Union Of India vs Tirupati Texco Products (P) Ltd.
2014 Latest Caselaw 2052 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         FAO No.264/2011

%                                                    24th April, 2014

UNION OF INDIA                                     ..... Appellant
                          Through:       Mr. Anuj Aggarwal, Advocate.

                          Versus

TIRUPATI TEXCO PRODUCTS (P) LTD.             ..... Respondent

Through: Mr. B.S. Mathur, Advocate.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

1. At the outset it is stated that there was a delay of 48 days in re-

filing the appeal and therefore while issuing notice in the appeal, delay of 48

days in re-filing the appeal was condoned by allowing C.M. No.11020/2011.

Counsel for the respondent contends that delay in re-filing the appeal ought

not to have been condoned. I note that there is no application for recalling

of the order dated 31.5.2011. Even assuming that there was such an

application, yet, the delay of 48 days in re-filing the appeal is condoned

inasmuch as delay of 48 days causes no real prejudice to the respondents and

which period of 48 days is for removing objections raised by the registry. I

therefore refuse to recall the order of condonation of delay in re-filing the

appeal as passed on 31.5.2011 including because no application is filed for

recall of this order.

2. This first appeal is filed under Section 37 of the Arbitration &

Conciliation Act, 1996 (hereinafter referred to as 'the Act') impugning the

judgment of the court below dated 10.11.2010 by which objections filed

under Section 34 of the Act by the respondent herein, petitioner before the

trial court were allowed and the Award dated 13.2.2001 was set aside

whereby the appellant/claimant was granted a money decree of Rs.29,925/-.

The court below has set aside the Award which granted damages on risk

purchase caused to the appellant/Union of India as the contract with the

respondent was cancelled as the respondent had failed to supply the

contracted goods/cotton ropes within the delivery period. The court below

held that there was no concluded contract and therefore there does not arise

any issue of the appellant/Union of India contending that losses are to be

compensated on account of risk purchase.

3. The facts of the case are that the appellant invited offers for

supply of cotton ropes. Respondent submitted its tender on 28.9.1990 which

was accepted by the appellant. Three different types of ropes measuring

69210 mtrs, 94350 mtrs, and 50,000 mtrs were ordered from the respondent

in terms of the tender. The quantity was subsequently enhanced to 86512

mtrs from 69210 mtrs so far as first item is concerned, and from 94350 to

117938 mtrs so far as second item is concerned, and this was done vide letter

dated 25.10.1990 of the appellant because the contract contained a + 25%

variation clause. So far as the delivery period was concerned for item nos.1

and 2 it was extended upto 31.12.1990 and for item no.3 the date of delivery

was 31.8.1990. There was a mistake on behalf of the appellant because

whereas the amendment letter was issued on 25.10.1990 the delivery period

so far as item no.3 was given as 31.8.1990 and consequently a fresh

amendment was issued for supply by 28.2.1992. The issue is that whether

this fresh amendment dated 13.12.1991 issued by accepting of the letter of

the respondent dated 20.11.1991, and received by the appellant on 2.1.1992,

amounted to a concluded contract and which would be if the request of the

respondent for extension of the delivery period to 28.2.1992 in terms of the

letter of the respondent dated 20.11.1991 was accepted by the appellant by

the appellant's letter dated 13.12.1991. In sum and substance, the issue is

whether the letter of the respondent dated 20.11.1991 amounted to an offer

and the same on being accepted by the appellant by issuing its letter dated

13.12.1991 results in a concluded contract.

4. The arbitrator held that the letter dated 20.1.1992 showed that

the contract stood concluded and not that this letter of the respondent dated

20.1.1992 was a fresh counter offer. The court below has however accepted

this letter dated 20.1.1992 as a counter offer and therefore objections of the

respondent were accepted and the Award was set aside.

5. Since for determination of the issue, language of the letter dated

20.1.1992 is relevant, I reproduce the same alongwith another letter dated

10.2.1992 issued by the appellant to the respondent as under:-

"Letter dated 20.1.1992

No.476/RC/91 Dated 20.1.92 Asstt. Director (Supplies) 7/29-B, Tilak Nagar, KANPUR Sub:- A/T No.101/504/K2/Tirupati/476/COAD dt.28.9.90 for supply of Rope Cotton.

Dear Sir, With reference to the above A/T we are in receipt of your Regd. Letter No.101/504/K2/476/Amd. No.465 dt.13.12.91 by which you have refixed the D.P. upto 28.2.92 as requested vide our letter No.476/RC/91 dt.20.11.91 and thanks for the same. Your above letter was received by us on 2.1.92.

In this regard we draw your kind attention towards personal meeting held with you on 19.11.91 in your office. It was requested by the undersigned to refix the D.P. upto 31.3.92 as requested in our letter dt.15.11.91. In response to our letter you have assured that the refixation of the delivery shall be given to us immediately upto 28.2.92. But the refixation of the D.P. letter No.101/504/K2/476/Amdt. No.465 dt.13.12.91 was only received by us on 2.1.92.

