Mtnl vs Vindhya Telelinks Ltd. & Ors.
2009 Latest Caselaw 1608 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


                                               Date of Reserve: March 31, 2009
                                                   Date of Order: April 23, 2009

+ OMP 286/2005
%                                                            23.04.2009
    MTNL                                              ...Petitioner
    Through : Mr. Ravi Sikri and Mr. Dipesh Sharma, Advocates

      Versus

      Vindhya Telelinks Ltd. & Ors.                    ...Respondent
      Through: Ms. Amrita Sanghi with Mr. D. Singh, Advocates


      JUSTICE SHIV NARAYAN DHINGRA

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

2.    To be referred to the reporter or not?

3.    Whether judgment should be reported in Digest?


      JUDGMENT

1. The petitioner has filed this petition under Section 34 of the Arbitration

& Conciliation Act, 1996 (for short, "the Act") for setting aside the award

dated 24th February 2005 passed by the Arbitrator (respondent No.2)

directing petitioner to pay to the claimant a sum of Rs.7,86,261/- along with

pendent lite and future interest @ 8% per annum on the principal amount

from 1st April 2002 till the date of payment.

2. The grounds raised in the objections are that the learned Arbitrator

failed to appreciate that the dispute with respect to the liquidated damages

was outside the purview of the arbitration agreement and the award passed

by the learned Arbitrator was quorum non judice and liable to be set aside.

OMP 286.05 MTNL v.Vindhya Telelinks Ltd. & Ors Page 1 Of 6

3. The respondent in reply to the objections has stated that the objections

were barred by limitation. On merits, it is submitted that the objections raised

by the petitioner are not tenable.

4. Brief facts relevant for the purpose of deciding this petition are that the

petitioner had placed a purchase order dated 12th October 1994 for supply of

polythene insulated jelly tin telecom cables of different specifications on the

respondent. A delivery schedule of the supply of cables was given in the

Annexure-B to the order. The delivery schedule provided for supply of entire

quantity of cables up to 15th February 2000. The claimant (respondent herein)

vide letter dated 12th January 2000 requested for re-fixing the delivery

schedule so as to enable it to supply the entire quantity of cables till 31st

March 2000. Vide letter dated 28th February 2000, the petitioner extended the

delivery period for 10 weeks from the date of issue of order, for supply of

balance quantities, but only in respect of 7 sizes of cables out of 13 sizes. The

petitioner's letter gave a tabular statement indicating the new/ extended

delivery period of 7 sizes of cables ranging from 25 th March 2000 to 15th April

2000. The delivery schedule in respect of rest of the sizes of cables was not

provided. In fact, the petitioner had by a prior fax message told respondent/

claimant not to supply outstanding quantities in respect of 3 sizes cables

namely 400/0.5A, 400/0.5UA, 1200/0.5UA. The respondent vide letter dated

13th March 2000 reminded the petitioner that it had not given extension in

respect of remaining 6 sizes of cable and told that the quantities of cables of

those 6 sizes were also lying ready with it awaiting delivery and if extension

was given, the cables would be offered for inspection and delivery. No

response was received. The claimant /respondent sent a reminder dated 26th

April 2000 asking for re-fixing the schedule for rest of the 6 sizes of cables.

OMP 286.05 MTNL v.Vindhya Telelinks Ltd. & Ors Page 2 Of 6 The petitioner vide their letter dated 16th May 2000 extended the delivery

period in respect of 4 sizes of cables up to 31st May 2000 and did not extend

the delivery schedule of 2 sizes of cables namely 2000/0.4(A)/2000/04(UA).

The delivery schedule in respect of these two sizes was not extended despite

reminders. On 26th June 2001, the petitioner sent a communication to the

respondent short-closing the purchase order/ contract in respect of

outstanding quantities and also informed that the liquidated damages of the

amount of Rs.7,43,907/- had been imposed in respect of the quantities not

supplied. The Claimant/respondent was asked to deposit this amount. Since

this amount was not deposited by the respondent/claimant, the petitioner

invoked the bank guarantee to the extent of Rs.7,43,907/- and called upon

the bank to remit this amount. The Claimant learnt about the intended

invocation of bank guarantee and moved an application under Section 9

before this Court. Vide order dated 12th October 2001, this Court directed the

bank to withhold the payment against the bank guarantee. However it

subsequently transpired that by the time this Court order was served on the

bank, the bank had already remitted the amount to the petitioner. However,

while finally deciding the application under Section 9 of the Act, this Court

held that invocation of the bank guarantee was not in accordance with the

terms of the bank guarantee and was bad in law.

