Jammu & Kashmir Coop Supply & ... vs Uoi
2008 Latest Caselaw 1092 Del

29
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                        Date of Decision:- 22nd July, 2008

+      CS(OS) 704A/1999



       JAMMU & KASHMIR COOP SUPPLY & MAKT.FD             .... Plaintiff
                     Through Mr. Shiv Khorana, Advocate.

                       versus

       UOI                                                       ..... Defendant
                                Through Mr. Rajeev Saxena, Advocate.


CORAM:

Mr. Justice S. Ravindra Bhat
1.

Whether reporters of local papers may be allowed to see the judgment? Yes

2. To be referred to the Reporter or not? Yes

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

% 22.07.2008

Mr. Justice S. Ravindra Bhat (OPEN COURT):

1. The Union of India, the defendant in this case has objected to an award

dated 5.3.1990, published by the sole arbitrator appointed by agreement of the parties to

decide inter se disputes.

CS(OS) 704A/1999 page 1 of 7

2. The plaintiff M/s The Jammu & Kashmir Cooperative Supply &

Marketing Federation Ltd. had on 31.1.1990 responded to a tender enquiry floated by the

Union of India for supply of 90,000 tons of Refined Rapessed Oil in ISI Tins to Defence

Services. It quoted different rates for specific quantities and different products in

February, March and April, 1990. This court is concerned, for the purposes of these

proceedings, with 5000 metric tons at Rs.2,530/- per MT.

3. The Tender was accepted by the Union of India on 5.3.1990 for this

quantity in the following terms:-

"The offer made vide your letter mentioned above has been accepted on the terms and conditions enclosed with this Ministry's Tender Enquiry No. J-12031/5/89-Pur.IV dated 8.11.1989, which is as under:-

        Description of      Accountin     Quantity in     Rate Per MT       Total Cost in
           stores            g unit         Mts           net inclusive         Rs.
                                                         of Exise Duty
                                                         and Sales Tax
      Refined Rapeseed Metric           500              Rs.23,720/- by Rs.1,18,62,500/
      oil in Ist Tins as per Tons                        31.3.1990       - (Rupees one
      ASC Spelfieation                                                   core eighteen
      No. 0170:80facked                                                  lakh sixty two
      in 15 kg square tins                               F.O.R.     Bari thousand five
      conforming to Ist                                  Brahamana       hundred only)
      specification No. Is:                              Jammu (BG)
      10339/1992

"The price is per metric tonne net F.O.R. Station of despatch and is inclusive of cost of raw materials, lost of manufature, cost of containers, marking, handling and transportation charges etc. including municipal octrol paid in respect of the stores upto their arrival at station of desptach and also inclusive of sales tax and excise duty.

CS(OS) 704A/1999 page 2 of 7

4. For the purposes of this controversy, it would be necessary to extract para

2 a and b of the schedule to the tender enquiry and clause 19 A,B & C of tender

conditions. They read as follows:

"PRICE (a) The prie per metric tonns as defined in col. 6 of the tender form will include the cost of vanspati/Refined oil, cost of containers, marking, handling, and transportation charges and duties municipal, octroi, etc. paid in respect of stores upto their loading station of despatch/fectory siding.

(b) The price quoted should be exclusive of Excise duty and Sales Tax which will have to be claimed separately in the manner provided in the schedule of the Tender and will be paid as admissible on the date of delivery subject to such rebate or exemption subject to the provisions of relevant clauses of the conditions of contract. If, however, tenderor chooses to bear the Excise Duty/ Sales Tax himself, he should clearly state that no FD/ST will be charged and the same will be borne and paid by him. Necessary 'D' requested in the tender.

19 EXCISE DUTY PAYMENT When the acceptance to tender provides payment of excise duty extra, irrespective of whether the duty of excise leviable is a percentage ad valoram or a fixed amount, the supplier while claiming reimbursement will furnish the following certificates:-

(a ) Certified that the excise duty charged on this bill is not more than what is payable under the provisions of the relevant Act or the Rules made thereunder.

( b) Certified that the amount of Rs.-----claimed as excise duty in this bill is in accordance with the provision as of the Rules in all respects and that the same has been paid to the excise authorities in respect of goods covered by this bill.

All claims for reimbursement of excise duty should be supported by the following documents:-

(i) A copy of the gate pass which besides showing the particulars of goods, quantity, rate and the amount of excise duty levied on

CS(OS) 704A/1999 page 3 of 7 each consignment should indicate the number and date of the A/T.