We therefore, request you to kindly refix the D.P. upto 31.3.92 as more than 45 days have passed from the Date of our discussion and receipt of your letter.

Thanking you,

Yours faithfully, For Tirupati Texco Products (P) Ltd.

DIRECTOR.

     Letter dated 10.2.1992

     No.101/584/K-2/476                        Dated: 10.2.92
     M/s Tirupati Texco Products (P) Ltd.,
     132-B, Cooperative Industrial Estate,
     Kanpur-22.

     Sub:-    A/T No.101/584/K-2/476/COAD dt.28.9.90 for supply of
     Rope Cotton.

     Ref:-     Your letter No.476/RC/91 dt. 20.1.92.

     Dear Sirs,

Please refer to your letter cited under reference, this is to inform you that the delivery period was refixed accordingly as per your offer. Any how you are hereby advised to supply the stores and regarding delivery period when you will approach for extension of D.P. The delivery period shall be considered. You are requested to inform the latest development of supplies to this office within 10 days.

This is however without any prejudice to the terms & conditions of the contract.

Yours faithfully

(D.N. SINGH) ASSTT. DIRECTOR OR D.S. & D."

6. The court below has relied upon second para of the letter dated

20.1.1992 whereby the respondent has asked for extension of delivery

period, however, in my opinion the court below has fallen into a clear error

in overlooking the first para of this very letter which showed that the

respondent thanked the appellant for re-fixing the delivery period i.e the

respondent accepted the amended delivery period for supply. The respondent

however only prayed for further extension of the delivery period because the

fresh delivery period would expire on 28.2.1992. Delivery extension was

asked because as per the respondent there was delay in receipt of the letter

issued by the appellant dated 13.12.1991 inasmuch as the same was received

by the respondent only on 2.1.1992. Whatever doubt remained that the

contract was concluded/entered into by the appellant's letter dated

13.12.1991 becomes clear from the letter of the appellant to the respondent

dated 10.2.1992 and which makes it more than abundantly clear that the

delivery period upto 28.2.1992 was fixed/refixed according to the 'offer' of

the respondent i.e the appellant re-affirmed the fact that the letter of the

respondent dated 20.11.1991 was an offer and appellant accepted the offer

by issuing its letter dated 13.12.1991. In my opinion, therefore, there cannot

be any doubt that the contract stood concluded when the appellant issued its

letter dated 13.12.1991 because this letter dated 13.12.1991 was an

acceptance of the offer of the respondent given by the respondent's letter

dated 20.11.1991 for re-fixing the delivery period upto 28.2.1992. As

already stated above, the respondent thanked the appellant for accepting the

fresh delivery period ending on 28.2.1992 but only requested a further

extension of the same, however, such request cannot take away the fact that

there was a finality with respect to a specific date of the delivery period

being arrived at and hence a concluded contract.

7. In my opinion therefore the arbitrator was justified in referring

to this letter dated 20.1.1992 for holding that contract was concluded, and

this becomes clear from the first para last few lines of internal page 4 of the

Award dated 13.2.2001. The court below accordingly was not justified in

accepting the objections and setting aside the Award and therefore the

findings and conclusions of the court below are set aside and the Award is

restored.

8. Learned counsel for the respondent however vehemently argued

that even assuming the respondent was guilty of breach of contract, yet, the

risk purchase amount of Rs.29,925/- ought not to have been awarded to the

appellant because this risk purchase amount is on account of the acceptance

of the fresh risk purchase tender ignoring the six other offers which were

lower than the offer given by the respondent pursuant to the risk purchase

tender. Learned counsel for the respondent however does not dispute that

the case of the appellant before the arbitrator was that the persons whose

tenders were not accepted were unregistered partnership firms, and appellant

did not accept the tenders from them for that reason and also for the reason

that those entities were not having requisite experience. Therefore once

legitimate reasons exist for accepting a particular tender at a higher rate,

because of lack of reliability and other factors pertaining to other tenderers,

it cannot be said that respondent is not liable for the risk purchase amount of

Rs.29,925/-. I may note that the appellant has claimed this amount of risk

purchase because the risk purchase tender was ultimately awarded to one

M/s. S.R. Enterprises from Kanpur.

9. Learned counsel for the respondent sought to place reliance

upon the judgment of this Court in the case of Union of India Vs. Daisy

Trading Corporation 2006 (130) DLT 471 to argue that once the terms of

the risk purchase tender are different than the tender which is cancelled on

account of breach, then, the arbitrator has committed an error in awarding

the amount of the higher risk purchase tender. I do not agree because no

doubt ordinarily the amount of damages is as per the lowest risk purchase

tender however if the lower tenders are for valid reasons not accepted by the

Union of India, there is justification, and accordingly, the risk purchase

amount for the higher cost would be payable by the respondent.

10. In view of the above, appeal is allowed. Impugned judgment of

the court below dated 10.11.2010 is set aside and the Award of the arbitrator

dated 13.2.2001 is restored whereby the appellant has been awarded a

money decree for a sum of Rs.29,925/-. Parties are left to bear their own

costs.

APRIL 24, 2014                            VALMIKI J. MEHTA, J.
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