Delhi Electric Supply ... vs Victor Cable Industries Ltd. And ...
2005 Latest Caselaw 1370 Del

JUDGMENT

Swatanter Kumar, J.

1. By this judgment, I would dispose of Suit No. 35/1994, Suit No. 1055/94 and Ex.200/2000 as they all are based upon same facts between the same parties and give rise to the same questions for consideration of the court.

2. In exercise of the powers conferred upon, the General Manager (E), Delhi Electric Supply Undertaking in terms of the Arbitration clause contained in the tenders of purchase order No. ST(SP-I)/TE-1873/1594 dated 31.1.1990 and additional purchase order No. ST(SP-I)/TE-1873/1686 dated 19.2.90, appointed Sh. O.P. Anand as sole arbitrator to adjudicate and decide the disputes which had arisen between the parties. M/s. Victor Cable Industries Ltd. had raised certain claims against the department and the department had also raised claims. The parties gave consent for enlargement of the time up to 30th September, 1993 and the arbitrator vide his award dated 29.9.1993 made and published his award. After the arbitrator filed the award in this court on 7.1.1994, notices were issued to the parties regarding filing of the award and objections, if any. On 8th March, 1994, it was noticed that the objections have been filed. Vide order dated 28.11.2001, the delay in filing the application for condensation in setting aside the ex parte judgment of the court was allowed and the objections filed were ordered to be transferred to the appropriate file. The objections to the award which were filed on behalf of M/s. Victor Cable Industries Ltd. to the award dated 29th September, 1993 have been registered as Suit No. 35/94.

3. M/s. Victor Cable Industries Ltd. had filed a petition under Section 20 of the Arbitration Act, 1940 i.e. Suit No. 1055/94 praying therein that the disputes arisen from another purchase order No. ST/SPI/TE-1991/1329 dated 11.3.1992 be referred to arbitration. The disputes were referred to arbitration and finally in that case also, an award was passed in favor of the M/s. Victor Cable Limited on 6.2.1996. Objections to the said award were dismissed and the award was made rule of the court on 26th October, 1998. In order to execute the said decree of the court M/s. Victor Cable Industries Limited had filed execution No. 200/2000. Delhi Vidyut Board successor of DESU had filed an appeal which was registered as FAO(OS) 534/2001 and was disposed of by the Division Bench while directing that the warrant of attachment shall not take effect till the respondents' objections in Suit No. 35/1994 are decided and one month thereafter.

4. Before I proceed to discuss the merit of the objections filed in Suit No. 35/94 around which the whole controversy between the parties revolves, it may be noticed here that the court on 8.11.94 had passed an interim order in Suit No. 1055/94. The injunction order passed on 11th May, 1994 was confirmed and the matter was referred to arbitration. A review application has been filed seeking review of the interim injunction granted by the court and it is commonly conceded by the parties that this review does not relate to reference of the disputes to the arbitrator. In this view of the matter, pendency of the review application No. 9650/1995 is of no consequence for determining the controversy in the present suit.

5. As already noticed, suit No. 35/1994 relates to the objections filed by M/s. Victor Cable Industries Ltd. to the award dated 29.9.1993 made and published by the sole arbitrator Sh. O.P. Anand. The objections of the objector are:-

A. There was no concluded contract between the parties and the offer made to the company was never accepted by it. Thus, there was no question of fulfillling the obligations in terms of the said contract. In this regard, reliance was placed on the letter dated 19.6.1990 exchanged between the parties.

B. The offer exchanged between the parties amounted to giving of a counter offer and it cannot be inferred that the original offer has been accepted. The award of the arbitrator is based on no evidence and is unreasoned; and lastly the risk purchase in which the company participated without prejudice to its right was in fact a consequence of a threat held out by DESU to it for de-registration/black listing. It is contended that the award, thus, should be set aside.

6. Reference to the basic facts would be necessary. It is the case of M/s. Victor Cable Industries Ltd. that they are an established business concern who have been doing business with DESU for a long time and they are aware of the system and working of the said undertaking. The undertaking had placed two purchase orders dated 30.1.1990 and 19.2.90 for 75 kms and 50 kms of cable. The price fixed between the parties was per unit Rs. 76,298.55/- per km.

7. These facts were taken to be admitted between the parties or treated irrefutable and the essence of the contract between the parties by the arbitrator. The learned arbitrator after considering the materials on record and examining the case of the respective parties decided the case as under:-

In consequence M/s. Victor Cable Industries Ltd., (formerly known as M/s. Victor Cables Limited), are liable to:-

1. Pay an amount of Rs. 40,07,225/- (Rupees forty lakhs seven thousand two hundred twenty five only), being the difference in risk purchase for purchase order No:ST(SP-I)/TE-1873/1594 dated 30-1-1990 and additional purchase order No. ST(SP-I)/TE-1873/1686 dated 19-2-90, which amount the claimant has lost in procuring the ordered quantities, to the claimant DESU.

