Victor Cables Industries Ltd. vs Delhi Electric Supply ...
2008 Latest Caselaw 2302 Del

*                      HIGH COURT OF DELHI : NEW DELHI


+                          FAO (OS) No.378/2005


                       Judgment Reserved on    :     2nd September, 2008

%                      Judgment pronounced on :          19th December,2008

Victor Cables Industries Ltd.                          ...Appellant
                       Through:   Mr. Valmiki Mehta, Sr. Adv. with
                                  Ms. Sangeeta Jain, Adv.

                       Versus

Delhi Electric Supply Undertaking                     ....Respondent
                       Through: Ms. Avnish Ahlawat, Adv. with Ms. Latika
                                 Chaudhary & Ms. Nidhi Gupta, Advs. for
                                 Respondent No.1
                                 Mr. Navin Chawla, Adv. for Respondent
                                 No.2
                                 Mr. Sudhir Nandrajog, Adv. for
                                 Respondent No.4

Coram:

HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE MANMOHAN SINGH

1. Whether the Reporters of local papers may
   be allowed to see the judgment?

2. To be referred to Reporter or not?

3. Whether the judgment should be reported                      Yes
   in the Digest?

MANMOHAN SINGH, J.

1. This Appeal is preferred against the impugned order dated

29th September 2005, passed by the learned single Judge of this court

deciding three matters, i.e. (i) CS(OS) No.35/94 - M/s. Victor Cable

Industries Ltd vs. Delhi Electricity Supply Undertaking; (ii) CS(OS)

No.1055/94 - M/s. Victor Cable Industries Ltd vs. Delhi Electric Supply

Undertaking and (iii) Execution Petition No. 200/2000 - M/s. Victor

Cable Industries Ltd vs. Delhi Vidyut Board whereby the objections filed

by the Appellant to the Award dated 29th September, 1993 were

dismissed and the Award was made rule of the court.

2. There was an agreement entered into between the

Appellant and the respondent which contained an arbitration clause .

The disputes arisen between the parties were referred to the sole

arbitrator, Sh. O.P.Anand, Chief Engineer(d) of the respondent to

determine/adjudicate upon the claims.

3. The following disputes were referred to the learned

Arbitrator for adjudication and settlement:-

i) Involving the recovery of Rs.40,07,225.00 from M/s. victor Cables Ltd, 6,Commercial Centre, Panchshilla Park, New Delhi-17 by DESU on account of the differences in risk purchase for P.O.No. ST(SP-I)TE-1873/154 dated 30.1.1990 and Addl. P.O.No. ST(SP-I)/TE 1873/1686 dated 19.02.1990.

ii) Cancellation of registration of the party M/s.

Victor Cables Ltd with DESU.

4. On the pleadings and documents filed by the parties,

following issues were framed:

"(i) Whether there is a contract ? OPD

(ii) Whether the claimant/respondent herein is entitled to the claim preferred by him in the statement, if so what amount? OPC

(iii) Whether the claimant is entitled to interest ?

OPC

(iv) Whether the claimant is entitled to the cost or any consequential relief ? OPC

(v) Relief."

5. The parties gave consent for enlargement of time upto 30th

September,1993 and the Arbitrator vide his Award dated 29th

September, 1993 made and published his Award in the following terms:

"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 30-01-90 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 a period of three months from the date of this award, whereafter interest @ 18% per annum will be payable till the final payments are made."

6. After the Arbitrator filed his Award in this court on 7th

January, 1994, notices were issued to the parties on 8th March, 1994

regarding the filing of the Award and objections. The appellant filed an

objection to the Award dated 29th September, 1993 bearing CS(OS)

No.35/94.

7. The Appellant had filed a petition under Section 20 of the

Arbitration Act, 1940 i.e. CS(OS) No.1055/94 praying therein that the

disputes arising from another purchase Order No. ST/SP-I/TE-

1991/1329 dated 11th March, 1992 be referred to arbitration. The

disputes were referred to arbitrator and finally in that case also, the

Award was passed in favour of the Appellant, M/s. Victor Cables

Industries Ltd on 6th February, 1990. Objections to the said Award were

dismissed and the Award was made rule of the court by order dated

26th October, 1992.

