Himpex Private Limited vs National Fertilizers Limited
2002 Latest Caselaw 758 Del

JUDGMENT

J.D. Kapoor, J.

1. The award dated 6.3.1995 which is sought to be made rule of the court has been assailed by the respondent-objector on the following grounds:-

i) The award is without jurisdiction inasmuch as the Arbitrator has considered and dealt with claims which are outside the scope of reference. The reference was made to the disputes arising out of purchase order No. 102/90/2223/943 whereas the Arbitrator has dealt with the disputes pertaining to different purchase orders.

ii) Under the disputed purchase order, the respondent was required to reimburse central sales tax at 2% whereas claim of the petitioner for reimbursement of additional 2% sales tax was allowed by the Arbitrator. Thus, the award with regard to claim No. 1 is beyond the terms of the agreement.

iii) The Arbitrator has wrongly awarded liquidated damages which the respondent had levied on the petitioner on account of delay on the part of the respondent.

iv) The Arbitrator has allowed payment of gulf charges which according to the respondent were rightly levied upon the petitioner.

v) The Arbitrator has wrongly awarded refund of earnest money and security deposit which the respondent has rightly forfeited because of non-performance.

2. While elaborating the aforesaid grounds, Mr. M. Haravo, learned counsel for the respondent-objector has referred to Clause 5 of the purchase order dated 30th August, 1990 which is as under:-

"5. Sales Tax: 2% CST against 'C' Form."

3. The purchase order dated 13th November 1990 also contained the same Clause. 2% of the sales tax payable under the contract is referred to the sales tax paid by the petitioner in Himachal Pradesh whereas the petitioner has claimed reimbursement of further 2% sales tax on the purchase of Jute fabric from Calcutta.

4. It is contended that the Arbitrator has committed gross error by referring to the terms and conditions of the previous purchase orders placed by the respondent on the petitioner whereas as per subsequent purchase order sales tax @ 4% was agreed and allowed. It is further contended by Mr. Haravu that the rate of sales tax with regard to purchase orders in questions, the Arbitrator should have only adhered to the terms of the instant purchase order wherein the parties agreed for central sales tax @ 2% but it appears that the learned Arbitrator was persuaded firstly by the fact that the respondent took some time to reply to the representations made by the petitioner for reimbursement of additional CST, secondly, that respondent wrote a letter to the petitioner seeking some additional documents/particulars about their claim. After receiving the reply of the petitioner with regard to additional CST, the respondent rejected the claim of petitioner for reimbursement of extra CST.

5. Mr. Haravu also contended that respondent merely considered the representation of the petitioner in view of their long standing business relationship with them but the earned Arbitrator has directed the respondent to pay additional 2% CST on furnishing of documentary evidence regarding payment of sales tax by the petitioner. Thus, according to the learned counsel, the Arbitrator has returned the finding that the petitioner is entitled to additional 2% CST and at the same time kept the right of the petitioner to receive the same open and un-adjudicated. Similarly the award for reimbursement of extra 2% CST was on supply made after 20.8.1992 which pertains to a different purchase order and therefore, the award is outside the scope of the reference.

6. On the contrary, Mr. Shiv Khorana, learned counsel for the petitioner has contended that the award with regard to CST was very much within the scope of reference as the award no where states that his reimbursement is with regard to a different purchase order and not the purchase order referred for adjudication.

7. It is further contended that all the aforesaid objections are afterthought as no such plea was ever raised when objections were filed pursuant to the notice to the award. Sales tax is payable under Section 64A of the sale of Goods Act, 1930 as it provides that any statutory increase in sales tax is payable and therefore the Arbitrator has determined reimbursement of additional sales tax in accordance with these provisions. The objection that the Arbitrator has kept the question of reimbursement open is without any substance as what has been observed is that the petitioner shall be entitled to additional sales tax subject to production of proof of payment of sales tax by the petitioner under the contract and therefore the finding of the Arbitrator is not adverse to the interest of the respondent.

8. According to Mr. Khorana, the fact that respondent had agreed to 4% CST can be gathered from the correspondence exchanged between the parties to the effect initial offer was also @ 4% and it was only after the goods were received by the respondent that the offer was rejected by the respondent on 30th March 1992 so much so vide letter dated 17th June, 1991 the respondent asked the petitioner to produce the evidence of payment of 4% CST and this conduct of the repondent shows that the respondent never rejected the offer of the petitioner.

9. Mr. Khorana thinks that had there been bonafide on the part of the respondent, it would have rejected the offer if not forthwith but in any case before the supply of goods. Thus by not rejecting the offer of the petitioner, the respondent by way of waiver or acquiescence had agreed to the offer of 4% sales tax and accepted the supplies.

10. It cannot be gainsaid that the Arbitrator is the creature of the agreement. He is rather instrument of the agreement and therefore is not over it. He has to remain within the arena of the agreement. Until and unless parties to the agreement subsequent agree to a particular term of the agreement, any unilateral offer or suggestion does not form part of the agreement. Whatever terms might have been exchanged between the parties during negotiations become irrelevant the moment parties enter into written agreement and concluding written agreement alone has binding force and all such offers or terms which are exchanged between the parties through various communications are rendered null and void.

11. It is in view of this settled law that the contention of the counsel for the petitioner-claimant that the conduct of the respondent in directing the petitioner to provide proof of payment of sales tax @ 4% shows that the respondent had never rejected the offer of the petitioner looses its force and substance. Again the contention that had there been bonafide on the part of respondent it would have rejected the offer forthwith and that too before supply of goods is rendered irrelevant.

12. The petitioner supplied goods on the basis of Clause 5 of the purchase order dated 30th August, 1990. This Clause alone was applicable to the parties and no other unilateral offer or suggestion or novation of contract by a party. The observations of the Arbitrator that prior to the supplies of goods respondent was not liable to refund or reimburse sales tax paid by the petitioner are therefore wholly unacceptable and unsustainable.

13. Similarly past practice or the norms adopted by the parties while dealing with each other are not relevant once the parties set down the terms in writing. Merely because the respondent asked the petitioner to give proof of payment of sales tax @ 4% did not mean the respondent had accepted the claim of the petitioner for reimbursement. May by this gesture was shown because of long standing business relationship with petitioner.

14. It is settled law that a party can agree to any term which may be repugnant to any statutory provision. For instance Section 64 of Sales of Goods Act provides that any statutory increase in sales tax is payable as and when it is made. By agreeing to the sales tax @ 4% CST parties waive and acquiesce their right to have benefit of Section 64A of the Sale of Goods Act, 1930. The objection of the respondent in this regard is allowed.

15. As regards the findings of the Arbitrator in respect of other claims these are purely findings of facts and are within the terms and conditions of the agreement between the parties. They do not require any kind of interference and are confirmed as the court cannot assess or examine such findings by way of appeal.

Award to the aforesaid limited extent pertaining to the reimbursement of sales tax is set aside whereas the Award in respect of all other claims except claim No. 1 and claim No. 2(i) is made rule of the court. Suit is decreed for the amount awarded against these claims with pendente lite and future interest @ 12% p.a. from the date of filing of award till its realisation.