Delhi High Court
Union Of India vs Bharat Battery Manufacturing ... on 10 October, 2018
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on : 27th September, 2018
Date of decision :10th October, 2018
+ O.M.P. 531/2008
UNION OF INDIA ..... Petitioner
Through: Mr. R.V. Sinha and Mr. A.S. Singh,
Advocates. (M:9868230464)
versus
BHARAT BATTERY MANUFACTURING COMPANY PVT LTD.
& ANR ..... Respondents
Through: Mr. Rajesh Banati, Mr. Ankit Banati
and Mr. B.K. Goswami, Advocates.
(M:9810294894)
CORAM:
JUSTICE PRATHIBA M. SINGH
JUDGMENT
Prathiba M. Singh, J.
1. The present petition challenges the impugned award dated 24th June,
2008 passed by the Learned Sole Arbitrator - Justice K.S. Gupta (Retired).
The brief background of the case is that a tender was called by the Union of
India for supply of batteries. The Respondent submitted its offer on 7th
October, 2002. The batteries were "secondary lead acid portable" of 6V 170
AH and 12V 75AH, for which the Respondent quoted a price of Rs.2070
and Rs.1871 per battery respectively. The supplies were for Defence
requirements. The offer given by the Respondent on 7th October, 2002 was
considered by the Petitioner and vide letter dated 26th March, 2003, the
Respondent was called upon to give its best reduced revised rates. The
Respondent thereafter submitted its revised offer vide letter dated 8th April,
2003 and reduced the prices to Rs.1829 and Rs.1749 for the 6V and 12V
batteries respectively. Supplies were made by the Respondent against
various purchase orders.
2. Disputes arose between the parties because the Respondent claimed
price variation as per clause 12 of Schedule A, of the contract, which was
refused by the Petitioner.
3. The Learned Arbitrator considered the matter and held that price
escalation was liable to be granted. The operative portion of the award reads
as under:
"...In the statement (Annexure-C24), details of Rs.
42,33,891/- being the differential amount due to
escalation in rate based on Hindustan Zinc Ltd.'s price
circulars (Ex. C-10 to C-18) have been set out.
Respondent has not lead any evidence showing any
inaccuracy in this statement. Claimant is, thus, entitled
to the said amount under the price variation clause.
Though the Rate Contract does not provide for
payment of any interest still in view of the ratio in
Secretary, Irrigation Department, Govt. of Orissa and
Ors. Vs. G.C. Roy, (1992) I Supreme Court Cases 508 ,
the claimant is entitled to interest on the above amount
which is quantified @ 9% p.a. As may be seen from the
said statement the interest has been calculated from the
respective date(s) of raising the bills. First bill was
raised on 12.8.2004 while the last on 13.5.2006. In the
facts and circumstances of case, the claimant is
awarded interest from 13.5.2006.
Accordingly, award of Rs. 42,33,891/- with interest @
9% p.a. from 13.5.2006 till date of realization of
amount is passed in favour of the claimant, and against
the respondent. Respondent will further pay share of
arbitration fee paid by the claimant, stamp duty and
Rs. 15,000/- as lawyer's fee to the claimant."
4. The only question raised and argued by the learned counsel for the
Petitioner, while challenging the award, is that there was no price variation
clause in the contract with the Respondent and hence the amount under the
said price variation clause could not have been awarded.
5. It was also submitted that the fact that the claim for price variation
was raised after the entire contract period was over, shows that the
Respondent was well aware that such a clause did not exist and the claim
was an afterthought.
6. On the other hand, learned counsel for the Respondent submits that
the rate contract, which was initially issued, had inadvertently omitted the
price variation clause. The fact that it exists is clear from the tender, the
offer letter, and also letter dated 2nd July, 2004 with which the price
variation clause was sent to the Respondent. The Respondent further argues
that the belated raising of this claim is an untenable submission inasmuch as
immediately after the rate contract was placed upon it, the Respondent had
written to the Petitioner informing of this omission and had called upon the
Petitioner to incorporate the same into the rate contract.
7. In rejoinder, Ld. counsel for the Petitioner submitted that the letter
dated 2nd July, 2004 attaching the price variation clause is without authority
of law. He submits that no amendment can be made into the rate contract
and, the same, if any had to be in writing. By a unilateral letter, such an
amendment could not have been added. He also submitted that the issuance
of this letter is with the condition that it is "without prejudice to the terms
and conditions of the contract". Thus, the letter cannot be read as
overwriting the rate contract. He relies upon Article 299 of the Constitution
to argue that any contract entered into by the Government has to be with the
authority of the President of India and not without authority, by any officer's
whims and fancies.
