M/S. Bharat Rasayan Ltd vs M/S. Hindustan Insecticides Ltd
2001 Latest Caselaw 584 Del

ORDER

K.S. Gupta.J.

1. This petition under Section 11 of the Arbitration and Conciliation Act,1996 was filed by petitioner company alleging that it is engaged in the business of manufacturing and trading of Technical grade pesticides an their intermediates. In pursuance of Tender Notice No.HIL/CO/1/96 dated 1st February 1996 issued by the respondent in local daily newspapers for purchase of Fenvalerate Technical and Cypermethrin Technical, the petitioner submitted its quotations/ offers Along with earnest money deposits etc with the respondent vide letter Nos. BRL: 96:4538 and 39, both dated 20th February 1996. Tenders were opened on 23rd February 1996 and petitioner company was declared successful tenderer. Respondent thereafter entered into negotiations with petitioner. Petitioner company gave its revised offers vide letter Nos.BRL: 96: 4823 and 24, both dated 21st March 1996. After further negotiations, petitioner vide its letter dated 12th April 1996 offered to extend interest free credit for 70 days instead of 30 days with respect to Cypermethrin Technical only. Petitioner also offered to respondent a special rebate of 2% on basic price of the supplies of Cypermethrin Technical only if payment was made by it within 70 days. The respondent agreed to pay interest on outstanding amount @ 24% p.a. in case of its failure to make payment within 30 days of the supply of Fenvalerate Technical and 70 days of Cypermethrin Technical. It is further alleged that respondent placed purchase orders bearing Nos.CTM-4/HO/D/11/Fenvalerate/96-97 dated 13/17th May 1996 for 3,000 kgs f Fenvalerate Technical 90% Min and CTM-3/HO/D/14/96-97 dated 20/23 May 1996 for 16 MTs of Cypermethrin Technical 92% Min. on petitioner company. Pursuant to these orders, petitioner company manufactured and supplied said materials to the respondent against invoices, details whereof together with due date of payment(s) have been set out in sub para (x) of Para 7 of the petition thus:-

  Item      Invoice No.   Date    Amount    Due Date
 Fenvalerate Tech  99/96  20.05.1996 1834074.00 20.6.96 

Cypermethrin Tech   119/96   08.06.1996  3260400.00   17.8.96 

 Do   122/96  08.06.1996  2201056.00  17.8.96 

 Do   139/96  11.06.1996  1911910.00  20.8.96 

 Do   143/96   11.06.1996  3517228.00  20.8.96 

 Do   151/96   19.06.1996 4024020.00  28.8.96 

 Do    158.96   22.06.1996  1341340.00  31.8.96 

 Do    164/96   24.06.1996  2488400.00  02.9.96 

 Do    172/96  26.06.1996  2671240.00  04.9.96

        TOTAL: 2,34,49,668.00

 

 2. It is stated that materials against said invoices were duly received by the respondent. In sub para (xi) of aforesaid para the details of part payments made by respondent have been given as under:- 


  Payment(Rs)      Date
 10,00,000     26.07.1996 

40,00,000     17.09.1996 

40,00,000     21.09.1996 

25,00,000     15.11.1996 

30,00,000     20.11.1996 

20,00,000     06.12.1996 

68,69,005     17.01.1997

 

Thus, a total sum of Rs. 2,33,69005/- was paid by the respondent after considerable delay. It is further alleged that invoices raised by petitioner company specifically provided that interest will be charged @ 24% p.a. if payment was not made within the stipulated period. Respondent was thus liable to pay amount of Rs. 12,90,210/- towards interest on delayed payments calculated @ 24% p.a. in addition to further interest calculated at the same rate on said amount of Rs.12,90,210/- from 17th January 1997 to 31st August 1999 which comes to Rs.8,12,832/- making the total liability of respondent to the tune of Rs.21,03,042/-. It is stated that Tender documents dated 20th February 1996 containing general terms and conditions of tender, has arbitration clause by way of clause 23. The petitioner got a legal notice dated 16th April 1999 served upon the respondent requiring it to occur in the appointment of an arbitrator to decide the dispute regarding interest on delayed, payments. In the reply dated 22nd May 1999 the respondent denied its liability to pay interest and took the stand that alleged claim towards interest was not a dispute and, therefore, could not be referred to arbitration. It was prayed that sole arbitrator be appointed court and dispute as to payment of interest on delayed payments be referred to him for adjudication.

3. In the reply filed by respondent which does not deal with all the averments made in petition, it is alleged that purchase order dated 13th/17th May 1996 pertains to supply of Fenvalerate Technical while purchase order dated 20th/23rd May 1996 to supply of Cypermethrin Technical. Purchase order dated 13th.17th May 1996 does not contain any arbitration clause though an arbitration clause is mentioned in purchase order dated 20th/23rd May 1996. Therefore, alleged claim for interest on delayed payments in respect of supply of Fenvalerate Technical cannot be referred to arbitration. It is further alleged that arbitration clause as contained in purchase order dated 20th/23rd May 1996 does not cover the dispute sought to be referred to arbitration. Both the purchase orders clearly reveal that there was no agreement to pay interest on delayed payments, if any, by the respondent. It is also alleged that the invoices raised by petitioner cannot bind the respondent as to payment of interest and/or the rate thereof. It is emphatically denied that respondent is liable to pay the amount claimed by way of interest on delayed payments.

