Union Of India (Uoi) vs Deccan Enterprises
2006 Latest Caselaw 2283 Del

JUDGMENT

Rekha Sharma, J.

1. The Union of India through the Ministry of Railways placed three purchase orders dated 1.8.85, 14.9.92 and 14.11.93 on M/s Deccan Enterprises Private Limited for the supply of G.R. Sole Plates. The first and the third purchase orders were non-starters in the sense that no supply at all was made there under. As regards the second, unlike the other two it did take off, for some supply in respect thereto was made though not completed. The end result was that the Railways cancelled all the purchase orders and forfeited the security amounts of M/s Deccan Enterprises Private Limited (hereinafter called the contractor) in respect of each purchase order. From here started the blame-game.

2. According to the Railways, time was the essence of the contract and even though it had granted extension of time to enable the contractor to execute the contracts it failed to do so. On the other hand, as per the contractor, it was the Railways and the Railways alone which was responsible for non-execution of the contracts. It is alleged that the Railways altered the terms of the purchase orders in relation to the specification of the stores, particularly with regard to the first and second purchase orders which disturbed the entire delivery schedule and that, when the stores were ready, it did not carry out the inspection in time. Therefore, to say, that time was the essence of contract was not warranted.

3. Feeling aggrieved by cancellation of the contracts and forfeiture of the security amounts, the contractor gave notice to the Railways for appointment of an Arbitrator to which it did not respond . The silence of the Railways compelled the contractor to move this Court under Section 20 of the Arbitration Act, 1940 for adjudication of the disputes detailed in the petition. The Court, vide its order dated 26.7.2000, referred the disputes as mentioned in para 10 of the petition to the sole arbitration of Justice P.K. Bhari, a retired Judge of this Court. The Arbitrator entered upon the reference and on 11.12.2002 awarded a sum of Rs. 47,500/- in favor of the contractor in respect of the first purchase order; Rs. 2,46,200/- in respect of the second and Rs. 4,22,800/- in respect of the third with interest @ 12% per annum w.e.f. 21.8.96 until payment besides cost of Rs. 25,000/-.

4. It was now the turn of the Railways to feel aggrieved and that is what has given rise to the present petition objecting to the Award. Needless to say that the contractor has given its full support to what the arbitrator has said.

5. A perusal of the Award shows that the Arbitrator has in great detail referred to a plethora of letters which were exchanged between the parties before the purchase orders were cancelled and relying upon the same and other material he has found the Railways blame-worthy for the non-execution of the purchase orders within the stipulated period.

6. For the purposes of this order, let me refer to each of these purchase orders as to provide a background to the arguments advanced.

7. First purchase order bearing No. 211-S-577/TSO/Deccan dated 1.8.85.

8. It was for the supply of 6mm thick GR Sole Plates conforming to IRS specification No. IRS-T-37-1982. The terms and conditions attached to the purchase order provided that the supply was to start after one month of receipt of the order and was to be completed at the rate of 50,000/- numbers per month i.e. by 10.11.85. The inspection of the stores was to be done by Research Designs & Standard Organisation (RDSO) and was to be carried out at the premises of the contractor in the process of manufacturing.

