Container Corporation Of India ... vs Texmaco Limited
2010 Latest Caselaw 191 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          OMP No. 24/2010

                                                    15th January, 2010



CONTAINER CORPORATION OF INDIA LIMITED                           ...Petitioner

                           Through:     Mr. A.S.Chandiok, Additional Solicitor
                                        General with Mr. M.M. Kalra, Advocate
                                        and Mr. Kunal Kalra, Advocate.

              VERSUS

TEXMACO LIMITED                                                  ....Respondent

Through:

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?      yes

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

    %                            JUDGMENT (ORAL)

VALMIKI J.MEHTA, J

1. This petition under Section 34 of the Arbitration and Conciliation

Act, 1996 challenges the Award dated 18.11.09 passed by the Arbitration

Tribunal of three members. Two issues have been urged before this Court by

the learned Additional Solicitor General on behalf of the petitioner. The first

OMP 24/2010 Page 1 issue is that the Arbitration Tribunal erred in awarding escalation upto the

original scheduled delivery dates. The second issue is with regard to the grant

of interest by the Arbitrator @ 9% per annum.

2. So far as the first aspect is concerned, it is necessary to refer to the

applicable Clause 10.2, the relevant portion of which reads as under:

"10.2 The above price adjustment formula shall be invoked by either party subject to the following further conditions:

      xxx                 xxx                 xxx
      b.     No price increase shall be allowed beyond the original

delivery dates unless specifically stated in the extension letter. As a rule no price adjustment shall be allowed for periods of delay for which the Supplier is entirely responsible. The Purchaser will however be entitled to any decrease in the Contract Price."(Emphasis added)

What is relevant is the first line of this Clause. The Arbitration

Tribunal relying on this line has held that the respondent is entitled to escalation

only up to the original delivery dates.

3. The Arbitrators have given their conclusions in this regard at

internal pages 17 and 18 of the Award and which portion reads as under:

"To appreciate the rival contention of the parties, we would focus our attention to the two clauses of the contract, Clause 16 and Clause 10 of the Special Conditions of contract. Clause 16 in our considered opinion provides that prices charged by the supplier for goods delivered and services performed under the contract shall not vary from the prices quoted by the supplier with the exception of any price adjustment authorized by the Special Conditions of contract.

Clause 10 of Special Conditions of the contract unequivocally stipulates that the price payable to the supplier shall be subject to adjustment during the performance of the contract to reflect changes in the cost of labour and material components in accordance with the formula indicated therein. In our opinion,

OMP 24/2010 Page 2 therefore, the provision for price adjustment in the Special Conditions of contract during the performance of the contract has nothing to do with the delayed performance of the contract, but as provided in Clause 10.2 and more particularly Clause 10.2(b) no price increase shall be allowed beyond the delivery dates unless specifically stated in the extension letter and this is co-related to the question whether delay in question is on account of supplier‟s or not. The Learned Counsel for the Respondent in our opinion totally mis-read the provision of the Special Conditions of contract referred to earlier and even in his written submissions has not noticed the true and literal meaning of the clause. When the clause itself says „no price increase shall be allowed beyond the original delivery date‟, necessarily, therefore, the supplier is entitled to the price increase in accordance with the formula as on the original delivery date. Clause 10 of the Special Conditions of the contract can not be construed to sustain the arguments of the Respondent that since there has been delay in the delivery of wagons from the dates mentioned in the contract, the Claimant is not entitled to the price adjustment clause. The claim of the Claimant on the price escalation clause is based upon the formula indicated in Clause 10 of Special Conditions of contract. The Respondent in the Written Statement refuted the aforesaid claim on the grounds that there has been delay in the delivery schedule and the extension letter did not provide that the price adjustment clause would be applicable. In other words, there is no denial to the concerned claim on the basis of the formula provided in Clause 10 of the Special Conditions of contract. That being so and in view of our conclusion on a combine reading of Clause 16 of the contract and Clause 10 of the Special Conditions of contract and the Claimant is entitled to the price adjustment and the price adjustment clause is applicable to the facts and circumstances of the case in hand, this Issue is answered in favour of the Claimant and against the Respondent." (Emphasis added)

4. The scope for interference by a Court to the objections under

Section 34 is now sufficiently pronounced upon. Unless the action of the

Arbitrators is illegal, that is, it is beyond the law of the land or that the same is

beyond the contractual provisions or that the findings/conclusions are so

OMP 24/2010 Page 3 perverse which shocks the judicial conscience, this Court does not interfere with

an Award. Putting it differently, this Court does not sit as an Appellate Court

over the findings and conclusions of the Arbitrator and if two views are

possible, this Court will not interfere with the Award merely if it is of another

view than the plausible view which is taken by the Arbitration Tribunal. It

cannot be disputed in law that the Arbitration Tribunal was indeed entitled to

interpret the relevant clause of the contract and unless there is gross perversity

in such interpretation, this Court cannot interfere with such an interpretation

under Section 34.

5. In my opinion by giving price escalation up to the original delivery

date, and which is in fact within the terms of the express language of Sub-

Clause (b) of Clause 10.2 of the Contract, the Award cannot be faulted with.

