Delhi State Civil Supplies Corp ... vs Union Of India
2012 Latest Caselaw 375 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                             Date of Decision : 19.01.2012

+     FAO(OS) 529/2009, FAO(OS) 531/2009 & FAO(OS) 541/2009


      DELHI STATE CIVIL SUPPLIES CORP LTD          ... Appellant
                    Through :Ms.Anju Bhattacharya, Ms.Shifalika
                             Dalmia and Mr.Elgin Matt John,
                             Advocates.

                   versus


      UNION OF INDIA                             ..... Respondent
                    Through : Mr.Ruchir Mishra, Advocate.
       CORAM:
       HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
       HON'BLE MR. JUSTICE RAJIV SHAKDHER

SANJAY KISHAN KAUL, J. (ORAL)

We must begin by noticing our anguish at the dispute between the UOI/Respondent and M/s Delhi State Civil Supplies Corporation Limited/Appellant (a State Govt. Undertaking) being dragged to different forums for judicial pronouncements rather being resolved amicably. It is really a question of one pocket or the other of the Government being enriched and it is unfortunate that judicial time is wasted in such disputes.

We may also note the strange and unacceptable plea of the appellant that it submitted a tender without proper application of mind and thus should have been permitted to back out of the tender which had been accepted. Such a plea is contrary to all settled law and we fail to appreciate how the appellant went into this misadventure and why no officer of the appellant suffered administrative

and financial consequences of such loss being caused to a public sector enterprise.

The facts are in a narrow compass. The UOI invited PSUs and State Level Federations for negotiations for supply of pulses, gram whole and barley on 31.03.1995 and the appellant submitted a tender on 06.04.1995. The tender was to be submitted with the requisite documents. The tenders submitted by the appellant qua supply of 900 metric tons of Dal Arhar at Rs.2,150/- per quintal {FAO(OS) No.541/2009}, 700 metric tons of Dal Masur at Rs.1,500 per quintal {FAO (OS) No.529/2009} and 500 metric tons of Masoor Whole at Rs.1,350/- per quintal {FAO(OS) No.531/2009} were accepted on 17.04.1995. Thus, three contracts came into being for the appellant to make supplies to the respondent. The undisputed position is that the appellant had a second thought over the matter and started seeking clarifications qua the tender after its acceptance starting from 28.04.1995. These clarifications were issued by the respondent. The strange plea of the appellant is that the tender of the appellant was incomplete as it had failed to submit IT clearance certificate and thus ought to have been rejected.

We may notice at this stage that if there was any deficiency in tender as per the respondent, it was for the respondent to take a call as the contract would be voidable at its option and not for the appellant to contend that it had a right to back out and withdraw from the tender post its acceptance. We may, however, notice the fair stand of the learned counsel for the appellant in this behalf that in view of the clear finding of the arbitrator in terms of the awards dated 11.07.2000, 12.07.2000 and 30.03.2011, as affirmed by the learned single Judge vide impugned order dated 04.09.2009, that a concluded binding contract had come into existence between the parties, this aspect could not be assailed in the appeal.

The failure of the appellant to make supplies resulted in ultimately the respondent cancelling the tender and issuing a fresh tender at the risk purchase of the appellant. The tenders for which the appellant had to make supplies were awarded to the State Trading Corporation of India/Punjab State Civil Supplies Corporation which supplied the goods. The respondent sought recovery of the differential amount on the principle of risk purchase. This dispute was referred to arbitration and gave rise to the awards mentioned aforesaid which have been affirmed by the common judgment of the learned single Judge.

There is a three-fold submission made by learned counsel for the appellant before us:

i) The award being a non-reasoned award ought to be set aside.

ii) The respondent made no endeavour to mitigate the losses and, thus, is dis-entitled to the differential amount.

iii) The terms and conditions on which the risk purchase order was placed are different from the ones on which the tender was sought to be awarded to the appellant.

Insofar as the first plea is concerned, we must observe that the reasons recorded by the arbitrator are rather cryptic. It would have been advisable for the arbitrator to have recorded more detailed reasons. We may notice that the arbitrator is, in fact, the additional legal advisor to the respondent and is familiar with the legal principles and, thus, ought to have taken better care in this behalf. However, we cannot say that there is absence of reasons so as to make it difficult to decipher as to what persuaded the arbitrator to award the amount. We cannot accept the plea of the learned counsel for the appellant that the arbitrator has only recorded the submission and those are not the conclusions as recorded in the award. The facts were really not in dispute and are in a narrow compass. The arbitrator recorded the facts as also the dates of risk purchase. It noticed the

quantities in question. The risk purchase order was placed on the lowest acceptable offer made without deviation. The supplies were made and full payments were made by the respondent for the supplies and the terms and conditions on which supplies were made were also the same. The necessary evidence in that behalf by reference of exhibit numbers has been noticed. The risk purchase was completed within the stipulated period of one year from the date of the breach. In view of all these facts noticed, we are in agreement with the view taken by the learned single Judge that the award is a speaking award, cryptic as it may be, and thus we find no merit in this plea.