8. Having heard the counsels for the parties, the dispute is in a very
narrow compass. The only question is as to whether the price variation
clause existed in respect to this tender or not. A perusal of the Notice
Inviting Tender (hereinafter 'NIT') shows that in clause 8, which dealt with
the technical requirements of batteries, the following was clearly specified:
"8. A) This R/C will be meant primarily for meeting
Defence requirements but certain Civil Indentors may
also purchase the batteries against above item. For
Civil Indentors however the supplies will be made
conforming to Defence Specifications.
b. The tenderers are requested to quote the prices on
firm and fixed basis for all elements except for Lead. In
case of Lead the prices are variable only as per
provision of price variation clause as per Appendix 'A'
of the Tender Enquiry based on M/s. Hindustan Zinc
Ltd's prices of Lead of purity of 99.99% @ Rs. 36,000/-
per M.T., Ex- Smelter point prevailing during the
month of June, 2002 in accordance with price
variation formula mentioned in Appendix-A.
c. Uniform price variation factors as indicated in the
tender enquiry will only be admissible. Tenderers
asking for higher variation factors may run the risk of
their offer being ignored or else the price will be
loaded for the sake of equitable comparison.
d. Tenders with any other price variation clause are
liable to be ignored straightway."
Thus, right at inception, the NIT had a price variation clause. Further, in
Appendix X to the NIT, a detailed manner of determining the variation in
price was also provided. Clauses (a) and (c) of Appendix X read as under:
"a) In case variation in the price of finished
products is desired due to variation in the price of lead
the price variation should be allowed in the manner
indicated below. No variation on any account is
permissible.
...
c) (i) Price variation will only be allowed to the extent
of the actual increase/ decrease in the basic price of
lead excluding Excise duty &Sales tax. Whenever two
or more rates are announced by the Hindustan Zinc
Ltd., during particular month, weighted average for
particular month and not the average of two or more
price shall be taken into account for working out
quarterly average price of lead for the sake of price
variation."
9. The understanding of all persons/entities who responded to the tender
was that the same had a price variation clause. In the offer letter dated 7th
October, 2002, the Respondent agreed to the price variation clause as
contained in Annexure X. The offer clearly specifies the escalation, which is
one of the conditions of the offer, as under:
"Escalation: Prices quoted for the batteries are based
on the lead price (99.99% purity) Rs. 36,000.00 per
M.T., Ex-smelter point (excluding packing, forwarding,
Sales Tax and Excise Duty) as declared by Hindustan
Zinc Ltd. for Actual Users and for every increase/
decrease of Rs. 100.00 (and complete multiple of Rs.
100/- in the price of lead, exclusive of Central Excise
Duty and Sales Tax etc., the price of each battery will
vary (upward/downward) at the rate as under:-
Item Type of Battery Variation factor
exclusive of Excise
Duty on account of
fluctuation in lead
price for each slab
of Rs.100/-
Cat pt. No.Z9/6140-
000043
Cat. Pt. No.Z9/6140-
000047
The price variation will be determined and adjusted on
the basis of Lead price ruling in the quarter preceding
to the quarter in which the Batteries are tender for
inspection. The dates the batteries are tendered for
inspection will be treated as the date of delivery for the
purpose of price variation. Whenever two or more
rates are announced by Hindustan Zinc Ltd. during
particular month weighted average for particular
month shall be taken into account for working out
quarterly average price of Lead for sake of price
variation."
10. When the Petitioner responded to this offer on 26th March, 2003, it
called upon the Respondent to consider reasonable prices in the
neighbourhood of the rates as indicated in Annexure A. The relevant portion
of the said letter is set out herein below:
"Dear Sirs,
With reference to above, it is informed that the
prices quoted by you have been considered to be on
higher side. Deptt. considers reasonable price in the
neighbourhood of rates as indicated in the enclosed
Annexure-'A'. Certain other terms and conditions
quoted by you in your tender which are unacceptable
have also been indicated in the enclosed Annexure-'A'
alongwith the terms which may be considered by the
Deptt.
...
Annexure A to the said letter is very significant and is set out herein below:
Item no. Description of stores Counter offer rate of
(Def Cat No.)" E.D. and ST) F.O.R.
Destination with
M.C. Note.
____________________________________________________
1. Battery Secondary Lead Acid Rs.1829.00
Portable 6V 170 AH No.2
(Z 9/6140-000043)
2. Battery Secondary Lead Acid
Portable 12V 75 AH No.2
(Z 9/614-000047) Rs.1749.00
NOTE: The above rates are based on HZL prices of Lead of
purity 99.99% @ Rs.36,000/- M.T. as per price
variation Clause of the tender enquiry as agreed by
you.
