Heavy Vehicle Factory, rep. by Senior General Manager, Avadi, Madras v. Oscar Equipment (P) Ltd. , rep. by its Managing Director, Kolkotta
2006-06-26
S.RAJESWARAN
body2006
DigiLaw.ai
Judgment : S. RAJESWARAN, J. This O.P. has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter called ‘the Act’) to set aside the original award dated 6.12.2004 and supplementary award dated 9.4.2005 passed by the arbitral Tribunal. 2. Thepetitioner floated a tender enquiry on 3.3.1990 for the supply and service required by Heavy Vehicle Factory (H.V.F.) for Hydraulic system of launching mechanism for Bridge Layer Tank (BLT) on Vijayanta Carrier Vehicle under Project “KARTHIK” used for Defence, consisting of hydraulic cylinder, assembly external and internal plumbing oil distributor rings and various other specified items for their requirement as per the enquiry. In response to that, the 1st respondent submitted its offer on 12.6.1990. Accepting the offer, the petitioner issued a purchase order on 29.10.1990 for a total value of Rs. 1,98,85,455/-. In terms of the purchase order, the 1st respondent was ordered to seek assistance from the Director, R&D E(E)Dighi, Pune for clarification and correctness of the manufacturing, drawing and subsequent development of the equipment. The 1st respondent was directed that all the machinery to be manufactured by them at their works would be inspected by the petitioner and only after the same was found as per the specification of the petitioner, it would be accepted and released for integration, installation and commissioning on the vehicle at the site of the petitioner. 3. In view of certain developments in the Defence Department, the purchase order was withheld upto 1994. As required, the 1st respondent submitted a revised quotation on 6.6.1994 and after negotiations, the petitioner issued an amendment to the existing purchase order on 25.4.1995 for a total value of Rs. 2,37,38,076/-. Insofar as the delivery of items to be supplied are concerned, it was specified that one pilot set of item shall be supplied within 8 months’ from the date of issue of amendment to the supply order and the bulk supplies made at 2 sets per month at H.V.F. from the date of receipt of bulk production clearance and the order shall be completed in 15 months’ time from the date of issue of amendment. The 1st respondent sent a fax on 5.5.1995 to the petitioner asking for complete set of facts and it was made clear that without the drawings the 1st respondent could not proceed in this matter.
The 1st respondent sent a fax on 5.5.1995 to the petitioner asking for complete set of facts and it was made clear that without the drawings the 1st respondent could not proceed in this matter. On 16.5.1995, a portion of drawings was sent by the petitioner and the petitioner advised the R & D Engineers to send the balance of the drawings directly to the 1st respondent. The petitioner again sent a copy of the drawing for the item Hull internal fitments on 6.6.1995. As there was a delay in supplying the drawings, the petitioner by telegram dated 16.5.1996, requested the Controller of Quality Assurance, Bombay to undertake inspection and to clear the items pending, supply-order delivery date extension amendment. The last drawings from R & DE(E) of Pune was received on 10.2.1997. The pre-delivery inspection by the petitioner was held on 25.3.1997 to 27.3.1997 and the 1st respondent supplied the material on 31.3.1997. Part payment was made and the petitioner by letter dated 2.9.1997 called upon the 1st respondent to withhold the delivery of further consignment and as dispute arose with regard to taking delivery of the balance material and payment of the balance amount, the arbitration clause was invoked and as there was no response, an arbitration petition was filed before this Court under Section 11 of the Act 1996 and 2nd respondent, was appointed as sole arbitrator. 4. Before the 2nd respondent, the 1st respondent claimed a sum of Rs. 2,27,06,662. 79 with interest at 18% per annum and also for other two claims. 5. The learned arbitrator by an award dated 6.12.2004 awarded a sum of Rs. 2,27,06,663.79 under claim No. NN, a sum of Rs. 61,33,172/- under claim No. 00 and rejected the claim under claim No. PP. 6. After the award was passed, a petition was filed by first respondent under Section 33 of the Act, 1996 seeking modification of the main award and by order dated 9.4.2005, the 2nd respondent directed the 1st respondent to deliver the balance materials on or before 15.5.2005 at the site of the petitioner and the petitioner must pay the value of the materials to be delivered by the 1st respondent. 7. Challenging the award dated 6.12.2004 and the subsequent order dated 9.4.2005 the above petition has been filed under Section 34 of the Act, to set aside the award. 8.