The second plea arises from the alleged lack of endeavour on the part of the respondent to mitigate the losses. It is the say of the learned counsel for the appellant that in view of the stand of the appellant soon after its acceptance, the respondent should have resorted to risk purchase forthwith. In fact, the appellant seeks to take advantage of its own wrong by claiming that if the appellant was in breach, the respondent should have made no endeavour to persuade the appellant to comply with the terms and conditions of the agreement. The aforesaid is a completely unacceptable plea for the reason that the respondent was well within its rights to persuade the appellant to comply with its obligations especially in view of the clarifications being sought by the appellant. We also cannot lose sight of the fact that we have UOI on the one hand and a State Public Sector Enterprise on the other hand and that obviously persuaded UOI to give a longer rope to the appellant to comply with its obligations. Once it became clear that the appellant was not willing to perform its obligations despite the indulgence, prompt steps were taken for procuring the goods on risk purchase from State Trading Corporation of India and Punjab State Civil Supplies Corporation. We may notice that the dates of breach and dates of risk purchase are as under:

 Case No.                    Date of Breach             Date of Risk Purchase
FAO(OS) No.541/2009         30.04.1995                 13.11.1995
FAO(OS) No.529/2009         15.05.1995                 13.11.1995
FAO(OS) No.531/2009         30.04.1995                 13.11.1995

The date of cancellation is stated to be the same for all the three contracts i.e.18.10.1995.

An aspect which has been considered by the learned single Judge, and which is material, is that the appellant knew that the respondent had to make procurements through tenders. If the respondent had gone straight to the market to try to procure quantities without a tender, a grievance would have been made by the appellant in this behalf. The only mode and manner of procurement would by floating a fresh tender at risk purchase of the appellant, which is what has been done in the present case. We may usefully refer to the observations of the learned single Judge in this behalf:

"13. As far as the challenge to the computation of damages for breach of contract is concerned, I think the judgment in Sitaram Bindraban (Supra) relied upon by the petitioner is a complete answer to the same. The purpose of Section 74 of the Contract Act is to place the party other than the one committing the breach of the contract in the same position as it would have been, had no breach occurred. In the present case, the only way in which the respondent could be placed in the same position as it would have been had the petitioner not committed the breach was by sourcing the goods which the petitioner had agreed to supply from elsewhere. Considering the procedure which the respondent Union of India is necessarily required to follow in procuring the said goods, nothing wrong can be found with the tenders being issued at the risk of the petitioner. The issuance of the said

tenders and the acceptance thereof involves a time lag. A pedantic insistence on the damages to be computed on the date of the breach, when it was known to the parties that it is not possible for the respondent to make the purchase on the same date would not fulfill the criteria of the respondent being placed in the same position as it would have been had the petitioner not committed breach of the agreement. The petitioner had in the present case with its eyes open entered into an agreement whereunder the respondent could make the Risk Purchase within one year of the breach (clause 2(ii) of the Appendix). The parties having agreed to the method of computation of damages, no fault can be found with the award computing the damages on such basis. There was no such mechanism agreed in the contract under consideration in The Bazpur Co-operative Sugar Factory Ltd. (Supra). The arbitrator is thus found to have followed the agreement between the parties in the present case."

We are in complete agreement with the view expressed by the learned single Judge and, thus, find that the all endeavours were made by the respondent to persuade the appellant to comply with its obligations and thereafter the respondent cancelled the tender and floated a new tender at risk purchase of the appellant. Thus, all steps were taken by the respondent in accordance with law to mitigate the losses.

The last aspect urged by learned counsel for the appellant is that the terms and conditions on which supplies had to be made were different. Learned counsel confesses that this aspect has not been discussed in the impugned order but claims that it formed a part of the synopsis filed by her and that she had urged this before the learned single Judge.

In our considered view if any submission remained unattended by the learned single Judge then the appellant ought to have approached the learned single Judge by filing a review application in respect of the said ground before urging the same in appeal in view of the settled legal position enunciated by the

Supreme Court.

Be that as it may, we have examined even the said plea on its merits. The plea arises from a claim made by the appellant that the destinations at which supplies had to be made were many more in the case of the risk purchase tender than in the tender awarded to the appellant.

We have perused page 80-A referred to by learned counsel for the appellant in this behalf and find that there were five destinations at which the delivery had to be made by the appellant in the tender which was awarded to it i.e. Delhi, Kanpur, Lucknow, Bombay (Mumbai) and Madras (Chennai). No doubt the number of destinations at which delivery was to be made in the tender floated at the risk purchase of the appellant were more but the venues were much closer being Jabalpur, Pathankot, Suratgarh, Bikaner, Bari and Firozpur, where supplies were actually made. The supplies to be made by the appellant spanned from Delhi to Chennai (Madras). Thus, the supplies as envisaged under the risk purchase tender were for nearer destinations and it is not as if the supplies had to be made at farther destinations which could have resulted in the bidding party quoting a higher rate. There cannot be a complete parity while examining the issue of risk purchase and thus the terms and conditions in the two tenders have to be similar as near as possible. The judgment referred to by learned counsel for the appellant in support of its case in Union of India v. M/s Daisy Trading Corporation; 2006 V AD (DELHI) 290 thus does not come to the aid of the appellant. It was noticed that in an order for the risk purchase to be upheld, the terms and conditions of the two tenders should be more or less similar and if they were different, the difference ought to have been noted and discussed.

On the factual matrix of the present appeals, as noticed above, there is really no difference in the terms and conditions as the destinations were nearer. This, in any case, was within the domain of appreciation of evidence by the

arbitrator and cannot be a ground to interfere under Section 34 of the Arbitration and Conciliation Act, 1996.

We find the appeals without any merit and dismiss the same with costs quantified at Rs.10,000/- per appeal.

                                        SANJAY KISHAN KAUL, J



                                        RAJIV SHAKDHER, J
JANUARY        19, 2012/dm