Patkai Timber Industries vs Union Of India (Uoi)
2005 Latest Caselaw 423 Del

JUDGMENT

Pradeep Nandrajog, J.

1. Petitioner has filed objections to the award dated 23.8.1993 published by Shri K.D. Singh, sole arbitrator. As per the award, claims No. 1, 2 and 4 of the petitioner have been rejected. Claim No. 3 has been allowed. Counter claim of Union of India has been allowed. Amount awarded under claim No. 3 has been set off against amount awarded under the counter claim.

2. Dispute between the parties surfaced as the petitioner failed to complete supplies under the contract between the parties and the respondent went in for a risk purchase. Petitioner had deposited Rs.25,000/- as security deposit which was for felted by the respondent on account of risk purchase. Petitioner had a claim in the sum of Rs.20,063/- being the price for the goods supplied and unpaid for. defense of the Union of India was that on part supply being effected, certain material was rejected. Rejection was intimated. Petitioner did not remove the rejected goods and did not replace the same and as a consequence, respondent did not effect payment. Further claim of the petitioner was in the sum of Rs.12,919.39 towards a bill dated 12.1.987.

3. Counter claim of Union of India, as noted above, was on account of risk purchase.

4. Pleading of the petitioner before the learned arbitrator was that it was to supply Timber Half Wroughts Butt, Timber Half Wroughts Guard and Timber Half Wroughts Grip Pistol to the Union of India as per tender specifications in tender No. TP/3/107/008/17-4-84/Z-3/690/COAC. When the bid of the petitioner was accepted, it deposited Rs. 25,000/- towards security. Petitioner claims to have supplied the following material :

a) Timber Half Wroughts Butt 2095 Nos.

b) Timber Half Wroughts Guard 1962 Nos.

c) Timber Half Wroughts Grip Pistol 363 Nos.

5. According to the petitioner, 611 Nos., 740 Nos. and 65 Nos. of the butts, guards and grips respectively were rejected. It received full payment for the material which was accepted. Grievance was that the Union of India after rejecting the material did not return the same and even did not make payment. According to the petitioner, at the tender quoted rates, it was entitled to Rs. 20,060.60 from the Union of India. On this sum, petitioner claimed interest @ 21% per annum from the date of bill till date of filing of claim i.e. from 1.2.1986 to 10.6.1991. Interest being Rs.21,063/-.

7. Petitioner further pleaded that the respondent breached the contract by placing orders on third party for supply of remaining material and accordingly, claimed refund of security deposit in the sum of Rs.25,000/-. Petitioner also pleaded that it had deposited a fixed deposit receipt in the sum of Rs.15,000/- with the Union of India, refund whereof was sought.

8. Further claim of the petitioner was in the sum of Rs. 2,919.39 being alleged payment withheld under bill No. PTM/HAW/1/87 dated 12.1.1987. Petitioner claimed interest on the said sum from 12.1.1987 to 10.6.1991 @ 21% per annum, which came to Rs.10,852.88.

9. Response of the Union of India to the claim and counter claim was that as per the contract, petitioner was to supply the following material :-

Sl. No.       Description           Qty.              Unit Rate
  a)      Timber Half Wroughts    Butt 15003          Rs.19.99
  b)      Timber Half Wroughts    Guard 12112         Rs. 8.95
  c)      Timber Half Wroughts    Grip Pistol 4587    Rs.18.84
 

10. As per the respondent, under the contract, if petitioner failed to effect supplies, respondent was entitled to proceed under risk purchase within six months. Admitting the supplies partially effected and as stated in the claim, qua the rejected material, Union of India pleaded that as per the contract, it was the responsibility of the petitioner to remove the rejected material and since petitioner failed to remove the rejected material after intimation of rejection, petitioner would have no claim.

11. On the issue of risk purchase, Union of India pleaded that as per request of the petitioner, vide letter dated 30.6.1985 delivery period was extended up to 30.4.1986. Petitioner failed to complete full supply by the contract stipulated extended date. Risk purchase contract was placed on 20.10.1986 i.e. within six months.

12. As per the counter claim, petitioner was to supply 13519 Timber Half Wroughts Butt, 10890 Timber Half Wroughts Guard and 4289 Timber Half Wroughts Grips by 30.4.1986. In other words, these quantities of the material were alleged not to be supplied for which risk purchase had to be effected. Difference in price quoted by the petitioner and the risk purchase price for the unsupplied material was Rs. 6,80,073.20. This was the figure of the counter claim.