7. Challenging the award dated 6.12.2004 and the subsequent order dated 9.4.2005 the above petition has been filed under Section 34 of the Act, to set aside the award. 8. Learned counsel for the petitioner as-sailed the award on the following grounds: (1) The award dated 6.12.2004 and the supplementary award dated 9.4.2005 suffers from failure of consideration and is opposed to public policy. (2) Thefindings of the 2nd respondent is contrary to the admitted facts on record. (3) The 2nd respondent has failed to consider the relevant contractual conditions like pilot sample clause, proving the worthiness of the machine at H.V.F., proving the functional, utility at contractors site, etc. (4) The2nd respondent failed to consider the law that the Governmental contracts being written as per Article 299 of the Constitution of India, the breach of the clauses would not give rise to compensation to the contractor. (5) The contractual conditions alone are material and the conduct of the individual is irrelevant and therefore the findings of the 2nd respondent are opposed to public policy. (6) The2nd respondent committed error of law in giving directions to supply balance material which is without jurisdiction. (7) The2nd respondent has failed to consider the franking clause and its impact in the right perspective. 9. Learned counsel for the petitioner while reiterating the grounds of challenge contained in the above petition, submitted that the award is opposed to public policy as the same is passed disregarding the mandatory clauses contained in the contract. 10. He relied on the judgment of the Hon’ble Supreme Court reported in State of Rajasthan v. Basant Nahata AIR 2005 SC 3401 for the proposition that public policy is not capable of being given a precise definition and what is opposed to public policy would be a matter depending upon the nature of the transaction. 11. Per contra, learned senior counsel appearing for the 1st respondent submitted that the petitioner has not made out a case to interfere with the award as per Section 34 of the Act and this Court need not interfere with the same in the absence of attracting any of the clauses enumerated under Section 34 of the Act, 1996. I am aware that this Court is not an appellate Court and this Court cannot reevaluate the evidence to come to a different conclusion.
I am aware that this Court is not an appellate Court and this Court cannot reevaluate the evidence to come to a different conclusion. An award can be interfered with only if the grounds set out under Section 34 of the Act get attracted. 12. In the case on hand, the 2nd respondent has framed four issues which are as follows: “(1) Whether there is a “fundamental breach” of the terms of contract as contended on behalf of the respondente (2) Whether the respondent has extended the delivery period by its conduct as contended by the claimante (3) Whether the claimant is entitled to get the payment as prayed for along with intereste (4) Interest, if allowed, at what rate and for which periode“ 13. 55 documents have been marked on the side of the 1st respondent-claimant before the 2nd respondent, Exhibit R-1 was marked on behalf of the petitioner herein. After evaluating the entire evidence adduced before him, the 2nd respondent has passed the award in favour of the 1st respondent. All the grounds raised before this Court were already raised before the 2nd respondent and the 2nd respondent on the basis of evidence and pleadings before him dealt with those grounds which are reasonable and plausible. The 2nd respondent is a final Court of facts and if 2nd respondent comes to a conclusion on the basis of the facts and evidence placed before him which are reasonable and plausible, then this Court sitting under Section 34 of toe Act, 1996 cannot interfere with the same even if another conclusion is possible. 14. Insofar as the question of breach of the terms of the supply order on the part of the 1st respondent is concerned, the 2nd respondent has observed as follows: ”22. I have gone through the pleadings and considered the rival submissions carefully. Before entering into the core issues viz., Whether there is a fundamental breach of the term of the supply order on the part of the claimant and whether the respondent has waived the breach by its conduct, it is necessary to bear in mind the nature of the contract entered into between the parties for items to be supplied. The supply order/contract was for the supply and services required by the H. V.F. for hydraulic system of launching mechanism for Bridge Layer Tank on Vijayanta carrier vehicle under Project Kartik.