5. The Claimant/ respondent later on invoked the arbitration clause and

made a claim of Rs.1,49,76,134/- as damages on account of loss and a claim

for refund of Rs.7,43,907/- recovered by the respondent by invocation of

performance bank guarantee along with interest.

6. It is noted by the Arbitrator that during arguments, the claimant

OMP 286.05 MTNL v.Vindhya Telelinks Ltd. & Ors Page 3 Of 6 /respondent did not advance arguments in respect of claim of

Rs.1,49,76,134/- (claim No.1) and only made submissions for refund of

Rs.7,43,907/-. However, since the claim No.1 was not formally withdrawn, the

learned Arbitrator considered both the claims and found that claim for

damages /profits for an amount of Rs.1,49,76,134/- was not tenable and

allowed the claim for Rs.7,43,907/- along with 8% interest.

7. A perusal of award passed by learned Arbitrator would show that the

Arbitrator had considered the provisions contained in the contract regarding

levy of liquidated damages and rescission of contract and found that the

petitioner had not imposed any liquidated damages in respect of cables

where the quantity of cables were supplied with delay under rescheduled

delivery period. The liquidated damages had been imposed on those

quantities which had not been supplied. The Arbitrator observed that the

question of invocation of clause 16 regarding imposition of liquidated

damages does not arise in this case and the clause was not attracted in case

of the material being not supplied. It was only attracted in case where the

material was supplied beyond the time schedule and the petitioner had

liberty to impose the liquidated damages because of delayed supply. The

learned Arbitrator observed that in case no supply was made and the contract

was short-closed on account of non supply, the question of imposition of

liquidated damages would not arise. The Arbitrator also found that the

petitioner had not served any notice under Clause 18(1) of the contract for

termination of the contract and even termination of contract being in violation

of clause 18 was bad in law.

8. It is settled law that this Court does not sit in appeal over the judgment

OMP 286.05 MTNL v.Vindhya Telelinks Ltd. & Ors Page 4 Of 6 of the Arbitrator. If the Arbitrator has given plausible interpretation to the

different provisions of contract, the Court cannot reject the interpretation

because another interpretation was also feasible. There is no dispute to the

fact that this court had passed order finally disposing of the earlier

application under Section 9 of the Act holding inter alia that the invocation of

the bank guarantee by the petitioner was contrary to the terms and

conditions of the bank guarantee and was bad in law. This order was not

assailed and had become final. This Court while passing order under Section 9

had considered the provisions of the bank guarantee as well as the provisions

of the contract between the parties and after considering the provisions of

the contract and the language of the bank guarantee, this Court came to

conclusion that the performance bank guarantee was wrongly invoked by the

petitioner and the bank guarantee did not include the instance of failure to

make supply by the scheduled date to the petitioner. The invocation of bank

guarantee was bad in law.

9. The contention of the petitioner that the issue of liquidated damages

was beyond the purview of the Arbitrator is also not tenable. Whether the

liquidated damages could be levied in case of short supply of cables is an

issue which was required to be gone into on the basis of contract. It is not the

case where the liquidated damages had been imposed by the petitioner for

delayed supply. The petitioner though had in the extension letter written that

the extension was being given subject to condition of liquidated damages but

the petitioner did not impose liquidated damages in case of delayed supply

and imposed liquidated damages for short supply of the cables, despite the

fact that the respondent had been writing to the petitioner that the cables

were ready and it should take the delivery of cables. The learned Arbitrator

OMP 286.05 MTNL v.Vindhya Telelinks Ltd. & Ors Page 5 Of 6 had authority to decide the issue if in view of provisions of the Contract,

petitioner could impose liquidated damages for short supply of cables in case

of closure of contract. The learned Arbitrator did not exceed his jurisdiction.

10. In view of foregoing facts and discussion, I find no force in this petition.

The petition is hereby dismissed. No orders as to costs.

11. Since I have dismissed the objections raised by the petitioner on

merits, I consider that there was no necessity to deal with the issue of delay

in refilling the objections.

April 23, 2009                                      SHIV NARAYAN DHINGRA J.
rd




OMP 286.05           MTNL v.Vindhya Telelinks Ltd. & Ors           Page 6 Of 6