Delhi High Court
Tamilnadu Telecommunication Ltd vs Railtel Corporation Of India Ltd on 27 October, 2021
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 27th October, 2021
+ O.M.P. (COMM) NO. 379/2020
TAMILNADU TELECOMMUNICATION LTD. ..... Petitioner
Versus
RAILTEL CORPORATION OF INDIA LTD. ..... Respondent
Advocates who appeared in this case:
For the Petitioner :Mr. Harish Vaidyanathan Shankar, Adv.
For the Respondent :Mr. Yaman Kumar, Adv.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioner (hereafter 'TTL') has filed the present petition
under Section 34 of the Arbitration & Conciliation Act, 1996
(hereafter the 'A&C Act') impugning an Arbitral Award dated
03.10.2012 (hereafter the 'impugned award') rendered by the Arbitral
Tribunal comprising of a Sole Arbitrator.
2. The impugned award was rendered in the context of disputes
that had arisen between the parties in connection with the purchase of
559 kms of 24 Fibre Armoured Optical Fibre Cable. TTL is a
manufacturer of Optical Fibre Cables (hereafter 'OFC') and supplies
Signature Not Verified
By:DUSHYANT
RAWAL
the said product to various government and non-government agencies
in India as well as overseas. It is stated that petitioner uses the
Fujikura brand fibre to manufacture the OFC and, has supplied over
3000 kms. of OFC to the Railways since the past decade.
3. The disputes in the present case arise in connection with the
Purchase Order dated 09.12.2005 (hereafter 'the PO') placed by the
respondent (hereafter 'RailTel') on TTL for the supply of 559 kms. of
24 OFC conforming to Research Design & Standards Organization
(RDSO) Specification no. IRS : TC-55/2000 with the fibre as per ITU
G652D Spec.
4. RailTel had issued a Notice Inviting Tender (NIT) for the
supply of OFC of the aforesaid specifications. TTL had submitted its
bid pursuant to the said notice and was declared as the successful
bidder. Thereafter, RailTel issued the PO for supply of OFC of the
aforesaid specifications at a value of ₹2,06,83,000/- (plus octroi, as per
actual).
5. TTL accepted the PO on 12.12.2005 and also submitted the
Performance Bank Guarantee (hereafter the 'PBG') for a sum of
₹21,43,34,000/- being 10% of the PO value. The delivery period was
first extended till 28.02.2006 and thereafter, to 07.03.2006.
6. The annexure to the PO setting out the material terms is
reproduced below:
"Tamilnadu Telecommunications Ltd. Annexure
1 Description of the 24F Armoured Optical Fibre Cable
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By:DUSHYANT
RAWAL
item:
2 Specification: IRS-TC-55/2000 (latest) with Fujikara
make of Fibre as per ITU G 652D specs.
Fiber has been tested by RailTel.
3 Quantity: 559 KM.
4 Rate Rs.37,000/- per Km. excluding Octroi &
Entry Tax
5 Break up of rates:
i) Basic rate: Rs.29,965.41 per Km.
ii) Excise duty: Rs.4,[email protected]% on basic price
iii) Sales Rs.1,[email protected]% against Form-C
Tax/CST/VAT:
iv) Transportation Rs.750/- per Km of OFC
charges:
v) Insurance: Included
vi) Octroi Maximum of 4% Bhusawal, Jalgaon & 3%
for Manmad on Basic + ED + ST +
Transportation + Insurance. Not applicable
/ payable for other areas.
vii) Entry Tax Nil
viii) Other charges: Nil
6 Total value: Rs.2,06,83,000/- (Rupees Two Crores Six
Lacs & Eighty Three Thousand Only)
excluding Octroi duty as per details in
5(vi) above.
7 Price variation No variation in price shall be applicable
clause:
8 F.O.R Destination
9 Consignee
particulars:
Sections Consignee Qty.
i) Itarsi - Bhusaval Consignee details address to be 332 Km
informed by RGM/Western
Region
ii) Manmad - Jalgaon Consignee details address to be 175 Km
informed by RGM/Western
Region
iii) Kolkata Area Consignee details address to be 52 Km
informed by RGM/Western
Region
Total 559 Km
10 Inspection: RDSO Inspection charges shall be borne
by RailTel, CO, New Delhi.
11 Delivery period: Within 60 days from the date of issue of
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By:DUSHYANT
RAWAL
P.O.
12 Warranty: 12 Months
13 Payment terms: 90% on receipt of material at site and
balance 10% on expiry of warranty period
/ submission of BG of equivalent amount
to be submitted in the Regional Office
where the bill is submitted for payment.
14 Bill paying & RGM/RailTel/Mumbai and Kolkata."
passing authority:
7. In terms of the PO, the OFC supplied was required to be
inspected by RDSO prior to its dispatch. There is no dispute that such
pre-dispatch inspection was carried out by RDSO and the supplies
made by TTL were made after such inspection.
