basis  that  the letter of cancellation was withdrawn.   The facts  depict that on 15th November, 1989, an intimation was sent  by  the  Appellants  to FCI stating that  due  to  the cancellation,  the cargo already arranged for, has gone  out of  control and a new cargo was being arranged.  In the same letter  the  Appellant further asked for fixation of  a  new date  of  delivery and to make consequential  amendment  for acceptance  of  documents under the letter of credit by  the Bank  but no reply is sent.  Letters of reminders have  been sent  again on 20th November, 1989, 24th November, 1989  but without  any  response  whatsoever   and  subsequently   the cancellation  came  in  January,   1990  as  noticed  above, forfeiting  the performance Bank Guarantee by FCI.  In  that view  of the matter, question of the time being the  essence would  not arise in the contextual facts.  More so by reason of  the  fact that the cargo was a cargo afloat on the  High seas.  Turning attention on to the other focal point, namely the  interference of the court, be it noted that Section  30 of  the Arbitration Act, 1940 providing for setting aside an award  of  an  arbitrator  is   rather  restrictive  in  its

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operation and the statute is also categorical on that score. The  use  of the expression ‘shall’ in the main body of  the Section  makes it mandatory to the effect that the award  of an  arbitration  shall  not be set aside excepting  for  the grounds  as  mentioned  therein to wit:  (i)  arbitrator  or umpire  has misconducted himself;  (ii) award has been  made after the supersession of the arbitration or the proceedings becoming  invalid;   and  (iii) award  has  been  improperly procured  or  otherwise  invalid.   The  above  noted  three specific  provisions under Section 30 thus can only be taken recourse to in the matter of setting aside of an award.  The legislature  obviously  had in its mind that the  Arbitrator being  the judge chosen by the parties, the decision of  the Arbitrator as such ought to be final between the parties.

     Be  it noted that by reason of a long catena of cases, it  is now a well settled principle of law that  reappraisal of  evidence by the court is not permissible and as a matter of  fact  exercise of power by the Court to  reappraise  the evidence  is unknown to a proceeding under Section 30 of the Arbitration  Act.  In the event of there being no reasons in the  award, question of interference of the court would  not arise at all.  In the event, however, there are reasons, the interference  would  still  be   not  available  within  the jurisdiction  of  the Court unless of course, there exist  a total  perversity in the award or the judgment is based on a wrong  proposition  of law:  In the event however two  views are  possible on a question of law as well, the Court  would not  be justified in interfering with the award.  The common phraseology  ‘error apparent on the face of the record’ does not  itself, however, mean and imply closer scrutiny of  the merits of documents and materials on record:  The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain  between the parties.  If the view of the arbitrator is  a  possible  view the award or the  reasoning  contained therein  cannot be examined.  In this context, reference may be  made to one of the recent decision of this Court in  the case  of State of Rajasthan v.  Puri Construction Co.   Ltd. (1994  (6)  SCC  485) wherein this court  relying  upon  the decision  of  Sudarsan Trading Co.’s case (Sudarsan  Trading Co.   v.   Government of Kerala and Anr.  (1989 (2) SCC  38) observed  in paragraph 31 of the Report as below:- "A  court of  competent jurisdiction has both right and duty to decide the  lis  presented before it for adjudication according  to the  best understanding of law and facts involved in the lis by  the judge presiding over the court.  Such decision  even if  erroneous either in factual determination or application of  law  correctly, is a valid one and binding inter  parts. It   does  not,  therefore,  stand   to  reason   that   the arbitrator’s  award  will be per se invalid and  inoperative for  the  simple  reason that the arbitrator has  failed  to appreciate the facts and has committed error in appreciating correct  legal principle in basing the award.  An  erroneous decision of a court of law is open to judicial review by way of  appeal or revision in accordance with the provisions  of law.   Similarly, an award rendered by an arbitrator is open to  challenge within the parameters of several provisions of the  Arbitration  Act.  Since the arbitrator is a  judge  by choice  of the parties and more often than not a person with little  or no legal background, the adjudication of disputes by  an arbitration by way of an award can be challenged only within  the  limited  scope  of several  provisions  of  the Arbitration  Act  and  the  legislature in  its  wisdom  has limited  the scope and ambit of challenge to an award in the

