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2007 DIGILAW 159 (DEL)

MUNICIPAL CORPORATION OF DELHI v. EASTLAND SWITCHGEAR (P)LTD.

2007-01-25

A.K.SIKRI

body2007
A. K. SIKRI, J. ( 1 ) IA. 10023/94 the Delhi Electric Supply Union (DESU) placed three purchase orders upon M/s. East Switchgear (P)Ltd. (hereinafter referred to as the `objector" for short), particulars whereof are as under: (a) P. O. No. ST/89/xen/isp-II/te-132/2416 dated 16/17. 10. 1989. (b) P. O. Nos. ST/89/xen/s. P. II)/te-147/2756 dated 27. 12. 1989. (c ) P. O. No. S9/89/xen/sp. II)/te-147/672 dated 8. 8. 1990 ( 2 ) ACCORDING to the DESU, the Objector did not supply the goods against these orders, which forced DESU to take supplies from other sources at the risk and cost of the Objector. The DESU had to pay more amount than the price agreed to between the DESU and the Objector. In these circumstances DESU made demand of this amount and as the Objector did not yield, the General manager (East) in exercise of powers conferred upon him in terms of Arbitration clause of the Conditions of Contract appointed Shri K. G. Bawa, Chief Engineer, desu as the Arbitrator vide his order dated 27. 9. 91. Shri K. G. Bawa entered upon reference and has made and published his Award dated 14. 12. 1993. It is a non-speaking Award whereby the learned Arbitrator has accepted the claim of DESU in the sum of Rs. 13,69,165. 40p as due and payable by the Objector and has thus directed the Objector to pay the said amount within 30days failing which it is further directed that the Objector shall be liable to make payment of interest @ 12% p. a. on the amount of Award up to the date of decree or payment, whichever is earlier. The Objector had also preferred counter-claims which had been rejected by the learned Arbitrator. After passing this Award, the Arbitrator filed the same in original along with proceedings. The notice of filing of the award was sent to the parties. The Objector has filed objections thereto in the form of present application. The DESU has contested the said objection by filing reply. ( 3 ) IT may be mentioned that MCD was the original plaintiff in this case as desu was at the relevant time a part of MCD. However, thereafter Delhi Vidyut board (DVB) was created which became the separate entity for supply of electricity in Delhi. The DESU has contested the said objection by filing reply. ( 3 ) IT may be mentioned that MCD was the original plaintiff in this case as desu was at the relevant time a part of MCD. However, thereafter Delhi Vidyut board (DVB) was created which became the separate entity for supply of electricity in Delhi. However, licence for this purpose has since been given to certain private companies and in respect of area in question successor of DVB is ndpl. Vide order dated 18. 1. 2006, therefore, NDPL was impleaded as plaintiff in place of MCD/desu. ( 4 ) I may mention that when the matter came up for hearing, counsel for the Objector made request for adjournment. However, it was declined as it was noted that matter was pending for the last almost 12 years and adjournments had been sought from time to time either at the request of the petitioner or the Objector. Adjournment was, therefore, refused and the parties were directed to file the written submissions. However, none of the parties have filed their written submissions. Therefore, I have gone through the record myself. ( 5 ) A perusal of the objections of the Objector would show that the Award is primarily objected on three counts, namely: (i) In respect of two purchase orders i. e. 27. 12. 89 and 8. 8. 90 it is alleged that there was never any conlcuded contract and, therefore, invocation of arbitration was not valid and the reference was without jurisdiction. Even otherwise, it is submitted, vide letter dated 18. 1. 1991 of the Objector, that arbitration clause was invoked in respect of first purchase order dated16/17. 10. 89. On account of aforesaid two purchase orders arbitration clause had never been invoked and, therefore, the arbitration proceedings including the award in respect of these two purchase orders is bad in law. (ii) Second nature of objection is on the merits of this case. It is alleged that after the Objector was given first purchase order dated 16/17. 10. 89, the objector manufactured the complete stock of Isolators but the DESU left the same. Consequent upon which the Objector vide his letter dated 18. 1. 1991 invoked the arbitration clause under the said purchase order. However, the request was not acceded to immediately and the Arbitrator was appointed only in april,1992 i. e. after a passage of more than one year. Consequent upon which the Objector vide his letter dated 18. 1. 1991 invoked the arbitration clause under the said purchase order. However, the request was not acceded to immediately and the Arbitrator was appointed only in april,1992 i. e. after a passage of more than one year. In the period between the request for arbitration and the appointment i. e. between January,1991 and april,1992, in order to defeat the justified claim of the Objector, the DESU cancelled the two purchase orders dated 27. 12. 1989 and 8. 8. 