2. Pay the aforesaid amount to the claimant DESU within period of three months from the date of this award, where after interest @ 18% per annum will be payable till the final payments are made.

b) During the proceedings of the arbitration, I learnt that the claimant DESU have on their own revoked their order of cancellation of the registration of the party M/s. Victor Cables Ltd. with DESU. None of the parties, that is either DESU or M/s. Victor Cables Ltd. presented their claim/counter claim in so far as these relates to this term of reference. Accordingly, I have not considered it necessary to deliberate this matter.

The claimant and the respondent to bear their own respective cost for arbitration.

8. As far as the objections of the objector with regard to the award being not reasoned or being without any evidence is concerned, there appears to be no merit in this contention. The arbitrator is not expected to write judgments. So far the findings recorded in the award are based upon the record produced before him and the conclusions drawn by the arbitrator have nexus to the facts of the case, there shall be substantial compliance to the principle of reasoning. In the present award, the arbitrator has referred to the facts of the case and has noticed some reasoning which in view of the arbitrator was sufficient to arrive at the conclusions for granting relief to the undertaking and against the company. During the pendency of the arbitration proceedings, an order was passed in regard to cancellation of registration of Victor Cables Ltd. which itself was withdrawn by the Undertaking. The reasoning given by the arbitrator may not be a detailed one but certainly the award cannot be stated to be unreasoned or an award which is based on no evidence. The jurisdiction of this court to interfere with an award on this ground is a very limited one. The award should be one which is based on no evidence or the reasons stated in the award should suffer from a patent error of law or an approach which would be impermissible and would violate the basic rule of law. Reference in this regard can be made to the judgment of the Supreme Court in the case of M/s. Arosan Enterprises Ltd. v. UOI and anr. .

9. Whether the award suffers from lack of evidence or is a case of no evidence, I would shortly proceed to discuss. The basic contention raised on behalf of the objector is that there is no concluded contract between the parties and the letter dated 30.1.90 and 19.2.90 tantamount to a counter offer. It is even the case of DESU that they invited tenders for the supply of goods in question and the tenders were opened on 30.8.1989. The company had also submitted their offer and they were requested to give their consent at their quoted rate of Rs. 76,289.55/- per km. computed to Rs. 1,00580/-. The company was to send their consent by 7.12.89 and was to be valid up to 15.2.90. Vide letter dated 5.12.89, the company had conveyed their acceptance and the validity period up to 15.2.90. After the purchase order for supply of 75 kms cable was placed vide purchase order dated 30.1.90 , the company vide their letter dated 8.2.1990 requested that their quoted rates should be varied from Rs. 76,289.55/- to Rs. 76,298.55/-. This request was repeated by letter dated 12.2.1990 and the company is stated to have informed the undertaking that they would be prepared to supply an additional order of 50 kms, if this order was placed on them within one month from the date of the main purchase order. The company submitted bank guarantee vide their letter dated 15.2.90. As such, there was a complete concluded contract and as the company failed to make the requested supplies, the risk purchase was effected at their cost and the claim of the undertaking was fully justified. The letter dated 19.2.90 was before the arbitrator vide which the Undertaking had placed further firm order of 50 kms on the terms and conditions of the main purchase order dated 30.1.1990. In this letter, the rate was quoted to be the same as was mentioned in the main supply order i.e. at the rate of Rs. 76,289.55/-. The company was also called upon to furnish a bank guarantee for a sum of Rs. 38,145/- vide same letter. The company vide their letter dated 8.2.90 had already requested for change of the price as afore-noticed. They had made a specific request in the said letter that. Hence you are requested to please amend the Purchase Order accordingly enabling us to convey our acceptance of the same immediately in toto. Despite this letter, the order was placed as afore-noticed. However, the request made in the letter dated 8.2.90 was further varied vide letter dated 12.2.90 wherein they had accepted the additional order of 50 kms on the same terms and conditions provided the order was placed within one month and they further claimed that the payment shall be made on priority basis. The language of the letter dated 12.2.90, thus, had to be certain conditions in relation to price variation and payments but the company had accepted to supply additional order of 50 kms cable. While issuing the purchase order for the additional quantity of 50 kms, the request of the company in relation to price variation was not accepted. It may be useful to notice at this stage that vide letter dated 5.12.89 the company had submitted their acceptance as per the original price and the validity period stated therein was 15.2.90. No terms and conditions of any kind was attached to this acceptance. Thus, it is difficult to accept the contention of the objector that vide letter dated 5.12.89 the contract between the parties had not been concluded with its validity period being up to 15.2.90. Before the company had sent its absolute acceptance in the above letter, vide letter dated 30.11.89 the undertaking had asked for a definite acceptance on the rate referred therein i.e. at the rate of Rs. 76,298.55/- per km. computed to Rs. 1,00,580/-. Thus the parties had acted with full awareness and the afore-stated letters which were exchanged between the parties concluded the contract. After receipt of this letter and even after submitting their letter dated 12.2.90, it is clear from the record of the arbitrator that the company had submitted the bank guarantee in compliance to the said letter. All doubts were to be at rest vide letter dated 31.5.1990 when the undertaking informed the company that there is no much difference in the price structure and the letter dated 14.5.1990 was not appreciated. Thereafter notices were given by the undertaking to the company to complete the supplies which in any case is not in dispute, were not effected. In this very letter, it was informed to the company that they were expected to commence the supplies immediately and confirm within seven days positively, failing which the department would be compelled to take action as per the terms and conditions. The company despite service of the such letter, chose not to take any action nor effected the supplies. This clearly shows a complete acquiescence on the part of the company in the claim of the undertaking. Vide letter dated 18.4.90, the company had stated that the purchase order should be treated as cancelled without any financial repercussions. The subsequent correspondence on the part of the company as well as the plea before the arbitrator appears to be an after thought. Once the company had accepted to make the supplies at the agreed rate with validity period up to 15.2.90 and the order was admittedly placed vide letter dated 12.2.90, there was no occasion for the company to wriggle out of its liabilities. If the company bonafidely believed that there was no concluded contract at that stage of the proceedings, there was no occasion for the company to refer to various terms and conditions and pray for amendment of the supply order. Rather, it should have taken recourse to such rights as are permissible to it in law. On the one hand, the company has pleaded that it was fully aware of the procedure of working in DESU and on the other hand, it shows complete in action in taking adequate steps which even a person of any business prudent would be expected to take. The letters of the company do not constitute variation of an unconditional acceptance submitted by them. At best, it could be said that certain further request was made by the company to the undertaking which was not accepted and the undertaking opted to enforce its rights under the concluded contract.

