Ellora Paper Mills Ltd. vs Union Of India
2010 Latest Caselaw 376 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                                OMP No.65/2003

                                                    22nd January, 2010.


ELLORA PAPER MILLS LTD.                                          ...Petitioner

                           Through:     Mr. Shiv Khorana, Advocate
              VERSUS

UNION OF INDIA                                                   ...Respondent

                           Through:     Nemo.


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 petition under Section 34 of the Arbitration and Conciliation Act, 1996

challenges the Award passed by the sole Arbitrator dated 1.11.2002. By the

impugned Award, petitioner has been fastened with the liability of risk and

purchase cost of Rs.52,66,320/- and which amount was awarded on account of the OMP No.65/2003 Page 1 petitioner failing to supply 485.344 metric tones of White Printing and Creamwove

paper. The Arbitrator has also awarded interest @ 18% per annum.

2. At the very outset, Mr. Khorana argued that this is a case where the matter

should be remanded to the Arbitrator for a fresh decision in accordance with law.

This argument was made by Mr. Khorana inasmuch as he contended that the main

dispute which was raised by the petitioner before the Arbitrator was that there was

no final and binding contract between the parties which laid out the agreed terms.

Mr. Khorana further states that there were substantial and wide differences with

respect to the contract and there was therefore no consensus ad idem because of the

offers and the counter offers.

3. In my opinion, the contention of the petitioner is valid and I therefore accept

the argument of Mr. Khorana urged on behalf of the petitioner that the Award in

this case needs to be remanded.

4. The facts of the present case are not straight forward in that there is only a

single notice inviting tender and a single acceptance of the tender. In reality, there

were repeated offers/counter offers and extensions as is brought out in the Award

itself and which portion of the Award reads as under:

"It is to be seen that UOI, through DGS&D, the claimant, after inviting tenders for the supply of 485.344 MTs of the While Printing & Creamwove

OMP No.65/2003 Page 2 paper and the same were opened on 19.8.94, M/s Ellora Paper Mills Ltd., Mumbai, submitted their offer against the Tender Enquiry. Their quotation no. TEN:94:675 dated 16.8.94 read with their revised offer no. TEN:94:1129 dated 12.10.94 followed by letter no. TEN:94:1065:dated 24.9.94 and letter no. EPB/DGS&D/1225/94 dt. 28.10.94 (A-1). The offer of the firm/respondent was accepted by the UOI claimant and A/T no. PM- 5/506/0002/19.4.93/Bulked/P-5/118/COAD/RP/239/COAB/ dated 25.11.94 (15.U-20.U/C) was placed on the firm for supply of 485.344 MTs of paper printing white paper Creamwove."

5. Mr. Khorana in support of his arguments has taken me through the statement

of defence filed in the arbitration proceedings and which gave various reasons

showing that unless with respect to such issues there was consensus ad idem, it

could not be said that there was a binding contract containing clarity with respect

to those terms. I would do no better than to refer to the relevant portion of the

statement of the defence and which runs as under:

"1. Each and every allegation contained in para 1 of the Statement of Claim made by the claimant are false, wrong, incorrect and are denied. It is denied that there was any valid risk purchase enquiry resulting into issuance of proper enquiry. The respondent had made clear in his terms that his offer contains the following terms:-

"(1). SALES TAX:-Sales Tax will be extra as applicable at the time of dispatch. Presently Central Sales Tax is 4% against form „D‟ & local (Maharashtra) Sales Tax is also 4% against form „AF‟.

(2). EXCISE DUTY:- Rates quoted are exclusive of Excise Duty. At present Excise Duty applicable @ 5% adv.plus 1/8% Cess Adv. Any statutory upward charges will be to your Account.

(3). OCTROI:- To be borne by the consignee if applicable.

Exemption Forms if any should be made available with supply order.

OMP No.65/2003                                                                             Page 3
             (4).    DELIVERY:- We are starting the delivery after the issuing the
                    inspection note and completed within 90 days.

            (5).    REGISTRATION:- We are registered with DGS&D, our

Permanent Registration No is Regn. II/0662- 90-E,Dt. 17-12-90. (6). FORCE MAJURE CLAUSE:- Our offer is subject to DGS&D Force Majure Clause.

(7). TESTING:- We have the requisite testing facility at our Factory at Tumsar.

            (8).    DECKLE:-       Our Deckle size is 235/240 cms.


            (9).    PACKING:- Paper will be packed as per requirements of Tender

Enquiry. For mansoon packing we will charge Rs.800/- per Ton extra.

(10). We agree to pre Inspection before dispatch.