4. I have heard Sh. Ajay Gupta for petitioner and Sh. Ashok K. Gupta for respondent for have also been taken through the record.

5. It has not been denied by the respondent that in pursuance of Tender Notice No.HIL/CO.1/96 issued by it for purchase of Fenvalerate Technical and Cypermethrin Technical, the petitioner company submitted its quotations/offers vide letter Nos.BRL 96: 4538 and 39, both dated 20th February 1996 and on tenders being opened on 23rd February 1996 the petitioner was declared a successful tenderer; after further negotiations the petitioner company vide its letter dated 12th April 1996 offered to extend interest free credit for 70 days in place of 30 days with respect to supply of Cypermethrine Technical only; pursuant to two purchase orders the petitioner supplied materials of the total amount of Rs.2,34,049,668/- as detailed in sub para (x) of Para 7 of the petition and total payment of Rs.2,33,69,005/- was made on the dates noted in sub para (xi) of said Para of the petition. Photostat copies of Tender document containing general terms and conditions in regard to Fenvalerate Technical are placed at pages 16 to 19 while with respect to Cypermethrine Technical at pages 23 to 26 on Part III file. Aforesaid, purchase order dated 13th/17th May 1996 in original is placed at pages 32 and 23 while purchase order dated 20th/23rd May 1996 at pages 34 and 35. Purchase order dated 13th/17th May 1996 as it stands does not contain arbitration clause as obtaining in purchase order dated 20th/23rd May 1996. Submission advanced on behalf of respondent was that contract for supply of Fenvalerate Technical came to be concluded with the placing of said purchase order dated 13th/17th May 1996 and as this order does not provide for arbitration, the part of relief seeking reference to arbitration of alleged dispute of interest on delayed payments in regard to supply of said material is misconceived. As is manifest from the endorsement made on top left hand side below the name of respondent printed in bold letters (Page 32) the said purchase order was placed by respondent with reference to Tender enquiry No. CX/T, opened on 23rd February 1996 In aforesaid photostat copy of Tender document (pages 16 to 19) against the column of reference number of the top at page 16 below the name of respondent. CX/T/26 is printed. Thus there cannot be any manner of doubt that above purchase order dated 13th/17th May 1996 was issued in continuation of said Tender document (pages 16 to 19). Under the heading of 'General terms and conditions of tender' in said Tender document by way of clause No. 23 it is provided:-

"Any dispute arising between the supplier and HIL will be referred to the arbitration and mutually agreed arbitrator will be appointed for the purpose of entering into reference to the arbitration. All legal matters pertaining to the purchase order for Delhi/Rasayani/Udyogmandal Unit shall be subject to the jurisdiction of Delhi/Panvel or Alibag courts/Cochin, as the case may be."

6. Even if said purchase order is silent about settlement of dispute between the parties through arbitration aforesaid clause No.23 will be attracted. Submission referred to above in regard to part of relief being misconceived thus deserve to be repelled being without any merit.

7. Further submission advanced on behalf of respondent was that as that as there was no agreement for payment of interest on delayed payment beyond 30/70 days for the date of receipt of materials between the parties, alleged claim towards interest on delayed payments cannot be said to be 'dispute' which may be referred to arbitration. By way of clause No.5 in Annexure I attached to aforesaid purchase order dated 13th/17th 1996 it is provided that payment shall be made from the head office against 30 days credit from the date of receipt of material at the unit of respondent. Similar stipulation providing 70 days credit is incorporated in Annexure I attached to another purchase order dated 20th/23rd May 1996. Clause No.5 seems to have been lifted from aforementioned Tender documents. Admittedly, payments in regard to supplies of both the materials had not been made within 30/70 days of the making of deliveries thereof to the respondent. There was no occasion to have fixed 30/70 days credit limit if payment of interest was not to be made on outstanding amount. Therefore, I am unable to agree with the submission advanced on behalf of respondent that claim for payment of interest on delayed payments is not a 'dispute' covered by the arbitration clause of said Tender documents as also purchase order dated 20th/23rd May 1996. Dispute regarding payment of interest on delayed payments raised by the petitioner company requires to be adjudicated by an arbitrator to be appointed by the court.

8. For the foregoing discussion, petition is allowed. Justice P.K. Bahri (Retd) is appointed as sole arbitrator for deciding the disputes noted in sub paras (xiv) and (xvi) of Par 7 of the petition. Arbitrator will fix his own fee which will be shared equally both the parties. He will make and publish the award in accordance with law.

9. Let a copy of this order be sent by the Registry to the arbitrator immediately for information.