9. The thickness of GR Sole Plates as asked for in the purchase order was 6 mm while the thickness as laid down in IRS specification No. T-37-1982 to which the plates were suppose to conform was 4.5 mm. Realizing this the RDSO vide its letter dated 18.9.85 required the contractor to submit proto-type samples before undertaking the bulk manufacture. In view of this development the contractor wrote to the Railways on 22.10.85 stating that since proto-type samples were to be first got approved from RDSO Lucknow, and only then the bulk manufacture was to be undertaken, the whole process was likely to take considerable time. Accordingly, it requested for extension of time by six months from the date of the receipt of the extension letter without any liquidated damages and also informed the Railways that it was in the process of manufacturing the samples. Thereafter, it sent the proto-type samples to RDSO, Lucknow, for approval. The RDSO rejected the samples, on the ground, that they did not conform to the relevant drawings and vide its letter dated 8.11.85 wrote to the contractor to manufacture the pads as per the drawings and send the same for approval at an early date. On receiving this communication the contractor vide its letter dated 4.2.86 wrote to the Railways that it had sent the samples to the RDSO in the month of November 1984 which were not found acceptable and that on investigating the reasons for the same it transpired that the RDSO itself was not clear about the drawings which lacked in many details. Therefore, it requested the Railways to look into the matter and asked the RDSO to modify the drawings so as to enable it to take up the production of the correct item at the earliest. The Railways in response to the said letter wrote to the contractor on 14.3.86 requesting it to submit samples for approval to RDSO Lucknow before undertaking bulk manufacture and also endorsed a copy of the same to RDSO, Lucknow with a request to approve the samples of the firm as early as possible if otherwise in order and if any modification in the drawings had been made the same be informed to the contractor to enable it to take up the production at the earliest. Then came the letter dated 21.3.86. In this letter the Contractor informed the Railways that it was yet to hear from the RDSO Lucknow, and that it would be calling upon the RDSO shortly to discuss the progress in the modification of RDSO drawing No. T-3005. In the meanwhile it asked the Railways to extend the delivery period by one year from the date of receipt of extension letter without liquidated damages. The further letter which the contractor wrote to the Railways was on 1.9.86 stating therein that it had come to its notice that the RDSO had finalised the drawings/ specifications and sent the same to it, i.e., the Railways. The Contractor therefore requested the Railways to send those drawings to it so that it could undertake the production of the stores at the earliest and also requested for extension of delivery period by one year from the date of the receipt of the extension letter without liquidated damages. The Railways vide its letter dated 3.9.86 sent three copies of the revised drawing No. T-3005 to the contractor with a direction to start bulk manufacture of the stores as per the drawings attached and also to intimate to it its latest delivery schedule. Then came the further letter of the Railways dated 7.10.86 to the Contractor. In this letter it admitted that the supplies of the contracted items could not be started by the Contractor due to some clarification/ modification in the drawings by the RDSO and therefore it accepted its request for extension of delivery period without liquidated damages but extended the same from 10.11.85 to 10.12.86. The contractor on receiving the letter dated 7.10.86 wrote to the Railways on 20.10.86 that lot of time was wasted in receiving the modified drawings and therefore the extension of two months was not adequate and it accordingly requested for extension of one year from the date of receipt of letter of extension without liquidated damages. The Railways did not respond to this letter but wrote a letter to the contractor dated 6.2.87 asking it to make the supplies as per revised specifications. Thereafter, by another letter dated 11.9.87 it threatened to cancel the contract. The Contractor responded to the same vide its letter dated 19.9.87. In the said letter it reminded the Railways of its letter dated 20.10.86 wherein it had requested for extension of delivery period from the date of receipt of letter of extension. It also informed the Railways that its factory had gone on strike and it had resumed production after the banning of strike by the Govt. of Andhra Pradesh. It further informed that new samples as per revised drawings were getting ready and therefore asked for further extension of delivery period by three months from the date of approval of samples by RDSO, Lucknow. The Railways in response asked the contractor to give probable date by which it would be able to submit the samples as per drawing approved by the RDSO. The contractor wrote back to the Railways on 12.12.87 stating that the samples were under final stages of manufacture and would be shortly sent to RDSO for approval and that after the approval it would arrange prompt manufacture and supply of the materials. The Railways then wrote letter dated 4.1.88 and thereby it wanted the contractor to give a time bound programme and repeated the same request in its letter dated 4.2.88 and 20.7.88. The contractor in response wrote letter dated 3.8.88 and therein referred to the problems being faced due to power cuts and requested for extension of the delivery period by four months. Thereafter, the contractor vide its letter dated 25.7.88 sent samples for approval to RDSO and vide a separate communication dated 9.8.88 informed the Railways as also sought extension of delivery period till 31.12.88. The Railways vide its letter dated 6.9.88 extended the delivery period till 31.12.88. Thereafter vide its letter dated 2.1.89 it wrote to the contractor that the supplies made after 31.12.88 would not be accepted unless express request was received from it for extension of the delivery period and the extension thereon was granted. The contractor in response to the same wrote letter dated 4.1.89 stating that the delay had occurred for the reasons imputable to new item being developed and new samples were manufactured based on new drawings/specification given by RDSO and the RDSO could make available the results of testing samples by February 1989. Thus the contractor requested for extension of delivery period till 30.6.89. The same request was repeated in the letter dated 5.1.89 and letter dated 6.1.89. The Railways vide its letter dated 19.1.89 extended the delivery period w.e.f. 31.12.89 till 30.6.89. Thereafter, the contractor in a letter to the Railways dated 5.7.89 sought further extension of time by four months on the ground that it was only on 16.5.89 that it had received approval of the samples from the RDSO Lucknow. In response to this letter the Railways wrote on 23.7.89 that since delivery period had expired on 30.6.89 and no supplies had been made in the extended delivery period it was proposed to cancel the purchase order for the entire quantity of one lakh numbers without financial implications on either side. It required the contractor to accept the proposal. This letter was followed by a reminder dated 31.8.89. The contractor sent its response dated 23.9.89 stating that it had already manufactured 1300 numbers of items and therefore requested that the same be accepted and the order for the balance quantity of 98700 numbers be cancelled without any financial implication. The Railways vide its letter dated 28.11.90 put the whole blame for non-supply on the contractor and proceeded to cancel the contract and also imposed damages equivalent to 5% of the total value of goods amounting to Rs. 48100/-. The contractor, in response wrote to the Railways on 12.11.90 and therein reminded it of its letter dated 28.7.1989, whereby it had proposed to cancel the purchase order without financial implication on either side which, the contractor further wrote it had accepted and therefore the question of imposing penalty did not arise. The Railways remained unmoved. It declined to waive the penalty and alleged that the contractor took undue time in submitting the samples to the RDSO and even after the samples were approved only 480 numbers were manufactured which were passed by the RDSO on 1.8.89 and therefore the contractor committed default in not supplying the goods in the extended delivery period.

