Delhi High Court

Pragati Mgfr. And Suppliers vs U.O.I. on 29 October, 2009

Author: Manmohan

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

+        CS(OS) 2695A/1994

PRAGATI MGFR. AND
SUPPLIERS                                   ..... Petitioner/Non-Applicant
                                Through     Mr. Shiv Khorana, Advocate

                       versus

U.O.I.                                      ..... Respondent/Applicant
                                Through     Mr. Rajat Gaur, Advocate


%                                      Date of Decision : October 29, 2009

CORAM:
HON'BLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not?                                YES
3. Whether the judgment should be reported in the Digest?                YES



                                JUDGMENT

MANMOHAN, J (ORAL)

I.A. 7606/1995

Present application has been filed by the Union of India seeking

condonation of delay in filing objections to the Award.

For the reasons stated in the application, delay in filing

objections is condoned. Accordingly, application stands disposed of.

I.A. 7605/1995

1. Present application has been filed by the Union of India under

Section 30 of Arbitration Act, 1940 (hereinafter referred to as "Act,

1940") challenging the impugned Award dated 31st May, 1994 to the

extent it rejected Union of India's counter-claim towards risk

purchase loss.

2. It is pertinent to mention that by virtue of the said Award,

learned Arbitrator had also directed refund of security deposit and

payment of balance amount under the contract dated 18 th March, 1988

executed between the parties. However, the decision to refund the

security amount as well as to make balance payment have not been

challenged in the present application.

3. Mr. Rajat Gaur, learned counsel for applicant-Union of India

submitted that the Arbitrator had misconducted himself by exceeding

his jurisdiction by not taking into account the term of the contract

which permitted the UOI to issue a risk purchase order. He stated that

the petitioner-contractor had been given a number of opportunities to

supply the tent poles and it was only after the contractor had

repeatedly failed to supply the same, that the applicant-Union of India

had purchased the said poles from three different suppliers. He

submitted that in the present instance, the contractor had been over-

paid beyond the contractual terms and the Arbitrator had not

considered the documents pertaining to the overpayment.

4. However, on a perusal of the Award I find that the learned

Arbitrator has rejected applicant-Union of India's counter-claim for

risk purchase on the following grounds :

1) Risk purchase contract was placed on the basis of Limited Tender Enquiry whereas the cancelled

contract was based on the Advertised Tender Enquiry

- proof of page (2) annexure (1) clause (15) sub- clause (d) filed by Union of India and Annexure (19) page 45 clause (15) (d) at page 46 filed by Union of India.

2) In original contract F.O.R. is Delhi and NOIDA while in risk purchase contract F.O.R. is consignee's end.

3) In original contract security deposit clause was at S.No. (9) while in risk purchase contract there was no security deposit clause.

4) In original contract there was option clause while there was no option clause in R.P. contract.

5) UOI have admitted that they did not issue the proper order for typographical or any other error.

6) Some of parties refused to give tender.

7) Respondent/UOI have not filed the comparative statement of the risk purchase contract.

8) Hence the risk purchase contract is defeated and illegal."

5. I am of the view that the Arbitrator has given cogent reasons for

disallowing the counter-claim of risk purchase. In fact, the Arbitrator

after considering the contractual term of risk purchase and the

documents on record has unequivocally found that not only the risk

purchase offer was not similar to the initial tender but the principle of

mitigation had not been followed by the Union of India.

6. I may mention that in similar cases this Court had refused to

interfere with an Award passed by an Arbitrator in jurisdiction under

Section 30 of Act, 1940. In this connection, I may refer to the

following two judgments :-

I) St. Gites Company Vs. Union of India reported in 59

(1995) DLT 735 wherein it has been held as under :-

"4. The only argument advanced by the Counsel for the Objector is that once the Arbitrator had come to a finding that the Government had rightly cancelled the contract of the petitioner and after also having come to a finding that the Government was within its right to issue risk purchase AT, the Arbitrator ought to have allowed the claim of the Union of India by awarding a sum of Rs. l,00,000.00 which is the amount of loss alleged to have been suffered by the Government.

5. After having gone through the record, I find that there are no merits in the contention of learned Counsel for the Objector. The Arbitrator on the basis of the material before him has come to a finding that on a comparison of the terms and conditions of the two risk purchase contracts with the defaulted contract, he found that they were at variance which could have an impact on the price quoted therein. He has also held that the terms and conditions of the risk purchase contract could not be more onerous nor liberal than those of the defaulted contract and as the terms were at variance, the Government was not entitled to any amount.

6. In view of the above discussion, he held that the supplier could not be held liable to pay the loss/additional expenditure alleged to have been incurred by the Government as a result of risk purchase. The claim of the Government was, accordingly, rejected......