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Arbitration  Act.  Over the decades, judicial decisions have indicated  the parameters of such challenge consistent  with the  provisions  of the Arbitration Act.  By and  large  the courts  have disfavoured interference with arbitration award on  account  of  error  of  law and fact  on  the  score  of misappreciation  and  misreading of the materials on  record and have shown definite inclination to preserve the award as far as possible.  As reference to arbitration of disputes in commercial  and  other  transactions  involving  substantial amount  has  increased  in  recent times,  the  courts  were impelled  to have fresh look on the ambit of challenge to an award  by  the  arbitrator so that the award  does  not  get undesirable  immunity.   In recent times, error in  law  and fact in basing an award has not been given the wide immunity as  enjoyed earlier, by expanding the import and implication of  "legal misconduct" of an arbitrator so that award by the arbitrator  does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decision of the  lis between the parties to arbitration.  Precisely  for the  aforesaid  reasons,  the erroneous application  of  law constituting  the  very basis of the award and improper  and incorrect  findings  of  fact,   which  without  closer  and intrinsic  scrutiny,  are  demonstrable on the face  of  the materials  on record, have been held, very rightly, as legal misconduct rendering the award as invalid.  It is necessary, however,  to  put a note of caution that in the  anxiety  to render justice to the party to arbitration, the court should not  reappraise  the  evidences intrinsically with  a  close scrutiny for finding out that the conclusion drawn from some facts,  by the arbitrator is, according to the understanding of  the court, erroneous.  Such exercise of power which  can be exercised by an appellate court with power to reverse the finding  of  fact,  is  alien  to the  scope  and  ambit  of challenge  of an award under the Arbitration Act.  Where the error  of finding of facts having a bearing on the award  is patent  and is easily demonstrable without the necessity  of carefully  weighing  the  various possible  viewpoints,  the interference  with award based on erroneous finding of  fact is permissible.  Similarly, if an award is based by applying a  principle of law which is patently erroneous, and but for such  erroneous  application of legal principle,  the  award could  not  have been made, such award is liable to  be  set aise  by  holding that there has been a legal misconduct  on the  part  of the arbitrator.  In ultimate analysis it is  a question of delicate balancing between the permissible limit of  error  of  law and fact and patently  erroneous  finding easily  demonstrable  from  the   materials  on  record  and application  of  principle of law forming the basis  of  the award which is patently erroneous.  It may be indicated here that  however  objectively  the problem may be  viewed,  the subjective  element  inherent  in  the  judge  deciding  the problem,  is  bound to creep in and influence the  decision. By  long training in the art of dispassionate analysis, such subjective element is, however, reduced to minimum.  Keeping the  aforesaid  principle  in  mind, the  challenge  to  the validity  of  the  impugned award is to be  considered  with reference to judicial decisions on the subject."

     It  is  on the basis of this well settled  proposition that  the learned Single Judge came to a conclusion that the findings  of  the Arbitrators in regard to the extension  of delivery  period  and  failure  to fix the  fresh  date  has resulted  in  breach  of  the contract on the  part  of  the Government  and the same being purely based on  appreciation of  material on record by no stretch it can be termed to  be

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an  error  apparent on the face of the record entitling  the court  to interfere.  The Arbitrators have, in fact, come to a  conclusion  on a closer scrutiny of the evidence  in  the matter  and re-appraisal of evidence by the court is unknown to  a  proceeding under Section 30 of the  Arbitration  Act. Re-appreciation  of evidence is not permissible and as  such we  are not inclined to appraise the evidence ourselves save and  except what is noticed herein before pertaining to  the issue  as  the time being the essence of the  contract.   In this  context,  reference may be made to a decision of  this Court  in the case of M.  Chellappan vs.  Secretary,  Kerala State  Electricity  Board  and Another (1975 (1)  SCC  289). Mathew,  J.  speaking for the Three Judge Bench in paragraph 12  and 13 observed as below:  "12.  The High Court did  not make  any  pronouncement upon this question in view  of  the fact  that it remitted the whole case to the arbitrators for passing  a  fresh award by its order.  We do not think  that there  is any substance in the contention of the Board.   In the  award, the umpire has referred to the claims under this head  and  the  arguments of the Board for  disallowing  the claim   and  then  awarded   the  amount  without  expressly adverting  to or deciding the question of limitation.   From the  findings  of the umpire under this head it is not  seen that  these claims were barred by limitation.  No mistake of law  appears  on the face of the award.  The umpire as  sole arbitrator  was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that is  no ground for challenging the validity of the award.  It is only when a proposition of law is stated in the award and which  is the basis of the award, and that is erroneous, can the award be set aside or remitted on the ground of error of law apparent on the face of the record:

     Where  an arbitrator makes a mistake either in law  or in  fact  in  determining  the matters  referred,  but  such mistake  does not appear on the face of the award, the award is  good  notwithstanding  the  mistake,  and  will  not  be remitted or set aside.