10. Second purchase order No. 211-S/11231 TSO/92/2/412 dated 14.9.92.

11. The second purchase order was for the supply of 80 sets of points and crossing of GR sole plates at the rate of Rs. 18000/- per set minus 5% discount. The delivery was to commence within one month from the date of the receipt of the purchase order and the same was required to be completed within four months thereafter which expired on 20.2.93. The items of stores to be supplied were suppose to conform to the drawings which were made available to the contractor by RDSO Lucknow only on 23.10.92. The RDSO Lucknow also asked the contractor to prepare proto-type samples of the goods as per drawings and get them approved in advance by (Track Directorate) without which the RDSO would not inspect the goods. The contractor sent prototype samples but it was after considerable delay on 11.2.93 that the RDSO (Track Directorate) cleared the samples. Thereafter the contractor started the manufacture but could not make the delivery within the stipulated period. It wrote letter to the Railways dated 7.3.93 in which it referred to all these facts and requested that the delivery period be extended by three months. The Railways in response wrote letter dated 13.4.93 and thereby extended the delivery period uptil 20.5.1993 without imposing any penalty. The contractor delivered 30 sets well within the delivery period which were accepted by the Railways. The contractor also manufactured the remaining 50 sets and offered the same for inspection to RDSO vide its letter dated 26.4.93. The RDSO rather than responding to the said communication wrote a letter to the contractor dated 14.5.93 which was as under:

During last inspection in April 1993, our Inspector inadvertently had not drawn the sample pads to Drawing No. 461/91 to 470/91 and P 5/63 and therefore said pads were not forwarded to Track Department for dimensional check. The samples of above said drawings are to be forwarded during the visit of CI(Chem) of this office in May, 1993 otherwise inspection of the parts to above drawings in future could not be taken up.

12. The contractor in the meanwhile wrote to the Railways on 17.5.93 seeking extension of delivery period for a further period of 60 days without liquidated damages followed by a reminder dated 13.8.93. The Railways declined to accede to the request due to fall in rates for similar stores. It asked the contractor to reduce the price of stores to Rs. 13500/- per set before delivery period could be extended. The contractor was not prepared to do so and therefore the Railways proceeded to cancel the contract for the supply of the balance goods and recovered a sum of Rs. 71,200/- equivalent to the security from the other bills of the contractor. The contractor pleaded with the Railways that it was not at fault in the performance of its obligation under the contract and if the remaining goods could not be supplied within the stipulated period it was due to reasons imputable to the Railways. The Railways was unmoved. The contractor therefore claimed a sum of Rs. 8,55,000/- as price of the balance 50 sets and Rs. 71,200/- as the penalty imposed on it, in all, amounting to Rs. 9,26,200/- along with interest thereon at the rate of 18% per annum w.e.f 26.4.93 on the first amount and w.e.f 3.12.93 on the second amount.