The supply order/contract was for the supply and services required by the H. V.F. for hydraulic system of launching mechanism for Bridge Layer Tank on Vijayanta carrier vehicle under Project Kartik. Bridge Layer Tank is a specialised equipment which is used by the Armoured formation and Engineering unit for crossing natural/original obstacles in the shortest time during the advancement tank column. BLT carries a pre-fabricated bridge which can be laid on obstacles and retrieved back in short time. Series of meetings were held with the claimant and the scope of supply and services were designed for the claimant during the technical and commercial negotiations with Tender Purchase Committee. It may be mentioned at this juncture that the claimant has been serving the respondent even today and has established itself as technically competent quality manufacturer of all types of linear hydraulic cylinder for Defence unit including installation and commissioning on vehicles. What is to be noted here is that the contract was not an ordinary one for supply of items which are readily available in the market or can be utilized/sold for other purposes. In other words, the items to be manufactured and supplied by the claimant in this supply order are meant only for the respondent and the same cannot be marketed otherwise. With this background, we have to look into the issues that arise for resolution in these proceedings.“ ”31. The reliance placed on the franking clause set out above is of no use to the respondent in view of the conduct of the respondent/its agencies as detailed above. I am unable to agree with the contention of the learned counsel for the respondent that there is fundamental breach of the terms of supply order on the part of the claimant as the delay is admittedly on the part of the respondent/its agencies in providing drawings and other materials as seen from the facts narrated above. There is no force in the contention that the respondent has not waived its rights. The very fact that the respondent has accepted 3 sets years after the lapse of time for delivery belies the above contention. The reason given for accepting the 3 sets (taking a sympathetic view) is not sustainable in law.” 15. Similarly, the question of extension of delivery period was also dealt with by 2nd respondent as under: “32.
The very fact that the respondent has accepted 3 sets years after the lapse of time for delivery belies the above contention. The reason given for accepting the 3 sets (taking a sympathetic view) is not sustainable in law.” 15. Similarly, the question of extension of delivery period was also dealt with by 2nd respondent as under: “32. Likewise the respondent was not justified in arbitrarily/unilaterally deciding to extend the delivery period up to 30.8.1997 for three sets only. The respondent has accepted two more sets along with pilot set is an accepted fact. No acceptable reason is given for not accepting the balance material when offered, particularly those materials were inspected and found satisfactory by the agency. If the respondent has not waived its right to adhere to the time schedule, it would not have accepted the 3 sets. It is to be noted that in terms of the supply order, the claimant is expected to purchase the materials not only from the pilot set but for the entire 9 sets. I accept the contentions of Mr. Arvind P. Datar that the purpose of sample clause is for establishment of quality rather than quantity. The bulk supply follows on acceptance of pilot set. Here, not only the pilot set was accepted but two more sets were also accepted. In the circumstances, the respondent is not entitled to refuse to accept the balance materials.” 16. The 2nd respondent has also considered the question of payment of interest and rendered his findings in this regard as under: “I do not find any good reason to deny the interest claimed at 18% per annum on the principal amount under “NN“ up to the date of the award viz., 6.12.2004. Accordingly, it is awarded. However, for the subsequent period viz., from 7.12.2004 onwards, interest is awarded at 12% per annum till the date of payment. So far as the interest on the claim under ‘OO ‘is concerned, I am of the view that, on the facts of the case, the respondent should not be mulcted with interest up to the date of the award. The claimant will get interest only from the date of award at 12% per annum till the date of payment.” 17.
So far as the interest on the claim under ‘OO ‘is concerned, I am of the view that, on the facts of the case, the respondent should not be mulcted with interest up to the date of the award. The claimant will get interest only from the date of award at 12% per annum till the date of payment.” 17. The 2nd respondent has also gone into the claim relating to the damages incurred by 1st respondent for keeping the goods in godowns and rejected the same, as it was not supported by any material. 18. Thus a reasoned award has been passed by 2nd respondent which cannot be easily interfered with under Section 34 of the Act 1996. 19. Insofar as the supplementary award dated 9.4.2005 is concerned, I am in entire agreement with the reasons given by the 2nd respondent arbitrator for directing the 1st respondent to deliver the balance materials and: the petitioner to pay the value of the materials. 20. Hence I do not find any merits in this O.P., and consequently this O.P. is dismissed. No costs.