8. In order to execute the said decree of the court, the

Appellant, M/s. Victor Cables Ltd had filed Execution Petition

NO.200/2000. The DVB, successor of DESU had filed an appeal which

was registered as FAO(OS) No.534/01 and the same was disposed of by

the Division Bench while directing that the warrants of attachment shall

not take effect till the respondent's objections in CS(OS) No.35/94 are

decided and one month thereafter.

9. In view of the Division Bench order dated 2nd December,

2003 the parties were directed to settle the amounts.

10. The payments due from each other were as follows:-

i) The Award in favour of erstwhile DESU in

September 1993 for Rs.40,07,225/- with interest

@ 18% p.a from 1.1.1994 till payment and Award

has been made rule of the court.

ii) The total amount recoverable with interest comes

to Rs.78,09,376.99 and the amount payable to the

party in another Award was Rs.1,65,37,720/-. In

the year 1999 itself accounts were settled and

balance amount of Rs.87,26,352.75 was paid by

the erstwhile DESU/DVB to the petitioner.

11. As stated, CS(OS) No.35/94 pertains to the objections under

Sections 30 and 33 of the Arbitration Act, 1940 to the Award dated 29th

September, 1993 made and published by the sole Arbitrator Sh. O.P.

Anand.

12. By the impugned order, the learned Single Judge rejected

the objections filed by the Appellant and made the Award dated 29th

September, 1993 as rule of the court and decree was passed in terms

thereof. CS(OS) No.1055/94 and Execution No.200/2000 were also

disposed of by the learned Single Judge in terms of the order of the

Division Bench as earlier mentioned by observing that the Appellant

would be entitled to adjust the amount due and payable by it in order

to settle the accounts accordingly.

13. The learned single Judge while dismissing the objections filed

by the Appellant has, inter alia, observed in Para 9 as under:-

"...........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 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 upto 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 inaction 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."

14. The present appeal has been filed against the said order

passed by the learned single Judge on 29th September, 2005. During the

course of the hearing, the learned Senior counsel appearing on behalf

of the Appellant has mainly raised the plea that there was no valid and

binding contract between the parties and, therefore, the Award of the

arbitrator is a nullity.

15. The case of the Appellant is that the Appellant is an

established business concern who has been doing business with DESU

for a long time and the Appellant is aware of the system and working of

the respondent. The respondent-erstwhile DESU issued tender for

supply of LT-XLPE Cables of the size 3.5 x 95 sq. meter total quantity

100 Km on 26th June, 1989 and the tender was opened on 30th August,

1989. The respondent had issued two purchase orders dated 30th

January, 1990 and 19th February, 1990 for 75 Kms and 50 Kms of cable.

16. On 25th August, 1989 the Appellant submitted their tender in

which they quoted payment terms as follows:-

"PAYMENT TERMS 100% payment along with taxes and duties shall be collected against receipted challan for which we will submit a 5% revolving bank guarantee on pro-rata basis. The bills can be submitted directly along with the receipted challan as payment cheque shall be prepared in favour of our bankers Account Victor Cable Ltd. ½% cash discount shall be offered if the payment is made within 10 days from the date of submission of

the bills on priority basis.

DELIVERY The delivery shall commence within 2 to 3 months from the date of receipt of order technically and commercially clear from purchase order and shall be completed 5 months thereafter."

17. The said offer of the Appellant were accepted vide letter

dated 30th November, 1989 by the respondent and the Appellant was to

send its consent for the above rates by 7th December, 1989 valid upto

15th February, 1990 failing which it will be assumed that the Appellant is

not interested in the subject any more.

18. On 5th December, 1989 the appellant had communicated the

acceptance but subject to the condition that their offer for cash

discount of ½% for payment on priority basis shall stand deleted. The

payment shall be made on priority basis within 10 days from the date of

submission of the bill. In another letter dated 12th December, 1989 by

the Appellant to the Executive Engineer, SP-I, DESU, it was submitted by

the Appellant that they are reconfirming their right to accept the order

@ Rs.1,00,580/- per kms (computed) if the payment is to be made on

priority basis instead of within 10 days and other contents of their letter

dated 5th December 1989 shall remain the same.

19. In view of the above acceptance of the offer by the

Appellant, the respondent placed the purchase order on the Appellant

by letter dated 30th January, 1990 wherein the delivery schedule and

payment schedule as submitted by the Appellant were quoted in the

said letter under the heading 'Payment' which reads as under:-

"PAYMENT 100% priority payment with full taxes and duties against received challan on furnishing of 5% revolving bank guarantee of the contract valued on pro rate basis valid for three months from the date of last supply.