13. Third purchase order No. 211-S/1202/TSO/93/53/530 dated 4.11.93

14. This order was in regard to supply of 1,40,000 numbers of 6 mm thick GRSP to Drawing No. T-3703 alt 3. The supply was to commence within one month of the receipt of the purchase order and was to be completed within one month thereafter. The delivery period was to expire on 10.1.94. The contractor wrote a letter dated 24.12.93 to RDSO Lucknow stating that the goods were ready and be got inspected at the earliest so that the same could be delivered before the expiry of the delivery period. Thereafter, the contractor vide its letter dated 29.1.94, intimated to the Railways that the RDSO Inspector had visited its factory from 9.1.94 to 24.1.94 but he did not inspect the goods as the delivery period had expired on 10.1.94. Thus the contractor requested for extension of delivery period to enable the RDSO Inspector to take up the inspection. The Railways in the meanwhile received quotations at lower rates and it therefore asked the contractor to agree to supply the material at the lower rate before its request for extending the delivery period could be considered. The contractor declined to do so. Consequently, the Railways vide its letter dated 22.7.1994 cancelled the contract and imposed penalty of Rs. 94,500/- equivalent to the amount of the security money. Aggrieved by the action of the Railways the contractor claimed refund of Rs. 94,500/- and Rs. 3,28,380/- as loss occurred due to fall in the price. The agreed price was Rs. 13.50 per unit while the reduced price was Rs. 11.155 per unit. Therefore, the difference of Rs. 2.345 was claimed as damages which with reference to 1,40,000 was worked out to Rs. 3,28,300/-.

15. The learned Arbitrator has found the Railways blame-worthy. As regards the first purchase order he held that the contractor was entitled to the refund of Rs. 47,500/- (equivalent to the security furnished by it) as against its claim of Rs. 48,100/- along with interest @ 12% per annum w.e.f 21.8.96 until payment. As regards the second purchase order, holding that the contractor was entitled to loss suffered by it in not being able to supply 50 sets at the agreed price, the learned Arbitrator held that it was entitled to compensation for the loss suffered as under :

Difference in price of 50 sets Rs. 17,000/- (-) Rs. 13500/-

= Rs. 3500 x 50 = Rs. 1,75,000/-

16. The contractor was also held entitled to refund of Rs. 71,200/- imposed as penalty. In all it was awarded Rs. 2,46,200/- with interest @ 12% per annum w.e.f. 21.8.96 until payment. Coming to the third purchase order, the Arbitrator upheld the claim of the contractor and awarded a sum of Rs. 4,22,880/- (Rs. 3,28,300 + Rs. 94500/-) along with interest at 12% per annum w.e.f. 21.8.1986 until payment.

17. Keeping in view what has been recorded by me above, should the Award be set aside?

18. According to the learned Counsel for the Railways the Award rendered by the Arbitrator is in conflict with public policy of India and is liable to be set aside in view of Section 34(2)(b)(II) of the Arbitration and Conciliation Act, 1996. As per him, the Arbitrator ought to have held that time being the essence of the contract and the contractor having violated the same, the Railways could not be held liable and that having failed to do so, the Award so passed violated public policy. What one may ask, constitutes public policy. The answer comes from the judgment of the Apex Court delivered in ONGC Ltd. v. Saw Pipes Ltd. . This is what the court says:

In our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case it is required to be held that the award could be set aside if it is patently illegal. The result would be - award could be set aside if it is contrary to:

(a)fundamental policy of Indian law; or

(b)the interest of India; or

(c)justice or morality; or

(d)in addition, if it is patently illegal.

19. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.

20. The Apex Court also says that if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal which could be interfered with under Section 34.

21. The above view by the Apex Court has been reinforced in a subsequent judgment reported as Hindustan Zinc Ltd. v. Friends Coal Carbonisation in .

22. The Railways wanted the contractor to be non-suited before the Arbitrator and having failed there wants me to do so on the ground that it failed to adhere to the time as initially set out in the purchase orders and later extended from time to time. It was argued by learned Counsel for the Railways that time was the essence of the contract and in support reference was made to Clause (0700) of the Standard Conditions of Contract which were applicable to the purchase orders. It reads as under:

0700 Time for and Date of Delivery; the Essence of the Contract:

23. The time for and the date specified in the contract or as extended for the delivery of the stores shall be deemed to be of the essence of the contract and delivery must be completed not later than the date(s) so specified or extended.

24. The learned Arbitrator, it was contended, ignored this clause and therefore the Award falls within the description of being against public policy as laid down by the Supreme Court.