10. All these documents were on record of the file of the arbitrator. The arbitrator, thus, granted the risk purchase effected by the undertaking and particularly held the company liable for additional purchase of the cable as well. The differential amount which was lost in procuring the ordered quantities was directed to be paid to DESU. The company was granted three months' time to make the payment failing which the DESU was held entitled to interest @ 18% p.a. This finding of the arbitrator again cannot be faulted with on any principles of law.

11. Learned counsel for the respondent while relying upon page 46 of the Law of Contract, Cheshire, Fifoot and Furmston's 12th edition relating to the phenomena of agreement contended that mere acceptance of tender would not produce a binding contract between the parties. The extract in this book relied upon by the counsel for the respondent, firstly, would have no bearing on the facts of the present case and secondly the facts as narrated above even would satisfy the ingredients spelled out in the said paragraph. The court has to examine all circumstances to see if the one party may be assumed to have made a firm offer and if the other may likewise be taken to have accepted the offer. These complimentary ideas present the convenient method of analyzing a situation provided that they are not applied too literally. An offer and acceptance capable of being converted into an agreement or concluded contract must consist of definite offer and acceptance. Tender certainly is an invitation to offer which was submitted by the company, where after the undertaking had required, vide their letter dated 30.11.89, the company to submit its firm acceptance for the validity period of the contract till 15.2.1990. This offer unconditionally was submitted by the company vide its letter dated 5.12.89, thus, constituted a definite offer and unambiguous and unconditional acceptance. This was case of standing offer during the period and up to 15.2.90. In the case of Great Northern Rly. Co. v. Witham (1873) LR 9 CP 16 where the company had accepted the tender, placed confirmatory orders which partly were even executed by the defendant, it was held that it was a case of standing offer to be converted into series of contract and the company was entitled to succeed in the case in an action for breach of contract. The orders up to 15.2.90 pro tanto fell beyond the possibility of revocation where after the company was entitled to take its remedies.

12. In view of my above discussion, I would reject the objections filed by M/s. Victor Cable Industries Ltd. and make the award dated 29.9.1993 of the sole arbitrator as rule of the court and the decrees passed in terms thereof.

13. Suit No. 1055/94 would also stand finally disposed of as the arbitrator has already filed his award even in that case and objections filed by DESU have been dismissed.

14. Execution 200/2000 which is an execution filed by the company in furtherance to the award dated 6.2.96 in its favor would also stand finally disposed of as in terms of the order of the Division Bench, the company would be entitled to adjustment of the amount due and payable to it. In terms of the order of the Division Bench in FAO(OS) No. 534/2001 dated 2.12.2003, the parties are directed to settle the accounts accordingly and they are granted one month time to make the payment in terms of the respective decrees. In the event of default, the parties would have a right to file fresh execution, if the need so arises.