8. In terms of the PO, 509.19 kms. of OFC was supplied at the
RailTel's Western Region during the period from 24.12.2005 to
05.03.2006 and 52 kms. of OFC was delivered to RailTel at Kolkata
on 13.02.2006. RailTel accepted the aforesaid deliveries and also
released 90% of the consideration against the deliveries. Subsequently,
RailTel also released the remaining 10% of the consideration in terms
of the PO without insisting on a bank guarantee. On 04.07.2006,
RailTel released the PBG.
9. RailTel claims that shortly after the supplies were made, certain
defects were noticed in the OFC supplied by TTL under the PO. TTL
had also supplied OFC under another contract, which was being
executed by another agency (IRCON). RailTel claims that certain
defects were also noticed in the material (OFC) supplied under that
contract (856 kms. of 24F armoured optical fibre cable for Malda-
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By:DUSHYANT
RAWAL
Rajgram, Barauni-Hajipur-Muzaffarpur, Salem-Banglore and
Ballarshah-Kazipet-Bibinagar sections).
10. RailTel brought the said defects to the notice of TTL by its
letter dated 11.10.2006 and, called upon it to replace the defective
cables.
11. RailTel claims that while blowing the OFC in the duct in the
Eastern Region, it was found that the outer sheath of black colour had
developed major cracks at several places. The outer sheath/PVC
cover was broken and kept peeling off while in storage. It further
claims that as per RDSO Specification no. IRS-TC-55/2000, the
armouring was required to be made of stainless steel and, the same
was found to be rusted within in a short span of time.
12. RailTel claims that it had also sent 14 mtrs. of OFC received
from Regional General Manager, Kolkata and three other samples of
12 inches each to RDSO, Lucknow for detailed examination and
analysis.
13. RailTel claims that four drums of 12 kms. of OFC were sent
from Kolkata to Siliguri and while laying the OFC from the first drum,
defects as mentioned above were noticed. On observing the said
defects, laying of OFC was stopped immediately and the said drums
(bearing drum nos. 3030,3036,3087 & 3192) were not used and stored
at Siliguri. According to the agreed specifications, the life of the OFC
was required to be for a minimum twenty five years and RailTel
claims that the supplies made by the petitioner did not have the
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By:DUSHYANT
RAWAL
requisite life. Similarly, RailTel claims that supplies were taken from
other drums (bearing drum nos. 0114,0115 & 12349) and the said
defects were noted, which included longitudinal cracks, separation of
outer jacket and poor quality of armour. RailTel claims that similar
samples were also taken from other supplies made by the petitioner.
The said samples were also analyzed by RDSO and were found to be
defective.
14. In the aforesaid context, RailTel sent a letter dated 27.08.2007
calling upon TTL to take immediate steps for replacing the entire 559
kms. of defective OFC irrespective of whether the same had been laid
or remained unused. RailTel had also invited the petitioner to jointly
identify the defective OFC drums and immediately replace the same.
RailTel further put TTL to notice that in the event appropriate action
was not taken by TTL within a period of 15 days of the said letter, it
would resort to contractual provisions and take the necessary steps.
TTL did not agree to replace the entire supplies made by it but by its
letter dated 08.09.2007, offered to replace the drums of OFCs that
were found defective.
15. On 31.10.2007, RailTel sent a letter inviting TTL to engage in
discussion for resolution of disputes in terms of Clause 23 of the
tender documents.
16. It is stated that the representatives of the parties met for
amicable settlement of the disputes, however, they were unable to
resolve the same. By a letter dated 03.12.2007, TTL informed RailTel
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By:DUSHYANT
RAWAL
that it was not agreeable for replacement of the cables and for paying
any compensation for the OFC already laid. TTL claimed that defects
had developed in the OFCs on account of mishandling on the part of
RailTel. RailTel disputed the aforesaid claim as according to it, the
defects noticed in the OFC were manufacturing defects and could not
have developed if the OFC manufactured by TTL was of the requisite
specifications.
17. Since the disputes between the parties could not be resolved,
RailTel invoked the agreement to refer the said disputes to arbitration.
And, the disputes were referred to the Arbitral Tribunal.
18. The claims made by RailTel in its Statement of Claim are
summarized below:
Claim No.1:
RailTel claimed that 220 kms. out of 559 kms. of OFC supplied
by the petitioner was lying unused in its stores. It claimed the
consideration paid by it for the said unused OFC quantified at
₹81,41,000/- (220 kms. of unused OFC * ₹37,000/- per km. as
per the Schedule of Rate given in the Purchase Order dated
09.12.2005).
Claim No.2:
RailTel claimed interest at the rate of 15% per annum on the
aforesaid amount of ₹81,41,000/-.
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By:DUSHYANT
RAWAL
Claim No.3:
RailTel claimed that it had procured 107 kms. of OFC from M/s
Teracom (another supplier) at the cost of ₹41,55,880/- [at
₹38,840/- per km.] Accordingly, it claimed the difference
between the price of the cables agreed to be supplied by the
petitioner (₹37,000/- per km. and ₹38,840/- per km.) quantified
at ₹1,96,880/-.