25. It was not disputed by the contractor that Clause 0700 stipulates that time was the essence of the contract. What was disputed was any lapse on its part that could be said to have delayed the performance of the contract. It roundly and squarely blamed the Railways for all the delay. Who, then, was responsible for the delay?

26. The trail of correspondence referred to by the learned Arbitrator vis-a-vis the first purchase order and as noticed by me too reveal that initially the date of supply of the stores was 10.11.85. There was no stipulation in the purchase order for preparation of any proto-type samples or approval of the same before undertaking the bulk manufacture. However finding that the thickness of stores as asked for in the purchase order was at variance with IRS specification to which they were suppose to conform the Railways altered the terms of the contract, in that it asked the contractor to first prepare prototype samples and have the same approved from RDSO, Lucknow. The contractor, was not obliged to accept these newly added pre-conditions to the execution of the purchase order. They were a departure from the terms originally agreed upon between the parties. Therefore the contractor could ask or even insist upon the Railways to first extend the delivery schedule before it prepared the prototype samples. But, it made no such issue. Rather it proceeded to prepare the samples and when they were ready sent the same to RDSO for approval. However, the samples did not meet the approval of the RDSO. Why? Not because of the fault of the contractor but because of RDSO's own fault. It sent drawings which were found wanting in many details. This is borne out from the fact that on 3.9.86 the Railways wrote to the Contractor that it was sending three copies of the revised drawings T-3005 which it had received from the RDSO and asked it to start bulk manufacture of the stores and intimate to it the latest delivery schedule. It is further borne out from the letter of the Railways to the contractor dated 7.10.86 in which it admitted that the supply of stores could not be started by the contractor due to some clarification/modification in the drawings by the RDSO. What needs to be highlighted is that the Railways which in its purchase order had fixed 10.11.85 as the outer date for completion of the stores took as many as 10 months to send the revised drawings. This singular circumstance flies in the face of the claim of the Railways that time was the essence of the contract. It goes to show that time was no priority with the Railways or its instrumentality, the RDSO.

27. The other correspondence relied upon by the Arbitrator and also noticed by me in the earlier part of the order goes to show that the Railways kept on extending the delivery period for as long as four years till 31.12.88 without imposing liquidated damages. It was only vide its letter dated 2.1.89 that it wrote to the contractor that the supplies made after 31.12.88 would not be accepted unless there was a specific request for extension of delivery period and there was an acceptance of such a request. The contractor wrote back on 4.1.89 stating that the delay had occurred for the reasons imputable to new items being developed, new samples being manufactured based on new drawings/ specifications given by the RDSO and that the results of the samples were still awaited. Accordingly, it asked for further extension of time which was granted till 30.6.1989. The contractor then wrote another letter dated 5.7.1989 in which it informed the Railways that it was only on 16.5.1989 that the RDSO had approved the samples and had given permission to commence the production in bulk. Accordingly, it asked for extension of delivery period by four months. The Railways in response to this letter wrote to the contractor on 23.7.1989 stating that the delivery period stood expired on 30.6.1989 and as it had made no supplies within the extended delivery period it was proposed to cancel the purchase order for the entire quantity of one lakh numbers but without financial implications on either side. The contractor wrote back on 23.9.1989 stating that it had already manufactured 1300 numbers of items and, therefore, requested that what had been manufactured be accepted and for the balance quantity of 98700 numbers the supply order could be cancelled without any financial implication. This was not acceptable to the Railways which cancelled the contract and imposed penalty of 5% of the total value of goods as damages amounting to Rs. 48100/-.

28. What needs to be highlighted is that even though the Railways vide its letter dated 19.1.89 had extended the delivery period till 30.6.1989 the contractor got only one month and fifteen days to complete the entire production of one lac items of stores, for it was only on 16.5.89, that the RDSO had approved the samples. As if all this was not enough the Railways declined further extension of time ignoring this fact and ignoring its own indifference in treating time as the essence of the contract. It never showed any urgency in the matter. It never asked the RDSO to either hurry up in the preparation of the fresh drawings or in the matter of approval of the samples and in the end it was prepared to call off the entire deal without financial implications on either side. This implies that it was conscious of the fact that the contractor could not be faulted or held responsible for the delay in manufacture of stores, otherwise why was it prepared to let go the contractor without any penalty? Of course, it later changed its stance but that was only when the contractor wrote to it stating that it had already manufactured 1300 items of the stores and at least that much number be accepted. It not only refused to accept the offer of the contractor but also went back from its original proposal of calling off the entire deal without any financial implication. Why this change of heart? No reason was assigned. No explanation was offered. The Railways simply cancelled the contract and imposed general damages equivalent to 5% amount of the total value of the contract to the tune of Rs. 48,100/-. This, as rightly held by the learned Arbitrator was unjustified and could not be countenanced.