5. Apparently w.e.f. 1.4.1990 on account of revision in the Union Budget

excise duty on rapeseed oil was withdrawn and abolished. Consequently, the Union of

India, on 2.4.1990 addressed a letter to the plaintiff taking the position that since excise

duty had been abolished the plaintiff had to send its supplies enclosing copies of gate

passes in order to claim entitlment to the agreed consideration of Rs.25,000/- per MT

2375 per MT. The plaintiff, however, contested this and stated that the price quoted was

a lumpsum and composite one and could not be divided as was done by the Union of

India. It, therefore, withheld supplies to the extent of 150 MT. The Union of India

resorted to risk purchase and later invoked arbitration proceedings. The Arbitrator by his

award rejected the Union of India's claim for Rs.13,24,557.03. In the course of

discussion on this head of claim, the arbitrator concluded, on consideration of note 2 (of

the notice to invitation of tender) and the other documents that the price was a composite

one and that the defendants' insistence for its downward revision was unjustified. He

therefore dismissed claim No.1 for Rs.13.5 lakh and correspondingly allowed the

counter claim to the extent of Rs.23,725/- for the 350 MTs supplied.

6. In these proceedings under Section 30/33 of the Arbitration Act, 1940, the

findings of the arbitrator are sought to be attacked. It is urged by Mr. Saxena, learned

counsel for the objector - Union of India, that a conjoint reading of clause 19 and note 2,

along with Section 64-A of the Sale of Goods Acts indicates revision of excise duty was

a price variation that had persuaded to the parties, to enter into contract.

7. Learned counsel placed considerable reliance on the tender submitted by

the plaintiff on 31.1.1995 in respect of specific quantities and the price quoted in which

CS(OS) 704A/1999 page 4 of 7 the entry towards excise duty had been indicated as Rs.750/- per MT. Learned counsel

urged that the arbitrator completely ignored this document and overlooked the material

impact of Clause 2 and Clause 19 of the tender documents in considering its signifying

intention in case of downward revision or completion of excise duty the price had to be

necessarily reflected during the supplies.

8. Mr. Khorana learned counsel for the plaintiff, on the other hand, urged that

the acceptance of tender communicated on 5.3.1990 indicates that it was for a lumpsum

price as quoted by the plaintiff. In other words even if there were to be an increase in the

sales tax etc, the plaintiff could not have claimed it. He submitted that Section 64 -A is

inapplicable in the facts of this case. Counsel also urged that on a fair application of the

well settled principles as to the jurisdiction of courts in interfering with awards, the

findings of the arbitrator in this case cannot be interfered with.

9. It is apparent from the above discussion that the controversy before the

court is a narrow one; it concerns the interpretation of two conditions in the tender

documents and the manner of acceptance of the plaintiff's offer. Clause 2 of the

schedule of the tender enquiry as well as the Note 2 to the invitation to tender signify a

more or less similar intention, namely excise duty and sales tax if payable by the

purchaser would have to be claimed separately. Clause 19-A and B of the tender

conditions prescribe a methodology for claiming actual payment of such excise duty.

Now in this case it is common ground that excise duty was abolished w.e.f. 1.4.1990.

The tender of the plaintiff's tender which was accepted on 5.3.1990 specifically stated

that it was in all inclusive price.

10. The contract was a commercial one and the parties initiated the terms and

conditions and took care in putting them down in writing. It is nobody's case that the

CS(OS) 704A/1999 page 5 of 7 plaintiff claimed excise duty in the manner agreed to by the parties, in terms of clause

19. On the other hand the document of 5.3.1990 makes it abundantly clear that it is an all

inclusive fixed and invariable price . In these circumstances the arbitrator concluded that

the price quoted was composite and invariable one and accepted as such.

11. As far as the argument Section 64-A (of the Sale of Goods Act) is

concerned, it begins with the expression "unless a different intention appears from the

terms of the contract" and goes on to indicate that increased tax effect would have to be

borne by it and in case of decrease or reduction, the seller would have to bear it. In

recent decision of the Supreme Court reported as Numaligarh Refinery Ltd. Vs. Daelim

Industrial Co. Ltd., (2007) 8 SCC 466, the court had occasion to consider the effect of

this provision. The court was concerned with a clear stipulation, clause 6 which casts the

entire liability of bearing the burden of new taxes and imposts upon one party. In that

case stipulation mandated to an agreement to the contrary, adverted in Section 64-A. In

this case the phraseology adopted in the tender condition, tender note and invitation to

tender as understood by the parties (and ultimately accepted by acceptance of the Union

on 5.3.1990) signify that the cost was a composite one. The Arbitrator also came to the

same conclusion. It is well established that an arbitrator being an agreed adjudicated is

entitled to consider the terms of the contract and interpret document, which fall within his

exclusive domain. Even if there is an error of law as long as such an error does not

amount to misconduct, in the sense that it is not patent, the Court would not disturb with

the findings.

12. Having considered the submissions and the materials on the record this

court is of the opinion that the objector Union has been unable to disclose any error of

law in the findings or in the approach of the arbitrator amounting to legal mis-conduct as

CS(OS) 704A/1999 page 6 of 7 Section 30 and 33 of the Act. The objections embodied in IA No. 7962/2000 are

accordingly dismissed. The award shall be made rule of the court but in the above terms.

JULY 22, 2008                                             S. RAVINDRA BHAT, J.

pkv




CS(OS) 704A/1999                                                        page 7 of 7