Bill in duplicate be submitted to ACA/(SB-I)RPH, New Delhi. If any consignment is rejected due to bad workmanship the poor quality of material the payments terms will thensforth change to 100% after approval of material at our stores."

20. Vide letter dated 8th February, 1990, the Appellant requested

the respondent for amendment of the rate for 3-1/2% x 95 sq. m Cable

to be Rs.76,298.55 per km instead of Rs.76289.55 as quoted in the

respondent's offer dated 30th November, 1989. By another letter dated

12th February, 1990 written by the Appellant to the respondent, the

Appellant conveyed their acceptance subject to the following terms and

conditions:-

"(i) Per unit rate of Rs.76289.55 should be amended to Rs.76298.55 as mutually agreed upon vide letter No. SI/SP-I/TE 1073/1297 dated 30th November 1989 and No.Vol/Q-0667/1267 dated 8th February 1990.

(ii) Quantity Variation: Additional order of 50 KMS on same terms and conditions shall be acceptable only if released on us within one month from the date of this purchase order. Otherwise it shall be subject to our mutual agreement.

(iii) Payment: As indicated in the purchase order, payments shall be made on priority basis and no discount shall be given by the same. If payments are not released on priority basis we shall be well within our rights to hold supplies against this purchase order."

21. The appellant had also informed the respondent that it

would be prepared to supply the additional order of 50 kms if this

order was placed on them within one month from the date of main

purchase order.

22. It is pertinent to mention that by letter dated 8th February,

1990, the appellant wanted a slight correction in the amount

mentioned in the order. The appellant had also stated that vide letter

dated 12th February, 1990, the additional order of 50 kms was

confirmed on the same terms and conditions only if released on them

within one month from the date of its purchase order otherwise it shall

be subjected to the mutual agreement.

23. On 15th February, 1990 the Appellant submitted the bank

guarantee with respect to 100% payment and security deposit. After

the receipts of these bank guarantees, the purchase order for 50 Km

material was also placed by the respondent vide letter dated 19.2.1990

for which the Appellant was asked to submit bank guarantee or deposit

the amount within 7 days for a sum of Rs.38,145/- on the terms and

conditions mentioned in the order dated 30th January, 1990. Thereafter

the appellant failed to make the required supplies.

24. Before cancelling the contract by the Appellant on 18th April,

1990; the respondent has written letter dated 17th April, 1990 to the

Appellant informing that since the supply was not being made as per

the delivery schedule, respondent is facing acute shortage of material

and important works were getting delayed, therefore, the appellant

was asked to supply the material. Even after the cancellation of

contract on 2nd May, 1990 another letter was written to the Appellant

by the respondent to start supply.

25. The respondent wrote letter dated 14th May, 1990, 31st May,

1990 and 16th June, 1990 but the Appellant refused to supply the

material and the contract was finally cancelled on 10th October, 1990 on

the condition that the risk purchase was taken up at the risk of the

Appellant. The matter was thereafter referred to the Arbitrator who

gave his Award by awarding a sum of Rs.14,07,220/- in favour of the

respondent.

26. The main contention of the Appellant is that the parties

were never at the same amount and there was no consensus ad idem.

Respondent's acceptance after 3 months from the cancellation of the

contract cannot be looked into. It is further argued by learned counsel

for the Appellant that the respondent vide order dated 30th November,

1989 in reply to the offer of the appellant gave its counter offer and

asked the respondent to send the acceptance to the said counter offer

by 7th December, 1989.

27. The appellant vide letter dated 5th December, 1989 conveyed

their conditional acceptance of the said order of the respondent and

further by letter dated 12th December 1989 it was confirmed that the

Appellant are ready to accept the offer of the respondent @

Rs.1,00,580 (computed) per Km if the payment is to be made on priority

basis within 10 days. It is further argued that the learned single Judge

erred in observing that the Appellant submitted the acceptance as per

letter dated 5th December, 1989 and no terms and conditions of any

kind were attached to its acceptance.