Claim No.4:
RailTel claimed interest at the rate of 15% per annum from the
date of payment, that is, from 18.12.2006 on the aforesaid
amount of ₹1,96,880/-.
Claim No. 5:
RailTel claimed that it had procured 35 kms. of OFC from M/s
Sterilite at the rate of ₹44,150/- per km. and it claimed
difference in the cost of the said OFC quantified at ₹2,50,250/-
(35 kms. * ₹7,150/-).
Claim No. 6:
RailTel also claimed interest at the rate of 15% per annum from
the date of payment, that is, from 29.09.2007 on the aforesaid
amount of ₹2,50,250/-
Claim No. 7:
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By:DUSHYANT
RAWAL
RailTel sought the costs for 197 kms. of OFC already laid along
with its laying costs at the rate of ₹1.13 lakhs per km. quantified
at ₹222.61 lacs (197 kms * 1.13 lakhs).
19. The Arbitral Tribunal considered the aforesaid claims. The
Arbitral Tribunal did not award the claims in monetary terms,
however, it allowed RailTel's Claim No.1 by directing the parties to
conduct a joint inspection of the entire unutilized OFCs subject to a
maximum of 220 kms. lying in full drum lengths and on original
drums at RailTel's depots within thirty days from the date of the
award and to be replaced by TTL within two months from the said
date of inspection.
20. Mr. Harish Vaidyanathan Shankar, learned counsel appearing
for TTL contended that the impugned award was vitiated by patent
illegality as it was beyond the scope of the contract entered between
the parties. He submitted that the decision of the Arbitral Tribunal to
direct TTL to replace the entire stock of unused OFCs lying at
RailTel's warehouse without ascertaining whether the same was
defective was perverse and the impugned award was, thus, liable to be
set aside. He submitted that the contract between the parties provided
for pre-dispatch inspection of OFC and it is admitted that the OFC
supplied by the petitioner had been duly inspected prior to the
dispatch. He submitted that the Arbitral Tribunal also did not consider
whether the warranty period had expired. He submitted that the
petitioner could not be asked to replace the unused cables on the
assumption that the same were still within the warranty period.
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By:DUSHYANT
RAWAL
21. Mr. Shankar also pointed out that RailTel had released the
balance 10% payment without insisting on the PBG and, this also
indicated that it was satisfied with the OFC supplied. He pointed out
that the Arbitral Tribunal had dismissed the aforesaid contention by
stating that the same was an administrative lapse. He submitted that
the said assumption was without any basis. In terms of the PO, the
balance 10% consideration was payable only after the expiry of the
warranty period and therefore, it must be presumed that the warranty
period had expired.
22. A plain reading of the impugned award indicates that the
Arbitral Tribunal had held that the evidence on record clearly
established that the OFC supplied by the petitioner did not meet the
requisite specifications in respect of stainless-steel armouring and the
outer sheathing. The PO expressly indicated the warranty period to be
twelve months. The Arbitral Tribunal found that RailTel had raised
objections with regard to the material supplied by the petitioner within
the warranty period. The relevant extract of the impugned award is set
out below:
"Claimant's contention that vide its letter dated
10.11.2006, it had asked TTL (well within the contractual
warrantee period) to replace all the defective cable
(covered by its PO dated 09.12.2005) is accepted, as these
very defects (cracking of outer sheathing and rusting of
the stainless steel armouring), pointed out vide its letter
dated 11.10 2006, were later upheld/confirmed on a
sufficiently large scale during subsequent tests conducted
by ROSO on samples taken in March & August 2007
from the OFC supplied under RaiTel's PO dated
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By:DUSHYANT
RAWAL
09.12.2005. Also, the claimant had kept pursuing this
complaint. Even if there may be some doubt on the issue,
I give the benefit of doubt to the Claimant in view of the
above.
ROSO's subsequent tests, referred to in the previous Para,
clearly established that the OFC supplied by the
respondent didn't meet the contract specifications' in
respect of the stainless steel armouring and the outer
sheathing."
23. The findings of the Arbitral Tribunal that the OFC supplied by
the petitioner did not conform to the requisite specifications and that
RailTel had asked the petitioner to replace the same within the
warranty period, are findings of fact. This Court does not find any of
the said findings to be patently illegal or without any basis.
Undisputedly, there is material on record to support such findings. The
evaluation of sufficiency or the persuasive value of such material falls
within the exclusive jurisdiction of the Arbitral Tribunal and, it is far
too well settled that this Court cannot reappreciate the evidence and
supplant its opinion over that of the Arbitral Tribunal in proceedings
under Section 34 of the A&C Act. Thus, no interference with the said
conclusion is warranted.
24. In view of the above, the present petition is unmerited and is
accordingly, dismissed.
VIBHU BAKHRU, J
OCTOBER 27, 2021
'gsr'
Signature Not Verified
By:DUSHYANT
RAWAL