29. For what has been discussed above, in relation to the first purchase order, I do not find the Award to be against public policy, or such that shocks the conscious of the Court, compelling it to take a view different from what the learned Arbitrator has taken.

30. This brings me to the second purchase order which was for the supply of 80 sets of points and crossing of GR sole plates per set minus 5% discount. The purchase order did not require preparation of any prototype samples and to obtain approval of the same from RDSO (Track Directorate)before undertaking the bulk manufacturing. However, as in the case of first purchase order, in this case also, this pre-condition was introduced with the result that the contractor could not undertake the bulk manufacture till the samples were approved by the RDSO (Track Directorate). Nonetheless, the contractor without demur accepted this pre-condition and asked the RDSO to supply the drawings. But no such drawings were available with it. The same were supplied only on 23.10.92. It was thereafter that the manufacture was undertaken. In the meanwhile the delivery period was extended till 20.5.1993. The contractor supplied 30 sets during the extended delivery period and also offered the remaining 50 sets for inspection to RDSO by sending a call letter dated 26.4.1993. The RDSO declined to inspect the remaining 50 sets, on the ground that during the inspection of 30 sets in April 1993, the Inspector inadvertently had not drawn sample pads to drawing No. 461/91 to 470/91 and PS/63 and therefore the said pads were not forwarded to Track Department for dimensional check. On receipt of this communication the contractor wrote a letter to the Railways dated 17.5.93 seeking extension of delivery period for a further period of 60 days without liquidated damages which was declined due to fall in rates of similar stores. It asked the contractor to reduce the price of stores to Rs. 13,500/- per set before delivery period could be extended.

31. Do the above facts justify the refusal of the Railways to extend the delivery period?

32. The Railways made a valiant attempt to justify its refusal to extend the delivery period by placing reliance on a letter from the contractor dated 25.5.93 addressed to the Chief Engineer, Northern Railways, Delhi. In this letter it was stated by the contractor that it had already supplied 30 sets and the balance quantity of 50 sets was under production and would be dispatched early as soon as RDSO inspection is done. In the same letter it asked for extension of delivery period beyond 20.5.93. It was submitted by learned Counsel for the Railways that from the letter of the contractor dated 25.5.93 it was apparent that as on 25.5.93, the remaining 50 sets were under production and were not ready for delivery. Therefore, the claim of the contractor that 50 sets were ready was false to its own knowledge.

33. It is true that the contractor in its letter dated 25.5.93 had written that 50 sets were under production but it cannot be ignored that in the same letter it had also written that as soon as the RDSO Lucknow would carry out the inspection of the sets the same would be dispatched. This implied that but for the inspection, the sets were ready for delivery. Therefore, when the contractor wrote that the production of 50 sets was underway it did not negative the contents of the call letter dated 26.4.1993. Hence, I agree with the finding of the learned Arbitrator that until proper inspection was done, the production of 50 sets could not be deemed completed. I am also of the view that the letter dated 25.5.1993 cannot be read in isolation. It has to be viewed in the context of two other letters, one written by the contractor dated 26.4.1993 and the other by the RDSO dated 14.5.1994. The Contractor in its letter had invited the RDSO for inspection of the stores. The RDSO did not take the call. Why? Not for the reasons advanced before me that the sets were not ready but because of its own letter dated 14.5.1993 wherein it had stated that in the earlier inspection carried out by its Contractor he had by inadvertence not sent the sample pads to Track Department for dimensional check and, therefore, further inspection could not be taken. This thus was the real reason for not responding to the call of the contractor for further inspection. However, let me for a moment assume that this was not the reason, but then the question arises why did the Railways not send its Inspector for further inspection after it had received the call letter dated 26.4.1993. Had it sent its Inspector it would have called the alleged bluff of the contractor that the sets were ready for inspection.

34. All this apart, the Railway has not furnished any explanation as to why at the first instance it introduced the pre-condition to the purchase order that prototype samples should first be prepared before undertaking the bulk manufacture and why drawings were not made available to the contractor immediately. It also failed to explain the lapse on the part of its Inspector who had cleared the earlier 30 sets as to why he had not sent the sample pads to Track Department for dimensional check. In this background, the Railways before blaming the contractor should have seen to it that its own house was in order. I, therefore, find no infirmity in the Award.