28. The submission of the respondent is that after the contract

was concluded between the parties, apparently the Appellant were not

in a position to supply the material and the appellant made a

representation on 21st February, 1990 wherein it was clearly stated that

at the time of acceptance of the order letter dated 5th December, 1989,

the payment would be made on priority basis within 10 days without

any discount and the same has also been incorporated in the order. The

said letter dated 21st February, 1990 cannot be considered to say that

the Appellant offer of payment on priority basis was not accepted. The

terms with respect to priority was accepted by the respondent and the

respondent conveyed the same in the purchase order dated 30th

January, 1990. The subsequent letters written by the Appellant and

then cancelling the contract is just an excuse on the part of the

Appellant.

29. It has further been submitted that after the concluded

agreement, a representation to confirm with respect to the payment

and slight variation in the price was only to the tune of Rs.10/- which

was under consideration but it does not mean that there was no valid

and binding contract between the parties.

30. In those representations, it was particularly mentioned that

the payment would be made on priority basis within ten days without

any discount and the same should also be incorporated in the order.

The appellant also made complaints about the discussion with Account

Officer for no priority payment against the order unless the specific

approval is conveyed by the Finance Advisor and Chief Accounts Officer.

Although according to the respondent, there was specific request of

approval of the Finance Advisor and Chief Account Officer conveyed to

the paying authority.

31. It has been further contended by the respondent that the

correspondence after 5th December, 1989 are only clarificatory and

even in the letter dated 8th February, 1990 in the form of

representation, the Appellant have categorically admitted that the offer

dated 30th November, 1989 was accepted on 5th December, 1989. The

said representation dated 21st February, 1990 was not a counter offer

but it was merely a clarification.

32. It is settled law that for setting aside of arbitral Award there

must be errors apparent on the face of the record or a misconduct by

the arbitrator. The main argument addressed by the appellant in the

present case is that there was no concluding contract between the

parties and the arbitrator passed a non-speaking Award without even

considering this issue which is a preliminary issue to proceed with the

arbitration. We consider that when arbitrator had taken a plausible

view on interpretation of contract, court cannot set aside Award on

ground of misconduct of arbitral proceedings.

33. A bare perusal of the Award of the arbitrator would show

that he had considered the dates of the contract that is 30th January,

1990 and 19th February, 1990 and thereafter, gave the findings in favour

of the respondent. The arbitrator was justified in passing the Award

and there can be no interference in the Award passed by the arbitrator

as the Award was not based upon either a proposition of law which is

unsound nor there was an erroneous proposition of law established, to

vitiate his decision.

34. As regards letter dated 19th February, 1990 was concerned,

the said letter was also available before the Arbitrator in which the

respondent placed further order of 50 kms on the same terms and

conditions of the main purchase order dated 30th January, 1990. In this

order the rate quoted by the respondent was the same as mentioned in

the letter dated 30th January, 1990. The company was also called upon

to furnish a bank guarantee.

35. Although the appellant wrote a letter dated 8th February,

1990 for the change of price but despite this letter, the appellant had

accepted additional order of 50 kms on the same terms and conditions.

The order was placed within one month and the appellant further

mentioned that the payment shall be made on priority basis. It is clear

that the appellant had accepted the supply of additional order of 50

kms despite the request made by the appellant to the respondent for

variation of the prices which was not accepted by the respondent.

36. It appears that by sending various letters of similar nature

dated 17th April, 1990, and 18th April, 1990 the respondent had written

to the appellant to supply the material as per the schedule, otherwise

the respondent would face acute shortage of material and important

works would be delayed. Another letter dated 2nd May, 1990 was

written by the respondent in this regard. However, the respondent did

not supply the material inspite of reminders dated 14th May, 1990, 30th

May, 1990 and 16th June, 1990. The contract was finally cancelled on

10th October, 1990. Therefore, the risk purchase was effected at the

appellant's cost.

37. It further appears from the letter dated 30th May, 1990 when

the respondent informed the appellant that there is not much

difference in price structure that respondent accepted the offer of the

appellant, therefore, letters written by the appellant to the respondent

do not make any difference. Despite the letter dated 14th May, 1990,

no supply was effected by the appellant.

38. It shows that the appellant was reluctant to supply the

material to the respondent and by its letter dated 18th April, 1990 the

appellant had cancelled the contract without any financial repercussion.

The subsequent correspondence on behalf of the parties appears to be

an afterthought.

