Union Of India vs M/S Gujrat Co-Operative Grain ...
2009 Latest Caselaw 5045 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

                                 OMP No. 266/2000

                                                 07th December, 2009

UNION OF INDIA                                      ...Petitioner


                           Through:     Ms. Geeta Sharma, Advocate

                           VERSUS


M/S GUJRAT CO-OPERATIVE GRAIN GROWERS FEDERATION LTD.
                                   ....Respondent

                           Through:     Mr. Shiv Khorana, Advocate
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

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

2. To be referred to the Reporter or not?

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

    %                            JUDGMENT (ORAL)

VALMIKI J.MEHTA, J

1. This OMP under Section 34 of the Arbitration and Conciliation Act, 1996

challenges the Award dated 23.6.2000 passed by the sole arbitrator. The

disputes which arose between the parties pertained to the contract dated

8.12.1997 whereby the respondent was awarded by the petitioner a contract for

supply of 850 MT of Urad Dal. The facts of the case are that the supply of Urad

Dal was to be made in three tranches of 250 MT, 300 MT and 300 MT by OMP 266/2000 Page 1 December 1997, January, 1998 and February, 1998 respectively. Time of

performance was the essence of the contract, but, there was a provision for

extension of time subject to payment of liquidated damages. By the letter dated

17.4.1998, delivery period was extended up to 16.5.1998, of course, subject to

the continuing the application of the clause of liquidated damages. The contract

was thereafter again extended for delivery up to 30.6.1998 vide a letter dated

19.6.1998 of the petitioner. Again in this letter, time has been made of the

essence subject to the levy of liquidated damages.

2. Before the Arbitrator, the petitioner filed its claims on account of failure

of the respondent to supply the Urad Dal and the claims arising out of

consequent action of issuing a risk purchase tender. The respondent also filed

its counter claim for recovery of the price of the goods to the extent to which

supply was effected.

3. By the impugned Award, the learned Arbitrator has dismissed the claim

of the petitioner for risk purchase costs inter alia on account of the fact that time

of performance was not the essence of the contract. The Arbitrator relied upon

the judgment of this court reported as Panipat Food Limited Vs. Union of India

1995 (60) DLT 258. I may note that this judgment relies upon the judgment of

the Supreme Court reported as Hind Construction Contractors Vs. State of

Maharashtra AIR 1997 SC 720. These judgments lay down the ratio that even

if time of performance is mentioned to be the essence of the contract, but if, the

OMP 266/2000 Page 2 contract provides for levy of liquidated damages for delay, then the time of

performance is not the essence of the contract though so stated in the contract.

4. In the present case, the aforesaid two judgments apply squarely because

even in the extension letters given by the petitioner, the application of the clause

of liquidated damages continued to operate. Therefore, I do not find any fault in

the Award by which it is held that time of performance is not of the essence of

the contract. Once time of performance is not of the essence and no notice is

given fixing a specific date for performance of the contract, then in such a case

the contract cannot be cancelled on the ground that time of performance is the

essence of the contract. Accordingly, I do not find any illegality or perversity in

the Award for this court to interfere under Section 34. It is settled law that this

court will not interfere with the Award merely because two views are possible.

In the facts of the case, I find that the view taken by the Arbitrator is one

plausible view and therefore the same cannot be challenged under Section 34.

Once the principal claim of the petitioner does not survive, then, the issue

of grant of interest also would not arise.

5. The Arbitrator in the second part of the Award has granted the respondent

amounts for the price of the goods supplied. It is not disputed that part of the

goods viz Urad Dal were in fact supplied by the respondent to the petitioner and

the Arbitrator has awarded the price of the goods supplied and transportation

charges with respect thereto in accordance with the contract. The amount

awarded under this head is of Rs.14,51,481/-. Obviously, a person who supplies

OMP 266/2000 Page 3 goods is entitled to the price of the same. Once time of performance was not the

essence of the contract and the Union of India has received the goods which in

fact it has appropriated, independent of everything else even under Section 70 of

the Contract Act, 1872, the petitioner is bound to pay the price of the goods to

the respondent. No fault therefore can be found with this part of the Award.

6. That leaves me with the issue with regard to the rate of interest to be

awarded. As per the Award interest has been awarded in favour of the

respondent and against the petitioner at 12% per annum simple. The Supreme

Court in the recent chain of judgments reported as Rajendra Construction Co.

Vs. Maharashtra Housing & Area Development Authority & ors.2005 (6) 678,

McDermott International Inc. Vs. Burn Standard Co. Ltd.& ors 2006 (11)

SCC 181, Rajasthan State Road Transport Corpn. Vs. Indag Rubber Ltd.

(2006) 7 SCC 700 and Krishna Bhagya Jala Nigam Ltd. Vs. G.Harischandra,

2007 (2) SCC 720 & and State of Rajasthan Vs. Ferro Concrete Construction

(2009) 3 Arb.LR. 140 (SC) has held that courts are mandated to take notice of

the falling rates of interest and taking such a scenario into account, the courts

have been directed to reduce the rate of interest granted by the Award. This

court following the aforesaid mandate of the Supreme Court judgments has been

uniformally awarding interest at the rate of 9% per annum. Accordingly, in the

facts and circumstances of the case, I award interest at the rate of 9% per annum

simple instead of interest @ 12% per annum as stated in the Award. I may

OMP 266/2000 Page 4 however, clarify that I am not changing the date of the interest which has been

granted.

7. With the aforesaid observations, the objection petition is dismissed with

costs of Rs.10,000/- in favour of the respondent and against the petitioner.

DECEMBER 07, 2009 /ib                               VALMIKI J.MEHTA, J




OMP 266/2000                                                                   Page 5