35. Now the third purchase order. It was for the supply of 1,40,000 numbers of 6 mm thick GRSP to Drawing No. T-3703 alt 3. The delivery period in respect thereto was to expire on 10.1.1994. The contractor wrote a letter dated 24.12.1993 to RDSO Lucknow stating that the goods were ready and be got inspected at the earliest so that the same could be delivered before the expiry of the delivery period. Thereafter, the contractor wrote another letter dated 29.1.1994 to the Railways and therein stated that the RDSO Inspector had visited its factory from 9.1.1994 to 24.1.1994 but he did not inspect the goods as the delivery period was due to expire on 10.1.1994. The contractor, therefore, requested for extension of the delivery period to enable the RDSO Inspector to take up inspection but the Railways declined to extend the same for the reason that it had in the meanwhile received quotations at lower rates and, therefore, wanted the contractor to supply the material at the lower rate. The only explanation that the Railways has furnished for not extending the delivery period was that the contractor had given very little time to the RDSO to inspect the stores. The explanation so given has no basis for the reason, that under the terms of the contract, the contractor was required to give only two weeks' notice for offering the goods for inspection. This was done. The contractor had written a letter to the Chief Engineer, Northern Railways dated 24.12.1993 requesting him to advise the RDSO to immediately depute its Inspector to inspect the stores so that the same could be dispatched within the delivery period of 10.1.1994. Therefore, the learned Arbitrator has held that had the goods been inspected in right earnest the contractor could have given delivery of the same within the stipulated period. The Railways has furnished no explanation as to why its Inspector arrived for inspection on 9.1.1994 when the time for delivery of stores was due to expire on 10.1.1994. Therefore, the fault is not inspecting the stores squarely lay with the Railways for which the contractor cannot be penalised.

36. This brings me to the last submission of the learned Counsel for the Railways. It was contended that the learned Arbitrator could not have awarded interest on the security deposits which were furnished in respect of each of the contract and in this regard Clause 2430 of the General Terms of the Contract was relied upon. The relevant part of this clause reads as under:

It is an agreed term of the contract that the sum of money so withheld or retained under this clause by the Purchaser or Government will be kept withheld or retained as such by the Purchaser or Government till his claim arising out of in the same contract or any other contract is either mutually settled or determined by the Arbitrator, if the contract is governed by the arbitration clause or by the competent court under Clause 2703 hereinafter provided, as the case may be, and that the contractor shall have no claim for interest or damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the contractor.

37. The contractor in its Statement of Claim before the learned Arbitrator has claimed interest at the rate of 18% per annum w.e.f. 1.12.1989 till payment. The Railways in its reply to the claim did not dispute either the rate or the period for which the interest was claimed. No reference was made to the aforementioned clause nor any objection of the kind raised before me was raised before the Arbitrator. It has been held by the Apex Court in State of Rajasthan and Anr. v. Nav Bharat Construction Co. that the issue of such a nature where it is claimed that the clause bars payment of interest depends upon the evidence which may be led by the parties as well as on interpretation of the clause by the parties and the Arbitrator. Therefore, it was further held that the contention having not been raised before the Arbitrator could not be raised at a later stage to assail the award. In the present award the learned Arbitrator has awarded interest from 21.8.1996, i.e., the date on which the petition under Section 20 of the Arbitration Act was filed in this Court till payment is made and that too at the rate of 12% per annum as against 18% claimed by the contractor. The interest so awarded is in the nature of pendente lite and future interest. I do not think the clause relied upon bars grant of such interest. The Arbitrator was empowered to do so. [See T.P. George v. State of Kerla and Anr. (2001) 2 SCC 758]. I am not persuaded to take a view from the one taken by the learned Arbitrator.

38. The learned Arbitrator has dealt with each of the purchase orders in great detail, and with the assistance of the learned Counsels for the parties, I too have gone through the record. The material part of the evidence finds mention against each purchase order. I feel, the learned Arbitrator has approached the matter critically and analytically. I find no reason to take a view contrary to the view taken by him. The Award is neither in violation of any statutory provision nor contrary to the law laid down by the Apex Court.

39. No other point was urged before me.

40. The objections are dismissed. No costs.