39. Learned counsel for the appellant has referred the decision

of Supreme Court in The Godhra Electricity Co. Ltd. & Anr. Vs. The

State of Gujarat & Anr.; (1975) 1 SCC 199 wherein it was held by the

Supreme Court in para 11 as under :

"In the process of interpretation of the terms of a contract, the Court can frequently get great assistance from the interpreting statements made by the parties themselves or from their conduct in rendering or in receiving performance under it. Parties can, by mutual agreement, make their own contracts; they can also by mutual agreement, make their own contracts; they can also by mutual agreement, remake them. The process of practical interpretation and application, however, is not regard by the parties as a remaking of the contract; nor do the Courts so regard it. Instead, it is merely a further expression by the parties of the meaning that they give and have given to the terms of their contract previously made. There is no good reason why the Courts should not give weight to these further expressions by the parties in view of the fact that they still have the same freedom of contract that they had originally. The American Courts receive subsequent actings as admissible guides in interpretation. It is true that one party cannot build up his case by making an interpretation in his own favour. It is the concurrence therein that such a party can use against the other party. This concurrence may be evidenced by the other

party's express assent thereto, by his acting in accordance with it, by his receipt without objection of performances that indicate it, or by saying nothing when he knows that the first party is acting on reliance upon the interpretation [see Corbin on Contract, Vol.3, pp.249 & 254-255]."

40. In the present case, we feel that there is no fresh

remake of mutual contract between the parties in order to

change the terms of the contract previously made, all the

subsequent communication exchanged between the parties are

of clarificatory nature, therefore, the judgment cited above by

the learned counsel for the appellant does not help his case.

41. In a formation of contract, the basic ingredient to make

it concluding one is the proposal from one party and its

acceptance by the other. So long as one of the parties to the

transaction could back out of it at his choice, there can be no

binding or concluded contract between the parties, although

they have an agreement on the material terms. The proposal

must be sufficiently definite to permit the conclusion of the

contract by mere acceptance. Similarly, an acceptance should

be final and unqualified expression of assent, to the terms of an

offer. An unqualified unconditional acceptance of the offer

creates a contract when communicated to the offeror.

42. In view of the above, we agree with the findings of the

learned Single Judge that there was a concluded binding

contract between the parties on 5th December, 1989. After

considering the correspondence exchanged between the

parties, intention of the parties show that both the parties

agreed to accept the basic terms of contract reached between

them in letter dated 30th November, 1989 and later on by letter

dated 5th December, 1989. All the subsequent events are of

clarificatory nature.

43. Therefore, we cannot accept the contention of the

learned counsel for the appellant that vide letter dated 5th

December, 1989 there was no concluding contract between the

parties. Both the parties were well aware about the letters and

correspondences exchanged between them which is in

reference to the concluding contract dated 5th December, 1989.

44. It is not in dispute that the appellant had been dealing

with the respondent for a very long time and if there was no

concluding contract at any stage of the proceedings, the

appellant ought to have taken the recourse of its rights in

accordance with law.

45. We hold that the representation dated 21st February,

1990 was not a counter offer but it was merely a clarification. It

appears that the appellant was not inclined to supply the

material and therefore delaying the matter in one way or the

other by sending various letters from time to time and there was

a valid contract between the parties and the contention of the

appellant cannot be accepted.

46. We feel that the material terms and conditions for

construing a concluded contract were exchanged between the

parties by letters dated 30.11.1989 and 5.12.1989. Even the

appellant on 15.2.1990 submitted the bank guarantees with

respect to 100% payment and security deposit.

47. The subsequent letters were only clarifications sought

and there was slight variation in the price which was only to the

tune of Rs. 10/-. Even on 19.2.1990, another order for 50 km.

was placed on the respondents on the same terms and

conditions as that of purchase order dated 30.11.1989.

48. The plea of the appellant that there was never

a concluded contract arrived at between the parties since

the parties were never of the same mind and there

was no consensus ad idem is untenable and has no

force. The conduct of the appellant by making bank

guarantee

clearly shows their intention to enter into this contract.

49. In view of above discussion, we find no infirmity with the

orders passed by the learned Single Judge, the present appeal being

devoid of any merits and the same is dismissed. No costs.

MANMOHAN SINGH, J.

December 19, 2008                                        A.K. SIKRI,j
sd/sa