     The  general rule is that, as the parties choose their own arbitrator to be the judge in the disputes between them, they  cannot, when the award is good on its face, object  to his  decision,  either  upon  the law or  the  facts.   (see Russell on Arbitration, 17th ed., p.322).

     13.   An  error of law on the face of the award  means that  you  can  find  in the award or  a  document  actually incorporated  thereto,  as for instance, a note appended  by the  arbitrator  stating the reasons for his judgment,  some legal  proposition which is the basis of the award and which you  can then say is erroneous (see Lord Dunedin in Champsey Ehara  &  Co.  v.  Jivraj Baloo Co.).  In Union of India  v. Bungo  Steel  Furniture Pvt.  Ltd., this Court  adopted  the proposition  laid down by the Privy Council and applied  it. The Court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the arbitrator has committed an error of law."

     In  any  event,  the issues raised in  the  matter  on merits relate to default, time being the essence, quantum of damages  - these are all issues of fact, and the Arbitrators are  within  their jurisdiction to decide the issue as  they deem  it  fit  - the Courts have no right  or  authority  to

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interdict  an  award  on a factual issue and it is  on  this score  the  Appellate Court has gone totally wrong and  thus exercised  jurisdiction which it did not have.  The exercise of  jurisdiction  is  thus wholly unwarranted and  the  High Court   has  thus  exceeded   its  jurisdiction   warranting interference  by  this Court.  As regards issues of fact  as noticed above and the observations made herein above obtains support from a judgment of this Court in the case of Olympus Superstructures  Pvt.   Ltd.  v.  Meena Vijay Khetan &  Ors. (1999  (5)  SCC  651)  Before we  conclude  one  significant feature ought to be noticed.  Admittedly, a meeting was held between  the  claimants and the Minister of Food  and  Civil Supply  and according to the claimant, it was agreed that on the  claimants  paying a sum of Rs.5 lakhs towards  expenses incurred  by the Government in opening the Letter of  Credit and  on  the claimants giving up any claim for damages,  the Performance  Bank  Guarantee would be released.  While  some discrepancy arise pertaining to the meeting in regard to the above  subject  but  the subsequent  evidence  disclosed  as appears  from  the  record  of   the  Arbitrators  that  the Appellants herein purchased a Bank Draft for Rs.5 lakhs from the  State  Bank  of  India and took it  to  the  office  of Government  of  India on 27th November, 1989 but it was  not accepted.  The Arbitrators as appears summoned relevant file of  the Government which was produced and the reasoned award contain  the  following:  "During the cross  examination  of Shri  S.K.  Swamy the note made in this file by the Minister referred  to  by S.  Santokh Singh was vertabim repeated  in the question but to the witness Shri Swamy on 8th May, 1991. How the claimants got the verbatim text of this note, if the file  was  privileged, is not clear, but what we  found  was that the note of the Minister on the file was exactly in the same  words  as the question put to Mr.  Swamy in his  cross examination  dated 8.5.91.  All facts stated by S.   Santokh Singh  are  mentioned  in  this  note.   This  part  of  the statement   of  S.   Santokh   Singh  is  thus  sufficiently corroborated  by  this note and S.  Santokh Singh  has  also produced  the draft for Rupees five lakh mentioned by him in his statement."

     This  aspect  of  the  matter has  also  been  totally overlooked  by  the  Appellate  Bench  of  the  High  Court. Needless to record that two Arbitrators Hon’ble Mr.  Justice S.N.   Shankar,  a retired Chief Justice of the Orissa  High Court  and Shri K.C.  Diwan, Senior Advocate upon  appraisal of  evidence and have considered the matter in its  entirety and  in  proper  perspective.   As  such,  the  question  of interference  with  the Arbitral Award does not  and  cannot arise.   In that view of the matter, these Appeals  succeed. The order of the Appellate Bench of the High Court stand set aside and the order of the learned Single Judge of the Delhi High  Court stands restored.  Each party however to bear its own cost.