13. Award of the learned arbitrator on the issue of the claims and counter claims reads as under :

CLAIMS OF THE CLAIMANTS M/S PATKAI TIMBER MILL :

(Claim No. 1)

The claimants have claimed Rs.20,060/- (Rupees twenty thousands and sixty only) towards the rejected material plus Rs.21,063/- (Rupees twenty one thousands and sixty three only) towards interest @ 21% per annum till filing of the statement of claim i.e. 10.6.91.

It is the case of the claimants that the respondents have not returned the rejected material till today. It has been argued on behalf of the respondents U.O.I. That the rejection was communication to the claimants and it was the duty of the claimants as per the contract to remove the rejected goods within 15 days of the I/Note dated 24.2.86, I have considered the aforesaid arguments and find that the claimants have not proved that they were prevented from removing the rejected goods from the premises of the consignee. In the light of the above, the claim of the claimant is disallowed.

(Claim No. 2)

The claimants have claimed Rs.12,919/39 towards towards the bill No. TTM/HAW/1/87 dated 12.1.87 plus interest @ 21% from 12.1.87 to 10.6.91 which comes to Rs.10,852/88.

The claim is disallowed since not proved.

The respondents U.O.I. have admittedly withheld Rs. 25,000/- to adjust part of their claim on account of breach of contract committed by the claimant. However, they have not admitted the amount of Rs.15,000/- in respect of the other contract No. 50/0009/6984/C-6/COAC/005 dated 27.2.85 for supply of Wooden handles phowrah. In the light of the above, the claim is allowed to the extent of Rs.25,000/- only.

The claimants have claimed pendent late and future interest @ 21% from the date of filing of their statement of claim till actual payment of decree, whichever is earlier.

The claim is disallowed, being unjustified.

COUNTER CLAIM OF THE RESPONDENTS UNION OF INDIA

The respondents U.O.I. have made a counter claim of Rs. 6,55,073.20 towards risk purchase loss plus interest @ 18% per annum from the date of breach.

AWARD :

The counter claim is allowed to the extent of Rs. 6,55,073.20 for the reason that the risk purchase made by the respondent was legally valid. However, no interest is allowed, since not justified under the facts and circumstances of the case. The amount of Rs.25,000/- awarded in favor of the claimant above may be adjusted towards the amount awarded hereby in favor of the respondents U.O.I.

14. The first and foremost objection urged by Mr. Shiv Khurana, learned counsel for the petitioner is that the award does not give any reasons and hence has to be set aside for the reason, contract requires reasons to be stated if claim was more than Rs.1 lacs.

15. I have noted the reasons in the award. I have also noted above the respective pleadings of the parties before the learned arbitrator.

16. Rejecting claim No. 1, learned arbitrator has given the reason that being communicated the rejection of some of the supplies, petitioner failed to remove the rejected material. Learned arbitrator has given further reason that the petitioner has not proved that it was prevented from removing the rejected goods.

17. Merely because something is stated briefly would not make it unreasoned.

18. In law, reasons would mean a rational ground for a decision. Reasons do not require detailed judgment. A short intelligible indication of the grounds would be good reason in law. An award would be a reasoned award if the mind of the arbitrator for the conclusions arrived at is reflected (See- , I.O.C. Vs. Carbon Ltd.).

19. Mr. Shiv Khurana, learned counsel for the petitioner did not dispute the terms and conditions of the contract between the parties attracted Clause 17(B) of Form DGSandD-68(R).

20. Learned arbitrator has recorded that after the rejection was communicated, petitioner failed to remove the rejected stores and was never prevented by the Union of India from removing the stores.

21. Neither can the award be said to be unreasoned nor can the award be said to be suffering from misconduct or a material irregularity insofar as rejection of claim No. 1 is concerned. Petitioner was certainly not entitled to any payment for the defective supply effected, more so, there being no evidence on record lead by the petitioner that the rejection was contrary to the contract.

22. Reason for rejection of claim No. 2 is that it is not proved. Indeed, during arguments, Mr. Shiv Khurana, learned counsel for the petitioner could not point out any evidence to establish raising of bill dated 12.1.1987 and supply effected there under. Learned counsel for the petitioner argued that the reason claim is disallowed since nor proved are not reasons in the eyes of law.