7. ......On the basis of material before him, the Arbitrator though has held that the Government was entitled to risk purchase, however, at the same time he has held that there were variations between the contract with the petitioner herein and the contracts which have been by way of risk purchase, as such he did not allow the difference between the two contracts to be paid to the Government by way of its claim. He has further held that the Government had failed to substantiate its claim of loss and for that reason as well the Government was not entitled to claim the alleged difference. The Arbitrator having come to a finding on the basis of the material before him, it may not be possible for the Court to upset the same. The Court is not to sit as a Court of appeal over the decision of the Arbitrator nor it is to assess the quality or quantity of evidence before the Arbitrator to find out as to whether the Arbitrator's decision is correct. Even an erroneous decision given by the Arbitrator

may not be set aside in case there was some material before the Arbitrator to come to that finding. On the same evidence which was before the Arbitrator, the Court may come to a different conclusion, but that by itself may not be a ground to set aside the award of the Arbitrator."

II) Union of India Vs. Kundras Shoes reported in 2007 (96)

DRJ 34 wherein it has been held as under :-

"14. Per contra the defendant contends that claim No. 1 has not been rejected merely on account of risk/purchase being not made within time but also on account of deviations between the terms of the contract awarded to the defendant and the terms in the risk/purchase contract entered by the claimant. The arbitrator relied on different deviations categorically stipulated by the defendant in his reply which are extracted as under for reference:


                      Contract of Kundra Shoes    Alleged R/P to Dawer
                1.    Under Clause 7 of the       Under Clause 7
                      DGS&D-68.... (Revised)      DGS&D-229 was alone
                      alone was made              made applicable.
                      applicable.

                2.    DGS&D-68, up to 9-8-89      up to 4-4-88, also was
                      was made applicable.        made applicable.
                3.    Under Clause 9 the term     There is no term
                      for security deposit is     security Deposit
                      imposed                     imposed.
                4.    The delivery was to be      It was forty thousand
                      made at 50 to 60            per month
                      thousand per month
                5.    For Delhi/Sonepat           For Amritsar
                6.    Supply of 2,20,192 pairs    It was for 89,542 pairs.
                      (3 times more)

15. The defendant contended that the order for risk/purchase was not accepted unconditionally and on account of various variation, the delivery period was re-fixed and communicated to the plaintiff vide letter dated 9th April, 1988 and the Arbitrator has taken all these aspects into consideration before rejecting the claim No. 1 of the plaintiff. The respondent relied on 1992 (2) RAJ 162 (SC) Himachal Pradesh Electricity Board v. R.J. Shah and Co.; AIR 1990 SC 1340, M/s. Hind Builders v. Union of India; AIR 1989 SC 890, Sudharshan Trading Co.

v. Government of Kerala and Anr; AIR 1989 SC 1263, Food Corporation of India v. Joginder Pal Mohinder Lal and Anr.; AIR 1971 SC 1646, Union of India v. Kalinga Construction Co., AIR 1999 SC 3869, Arosan Enterprises v. Union of India, to contend that the Court cannot substitute its own decision and conclusion in interpretation of a contract which is a matter for an arbitrator to decide. As appraisement of evidence by arbitrator is never a matter which the Court questions and considers because the parties have selected their own forum and the deciding forum must be conceded the power of the appraisement of the evidence. The defendant contended that there is no error in exercise of jurisdiction and highlighted the distinction between an error within the jurisdiction and an error in exercise of the jurisdiction. It was also contended that mitigation of damages relates to question of facts to which the decision of the Arbitrator is final. Regarding the plea of the plaintiff that sale of rejected goods could not be a justification for rejecting the claim of the plaintiff for non- replacement of the store, it was contended by the defendant that if he had refused to take delivery of the rejected goods, the plaintiff could dispose of the same and while doing it, plaintiff was bound to follow the principle of mitigation of damages. Instead of disposing of the goods within seven days as contemplated under the contract, the plaintiff took seven years and is still could get such a good price and therefore the conclusion of the arbitrator that the plaintiff could not take advantage of his own delays, cannot be faulted by the plaintiff.

18. The learned Arbitrator has considered the terms of the contract and the telegram dated 2nd March, 1988, formal order dated 4th April, 1988 and deviations between the contract of defendant and the contract to risk/purchase as well as other low rates which were not considered by the plaintiff and after due consideration has disallowed the claim. In the circumstances it cannot be inferred that the arbitrator has not considered the telegram relied on by the plaintiffs and the definition of acceptance as referred to by the plaintiff. The Learned Counsel for the plaintiff is unable to show any legal proposition considered by the arbitrator being erroneous. An award may be set aside on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion. Appraisement of evidence by the arbitrator is never a matter which the court questions and considers. If the parties have selected their own forum, the deciding

forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole Judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator......"