6. The next issue which was urged was with respect to grant of

interest and to the rate at which it was granted. This aspect has been dealt with

and pronounced upon by the Arbitrators while dealing with issue No.5 and the

relevant portion of the Award reads as under:

"Issue No.5 This issue is on the claim of interest. The question regarding Arbitrators‟ power to award interest on the sum found due and payable even for the pre-reference period, in the absence of any specific stipulation or prohibition in a contract, has been authoritatively decided by the Constitution Bench of the Supreme Court in the case of Executive Engineer, Dhankanal Minor Irrigation Division Vs. N.C. Budharaj reported in 2001 2 SCC page 721. The Supreme Court has held that a person deprived of the use of money to which he is legitimately entitled as a right to be compensated for the deprivation by whatever name it may be called such as interest, compensation or damages. In view of the

OMP 24/2010 Page 4 aforesaid authoritative pronouncement of the Supreme Court and the case in hand there has been no prohibition in the contact for grant of interest, the Claimant is entitled to the interest on the amount awarded from the date it fell due and the interest would run @ 9% per annum. This issue is answered in favour of the Claimant and against the Respondent."

I am, in fact, absolutely and completely surprised at the

submission that the rate of interest @ 9% can in any manner be contended as

excessive. I may only state that this Court has in fact been consistently

awarding interest @ 9% per annum in view of the various judgments of the

Supreme Court such 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 ).

Surely the grant of interest at 9% simple cannot be said to be excessive and

hence I reject this contention.

7. Another aspect which was argued was that interest ought not to

have been granted because no notice was served upon the petitioner under the

Interest Act. On merits, in my opinion, this contention is not sound because the

Arbitration Tribunal has rightly relied upon the observations of the Supreme

Court in Executive Engineer Vs. N.C. Budhiraja's (2001) 2 SCC 721 case

to hold that if a person is deprived of use of money, he is legitimately entitled,

OMP 24/2010 Page 5 as of right, to be compensated for such deprivation, by granting monies by

whatever name it may be called whether interest or compensation or damages.

In any case, the issue is now settled, in view of the recent judgment of the

Supreme Court reported as Madnani Construction Corporation (P) Ltd. Vs.

UOI,2009(14) SCALE 399: MANU/SC/1869/2009. In this judgment, the

Supreme Court has reiterated the right of the Arbitrators to grant pendent lite

and future interest till realisation. Therefore, the impugned Award to the extent

it grants interest for the two periods of during reference and post Award cannot

be faulted with. So far as the pre-reference period is concerned the Arbitrators

have awarded interest in equity as damages/compensation, and which is

permissible in view of N.C. Budhiraja's case. See also State of U.P. Vs. Harish

Chandra 1999(1)SCC 63. In fact, in Madnani's case (supra) the Supreme

Court has reiterated the right of the Arbitrators to grant interest in spite of a

stipulation to the contrary in the contract between the parties. Finally, I may

state that the judgment in Madnani's case will apply aforetiorrari, to the

present case inasmuch as the present case is governed by the 1996 Act which

has Section 31(7) which gives a statutory right to the Arbitrators to Award

intent for all three periods of pre-reference, pendent-lite and post Award, and

nowhere Section 31(7) in any manner restricts the right of the Arbitrators to

grant interest i.e. of interest to be granted only if a notice is issued under the

Interest Act, 1978.

OMP 24/2010 Page 6 I may state that in the Award there is no mention that any such

objection that no notice was given under the Interest Act was canvassed. It

appears that during final arguments this issue may not have been pressed,

otherwise, in my opinion the Arbitration Tribunal headed by a retired Chief

Justice of India, would have surely dealt with this issue. Also, if a vital issue

was argued and supposedly overlooked then such position could have been

brought to the notice of the Tribunal but, the same has not been done by moving

of an appropriate application before the Arbitration Tribunal after passing of the

Award. Also, I do not find for the present, any record having been filed by the

petitioner to substantiate that such an issue was raised in the arbitration

proceedings at the time of final arguments.

8. I may state that the Learned Additional Solicitor General wanted

me to record that so far as ground (G), as alleged in the petition is concerned the

same was not pressed. I record that this aspect has not been pressed by the

petitioner before me and if it is available in law, the petitioner is entitled to

approach the Arbitrators for any such relief on the basis of averments as

contained in ground (G).

9. I may finally note that an application was moved for removal of the

Arbitrators on the ground that they were biased. This application was dismissed

by the Arbitration Tribunal observing that it was unfortunate that at the

conclusion of the proceedings, when an application for amendment was moved

by the petitioner and which was dismissed, it cannot consequently be said that

OMP 24/2010 Page 7 the Arbitrators are thereby biased. Mr. Chandiok, Learned Additional Solicitor

General has, with his usual fairness ,not pressed this objection with regard to the

ground for removal of the Arbitration Tribunal.

10. Accordingly, the present objection petition is dismissed with costs

of Rs.50,000/-. Costs to be deposited with the Registrar General of this Court

for being utilized in the Juvenile Justice Fund within a period of four weeks

from today.

                                                     VALMIKI J.MEHTA, J


January 15, 2010
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OMP 24/2010                                                                  Page 8