Thus, even while responding to the initial offer made by the Respondent, the
Petitioner called upon the Respondent to submit a revised price, but, with a
price variation clause. The revised offer was thereafter submitted by the
Respondent on this basis.
11. The revised offer also mentioned that the prices of lead were based on
Hindustan Zinc Limited's price of lead "as per price variation clause of the
tender enquiry." Thereafter on 5th May, 2003, the final order was placed
through rate contract number AM-5/RC-14100105/072003/WT
BTYS/DEF/2003-04/75/BHARAT/COAC/185 Dated 05 MAY, 2003 which
reference the tender enquiry, the quotation date and the revised offer dated
8th April, 2003. Schedule A of the rate contract also contained the price
variation clause in the following terms:
"12. PRICES (PRICE VARIATION CLAUSE)
The above rates are based on HZL Prices of
Leas purity 99.99% @ Rs.36,000/- per M.T. ex-
smelter, prevailing in the month of June-2002
excluding packing forwarding, Sales Tax & Excise
Duty as mentioned in price variation clause as per
Schedule 'B' of this Rate Contract."
12. However, in Schedule B, which was attached with the rate contract,
no details regarding the manner in which price variation would be
determined were given. The Respondent immediately noticed the absence of
the said clause, and on 17th June, 2003 wrote to the Petitioner that in the
price variation clause, the variation factor of batteries had not been
incorporated. It issued a reminder on 28th June, 2004. In response to the
reminder letter, the Petitioner issued a letter dated 2nd July, 2004 attaching
therewith schedule B i.e. the price variation clause and the formula to
determine the same. The said letter reads as under:
"To
M/s The Bharat Battery Manufacturing Co. Pvt.
Ltd.,
238 A, Acharya Jagdish Chandra Bose Road,
Kolkota-700020.
Sub: This office Rate Contract No.AM-5/RC-
14100105/07200/WT Btys/Def/2003-
04/75/Bharat/COIAC/185 dt.5.5.2003 on you.
Ref: Your letter No.271/820/2004-2005 dt.28.6.04.
Dear Sirs,
Please refer to your letter cited above regarding
price variation formula and slab factors not mentioned
in the subject R/C. In this connection please find
enclosed schedule B which contains complete price
variation formula along with variation factor.
This is, however, without prejudice to the terms
and conditions of the contract.
Yours faithfully,
(P.C. Sharma)
Asst. Director (Supplies)
For Director Generaol of Supplies & Disposals"
It is interesting to point out that this letter is issued by the Assistant Director,
Supplies, who had also issued the initial rate contract. Schedule B attached
to this letter merely prescribes the formula for calculating the price variation
as mentioned in schedule A. According to Ld. counsel for the Petitioner,
since the original rate contract did not contain schedule B, the Arbitrator
erred in granting the price escalation. This submission is completely without
any merit inasmuch as every document which has been issued by the
Petitioner, as well as the offers submitted by the Respondent contain the
price variation clause. The NIT, the initial offer, the request of the Petitioner
to submit a revised offer and the revised offer submitted by the Respondent -
all contain the price variation clause. There is a reference to price variation
even in schedule A to the rate contract. Only the formula for calculating the
price variation was missing, which was thereafter given to the Respondent
vide letter dated 2nd July, 2004.
13. The legal submissions made by the counsel for the Petitioner that no
amendment could have been executed to the rate contract as this would be
contrary to Article 299, are without any basis. The Learned Arbitrator has
clearly concluded that all the letters written by the Respondent were on the
record of the Department. The price variation clause was an integral part of
the contract. The General Conditions of Contract of Government of India
(Amended up to 30th June, 1991) clearly contain a clause defining the term
`contract' as under:
"(c) "Contract" means the invitation to tender,
instructions to tenderers, tender, acceptance of tender,
particulars and the general and special conditions
specified in the acceptance of tender and includes a
repeat order which has been accepted or acted upon by
the contractor;"
14. Thus, in order to arrive at a conclusion as to whether the price
variation clause existed or not, no single document can be considered in
isolation, but the documents have to be read as a whole. There is no doubt
from the chronology of events and the correspondence exchanged between
the parties that the price variation clause existed.
15. Admittedly, the Respondent made a large amount of supplies of
batteries to the Petitioner right till the last date of the contract. The claims
and the calculations which form the basis of the claim have not been
questioned before this Court. The Respondent has placed on record the
monthly notification/circulars issued by Hindustan Zinc Limited containing
the price of lead. It is on the basis of these circulars that the price variation is
sought. Thus, there is no merit in the petition. The same is dismissed. All
pending I.As are also disposed of.
PRATHIBA M. SINGH, J.
JUDGE
OCTOBER 10, 2018
Rahul