1990 in september,1991 and also placed alleged risk purchase order. It is, thus, submitted that the Objector was not responsible for cancellation of the subsequent two purchase orders as dispute regarding first purchase order was still pending. ( 6 ) IT is also the case of the Objector that as it was necessary to offer the risk-purchase tender to the original Objector/tenderer, the Objector had quoted the rates almost 1-2 lakhs lower than the rates at which the contract was ultimately awarded and, thus, it is clear that the DESU wanted to favour somebody else for the reasons best known to its officers and burden thereto cannot be imposed upon the Objector and the Objector cannot be made to pay the said amount. ( 7 ) IT is also alleged that in the arbitration proceedings, which commenced in April,1992, the DESU adopted delaying tactics which the Objector could ill afford being SSI Unit by coming to Delhi all the way from Kolkata. Therefore, the Objector yielded to such delaying tactics and mounted pressure and within a single date of hearing, the Arbitrator reserved the matter for orders and pronounced unconsidered and non-speaking Award. It is also contended that the counter-claims of the Objector as well as documents and material placed by the Objector are not at all considered and the learned Arbitrator has only considered the aspect of the alleged risk purchase by the DESU. The Arbitrator has, therefore, misconducted himself and there is no impartial consideration of the matter by him. It is also submitted that no evidence is led to prove any damages and, therefore, the Award is based on no material/no evidence. (iii) The third objection to the Award is on the nature of proceedings. It is stated, in the first instance, that the Arbitrator entered upon reference vide his letter dated 20. 4. It is also submitted that no evidence is led to prove any damages and, therefore, the Award is based on no material/no evidence. (iii) The third objection to the Award is on the nature of proceedings. It is stated, in the first instance, that the Arbitrator entered upon reference vide his letter dated 20. 4. 1992 and the very first hearing fixed by him, viz. 9. 9. 1992, was beyond the expiry of statutory period of four months. Therefore, the Arbitrator had also become functus officio and the proceedings as well as the Award are void as the same is given beyond the period prescribed. It is further contended that no notice of making or signing of the Award as contemplated under clause (1) of the Arbitration Act,1940 has been given to the objector. ( 8 ) INSOFAR as the Objector's argument that there was no calculated contract in relation to purchase order dated 27. 12. 89 and 8. 8. 90 is concerned, it proceeds on the allegation that the parties were still at the negotiating stage where drawings were not finalized by the parties and thus before final consensus could be reached, the purchase orders were cancelled. This submission of the objector is without any merit. The Objector has not disputed placement of the said purchase orders dated 27. 12. 89 and 8. 8. 90. These two purchase orders are on the record of Arbitrator"s file. It has come on record that the DESU had floated tender for purchase of Isolators on 28. 10. 88. Due date of opening of tender was 28. 11. 88. Eight parties had submitted their offers which were opened on 28. 11. 88. The Objector had also participated in the said tender. Thereafter negotiations took place and the parties were asked to submit their last price in respect of these items. The Objector also submitted its prices which were opened on 25. 9. 1989. Finding the price of the Objector as lowest, purchase order dated 27. 12. 89 was placed for supply of 75 isolators for a total ex-work cost of Rs. 17,71,975/ -. This purchase order not only gives the description of the items and the quantity in respect of the same but also the unit rate and the purchase amount. 9. 1989. Finding the price of the Objector as lowest, purchase order dated 27. 12. 89 was placed for supply of 75 isolators for a total ex-work cost of Rs. 17,71,975/ -. This purchase order not only gives the description of the items and the quantity in respect of the same but also the unit rate and the purchase amount. Four types of isolators are mentioned for different quantities and in this manner, total ex-work cost, as mentioned above, is stated in the purchase order. This purchase order also stipulates the conditions regarding delivery, quantity variation as well as drawing. Thus this purchase order ultimately amounts to accepting the offer of the Objector and with the placing of the purchase order, calculated contract is arrived at between the parties. If there was any dispute regarding drawing etc. , as it is the case of the DESU that the Objector had submitted their drawings vide letter dated 17. 1. 90 and the desu had asked the Objector to incorporate certain corrections etc. and ultimately revised drawings were submitted which were approved by the DESU. In any case, the dispute regarding these drawings, if at all, would be in the execution of the contract and from this it cannot be said that there was no concluded contract. Same is the position in regard to purchase order dated 8. 8. 90 vide which order for supply of 19 isolators was placed. According to the desu this was in accordance with the "quantity variation clause" of the main purchase order dated 27. 12. 89. As such, a purchase order could be placed in view of the conditions mentioned in the original tender, which is not disputed by the Objector, it cannot be said that there was no concluded contract. ( 9 ) INSOFAR as the other limb of the argument, namely, there was no reference with respect to the two purchase orders is concerned, some background facts need to be noted. It appears that after the first purchase order dated 16/17. 10. 89 was placed on the Objector, the Objector offered certain goods for inspection but some dispute arose. Before these goods were offered for inspection, second purchase order dated 27. 12. 