(11). NOMINAL:- Nominal weight of the ordered paper will be charged by us as the relevant Indian Standard WEIGHT Prescribes a tolerance limit in the mass of the ream. (12). The goods will be dispatched through Railway either in wagon Load or Parcel the freight will be borne by the consignee. In case of if R.R. is prepared than the freight amount will be reimbursed to us.

In case of non-availability of Railway Booking despatches by Road Transport should be permitted. The Transport freight will be reimbursed equivalent to railway freight. Unloading charges of Truck at the consignee‟s premises will be charged extra & Rs.500/- per truck.

(13). Modvat Benefit has been taken into account in the quoted prices. (14). If Railway receipt is issued on prepaid basis than freight will be reimbursed with progress bill."

Note:-

(A).Minimum Order per consignee should be for 50 metric tones or more. (B). Deckle IS 235/240. Please consider the order looking to our deckle, we place order 1/3rd quantity in real width 609 (61cm.) and 2/3 roll quantity in 86 cm. So the deckle can be utilized and next aligned delivery schedule."

OMP No.65/2003 Page 4

6. Mr. Khorana has also then taken me through various counter offers which

were made in this case by the petitioner amending one term or the other besides

leaving the original terms and conditions given in the letter dated 16.8.1994

unchanged except to the extent of modification specifically mentioned in each of

the subsequent letters/ counter-offers. These documents are the letters dated

16.8.1994, 25.9.1994 and 12.10.1994 of the petitioner to the respondent.

7. Mr. Khorana, therefore, argued that a conspectus of the aforesaid shows that

with respect to various terms such as the force majeure clause or the requirement

of consignee to take at least 50 metric tonnes or sales tax and so on, there was no

concluded agreement between the parties. Mr. Khorana also drew my attention to

the letter dated 10.12.1994 which was sent by the petitioner immediately on

receiving the so called work order dated 25.11.1994 issued by the respondent.

This letter of the petitioner dated 10.12.1994 categorically states that there is no

concluded contract between the parties on account of non-acceptance of the

different terms which were already given from time to time by the petitioner. This

letter dated 10.12.1994 clearly states that the petitioner informed the respondent

that they do not accept the counter offer which was made by the acceptance of the

tender dated 25.11.1994 and which letter has too not been adverted to by the

arbitrator in the Award.

OMP No.65/2003 Page 5

8. A reference to the Award shows that this issue has been given complete go

bye by the Arbitrator. In my opinion, this is indeed an extremely vital issue, which

did call for attention and decision for the Arbitrator, because, risk and cost liability

can be fastened upon the petitioner only if there was in fact in the final place a

contract with the petitioner of the respondent. The Arbitration and Conciliation

Act, 1996 vide its Section 31(3) requires that the Award has to be a reasoned

Award. What is a reasoned Award has been lucidly dealt with by a learned Single

Judge of this Court (Rajiv Sahai Endlaw, J) in the case of Jai Singh Vs. DDA

2008(3) Arb.LR 667. What is a speaking order is also the subject matter of the

Constitutional Bench judgment of the Supreme Court reported as S.N.Mukherjee

Vs. Union of India AIR 1990 SC 1984. A decision in terms of the aforesaid

Supreme Court decision cannot be a speaking decision unless the Arbitrator deals

with and pronounces upon the important contentions of a party. In the present

case, the Award is wholly silent as to the vital defence of the petitioner that no

contract at all was entered into between the parties.

9. The Award is therefore a non-speaking Award and violates Section 31(3) of

the Arbitration and Conciliation Act and needs therefore be set aside and is

accordingly set aside. Mr. Khorana states that he accepts fresh arbitration

proceedings be conducted by an Arbitrator in terms of the agreed arbitration clause

OMP No.65/2003 Page 6 and he would like the matter to be remanded back to the Arbitrator for deciding

the matter afresh in accordance with law and after dealing with the contentions of

the present petitioner . Accordingly, I set aside the impugned Award and remand

the matter back to the Arbitrator for passing a fresh Award in accordance with law

and which Award must deal with and pronounce upon the contention which has

been raised by the present petitioner with respect to there not being a binding

contract between the parties on account of lack of consensus ad idem on various

vital terms.

10. With the aforesaid observations, this petition is accepted and the matter is

remanded back to the Arbitrator as stated above. The original arbitration records

which are before this court be sent back by special messenger to the Director

General of Supplies and Disposal, Jiwan Tara Building, 5 Sansad Marg, New Delhi

for being handed over to the Arbitrator.

                                                  VALMIKI J.MEHTA, J


January 22, 2010
ib




OMP No.65/2003                                                              Page 7