23. If nothing is brought on record by a party, what else would the arbitrator do other than to record disallowed since not proved. Had the petitioner brought some evidence on record, matter could have been looked into in the context of the evidence brought on record. Objection to claim No. 2 is without any basis and is repelled.

24. Under claim No. 3, learned arbitrator has allowed the claim towards the security deposit but while allowing the counter claim has granted adjustment.

25. For breach of contract, Union of India would be entitled to risk purchase being the difference in the contract stipulated amount as per the contract between the parties and the amount paid at the re-tendered stage. Security deposit had to be adjusted in such eventuality. Obviously, Union of India could not forfeit the security deposit and in addition, claim difference under the risk purchase.

26. Objection under claim No. 3 was to the part of the award where-under the learned arbitrator rejected the claim for return of FDR in the sum of Rs.15,000/-.

27. A perusal of the award would show that the learned arbitrator has noted that the said FDR pertained to another contract No. 504/009/6984/C-6/COAC/005 dated 27.2.1985.

28. Shri Shiv Khurana, learned counsel for the petitioner could not point out to this Court any document which would establish that the FDR in question was under the present contract.

29. Since the claims of the petitioner were rejected, claim No. 4, towards interest, had to be rejected as a consequence.

30. In the context of counter claim, allowed in the sum of Rs. 6,55,073.20, learned arbitrator has recorded that risk purchase was legally valid.

31. It may be true that extensive reasons have not been given by the learned arbitrator, but evidence on record would show that on 31.1.1985 (U-11) respondents acceptance of petitioner's tender was intimated. Petitioner was to effect the supply within the contract stipulated period. After partial supply was effected, part of which was accepted and part was rejected, petitioner failed to complete the supply. Vide letter dated 21.8.1986 (U-37) delivery period was extended up to 30.4.1986. admittedly, the petitioner had not completed the supplies by the said date. Respondent claim for the risk purchase on unsupplied quantity. Evidenced by the document (U-73) dated 20.10.1986, contract was placed on M/s Assam Trading and Distribution Corporation for supplying balance quantity of material at price noted in the said letter of acceptance.

32. It was not disputed that as per the contract, respondent was entitled to risk purchase, provided the same was effected within six months of the breach of contract. The quantification of the risk purchase amount was not questioned by Mr. Shiv Khurana, learned counsel for the petitioner.

33. Objection urged in the context of risk purchase was as pleaded in para 10 of the objections. Objection was that due to ban of cutting timber by State of Assam, petitioner could not procure the goods and as a result, contract stood frustrated under Section 56 of the Indian Contract Act due to supervening circumstances beyond the control of the petitioner.

34. I have perused the claim of the petitioner filed before the learned arbitrator on 11.6.1991. There is no whisper in the same that due to ban by the State of Assam on cutting of timber, contract stood frustrated. Record of the learned arbitrator would show that the petitioner filed a rejoinder to the counter statement of claims filed by the Union of India. In paras 12 and 13 of the said reply, petitioner referred to the ban imposed by the Government of Assam on cutting of Assam Amri and Assam Bole.

35. The term of the contract required the supplier to supply the wood being as under :

Assam Amri or Assam Bole or other approved species.

36. Petitioner did not plead that it sought approval of other species for which approval was not granted.

37. Had the contract required only a particular kind of wood to be supplied, being Assam Amri or Assam Bole, petitioner might have had a case to plead frustration of the contract. But the contract provided for an alternative. No evidence was shown to this Court that either alternative wood was not available or that the petitioner offered to supply the same and offer was not accepted.

38. Hardship in performance of a contract is different than frustration of a contract.

39. There being no dispute that re-tendered contract was for the balance quantity of the material and was effected within six months of breach of contract, award on account of counter claim cannot be said to be unjustified.

40. IA. No. 119/95 is accordingly dismissed with costs in the sum of Rs.5,000/- against the petitioner and in favor of Union of India. CS(OS) No. 2417/93.

In view of dismissal of IA. No. 119/95, award dated 23.8.1993 published by Shri K.D. Singh, sole arbitrator is made a rule of the court. Post decretal interest on the principal sum awarded is granted @ 9% per annum from the date of decree till date of realization.