89 had also been placed, which was independent of the first and was pursuant to a different tender notice. In modification, third purchase order dated 8. 8. 10. 89 was placed on the Objector, the Objector offered certain goods for inspection but some dispute arose. Before these goods were offered for inspection, second purchase order dated 27. 12. 89 had also been placed, which was independent of the first and was pursuant to a different tender notice. In modification, third purchase order dated 8. 8. 90 for additional supply was also given. Insofar as the Objector is concerned, it raised dispute qua the first purchase order and asked for arbitration. As in the meantime no supplies were made/or offered qua second and third purchase order, the DESU cancelled these two purchase orders vide letter dated 21. 2. 1992 and informed the Objector that it would be making risk purchases. No doubt, as far as request of the Objector for appointment of Arbitrator in respect of first purchase order is concerned, it was delayed and the Arbitrator was appointed vide letter dated1/2 April,1992. By that time risk purchases were also made because of non-supply of goods in respect of second and third purchase orders and, therefore, Shri K. G. Bawa, Chief engineer, DESU was appointed as the Arbitrator in respect of all three purchase orders with request to enter upon reference. What is important is the reply of the Objector dated 13. 4. 1992. In this reply the Objector has stated that "we are relieved to note that our repeated requests for arbitration against various purchase orders placed on us has, at least been accepted by your General manager (E) and is forwarded for your action" This is a letter addressed to the Arbitrator wherein the Objector has accepted the appointment of the arbitrator in respect of various purchase orders i. e. all the three purchase orders. First reaction of the Objector, therefore, was to unconditionally, and without any demur, accept the arbitration in respect of all the three purchase orders and rather welcomed this move. Moreover, reply dated 23. 12. 1992 to the statement of claims submitted by the DESU would reveal that no such objection is taken and the claim is refuted only on merits. Therefore, it does not lie on the mouth of the Objector to now raise such an objection having participated in the proceedings without questioning the validity of the reference. ( 10 ) INSOFAR as objections of second nature are concerned, they are on the merits of the case. Therefore, it does not lie on the mouth of the Objector to now raise such an objection having participated in the proceedings without questioning the validity of the reference. ( 10 ) INSOFAR as objections of second nature are concerned, they are on the merits of the case. It is not the jurisdiction of this Court under Section 33 of the Arbitration Act,1940 to sit as an appellate authority after the Award of the Arbitrator. It is not disputed that as per Arbitration Clause Agreement the arbitrator could give a non-speaking Award. In case of a non-speaking Award it is not possible to fathom into the mind of the Arbitrator to find out as to what were the reasons which persuaded him to award the claim of the DESU and reject the counter claims of the Objector. The DESU in its Statement of Claims has given the circumstances in which the two purchase orders were cancelled when the objector allegedly failed to supply the material and placed the purchase order on another firm. It is not disputed by the Objector that he was given an opportunity to participate in the said tender. However, the case of the objector is that though his rates were less, still somebody else was favoured with the award of work. What is to be noted is that the Objector in the meantime had been black-listed and that was the reason for not placing the orders upon the Objector. The Objector knew it fully well, that is why in reply dated 23. 12. 92 to the Statement of Claims of the DESU, the Objector has mentioned that their offer was rejected as they had been black-listed. In fact, in the entire reply the Objector has stated that claim of the DESU was a secondary issue and the primary issue was solution of the technical dispute and, therefore, requested the Arbitrator to invite Additional Chief Engineer (Store)to attend the next arbitration meeting so that the said issue could be sorted out. Request is also made in this reply that DESU should lift the black-listing ban during the pendency of the arbitration so that they are able to participate in the tenders which were being floated by the DESU. This factum of black-listing is even admitted in this application raising objection to the Award. Request is also made in this reply that DESU should lift the black-listing ban during the pendency of the arbitration so that they are able to participate in the tenders which were being floated by the DESU. This factum of black-listing is even admitted in this application raising objection to the Award. However, it is nowhere stated that any steps were taken to challenge the order of black-listing. It, therefore, cannot be said that the party which was given the order at the risk of the Objector was favoured or it was a case of no evidence. The record shows that relevant documents regarding risk purchase are filed by the DESU which are collectively annexed as Annexure-M to the Statement of Claim and on that basis DESU alleged that it suffered a loss of rs. 11,69,165. 40. ( 11 ) I now take up the third ground. It is trite law that the Arbitrator enters upon reference not on the writing of letter but when he applies his mind. Therefore, four months' period for making and publishing of the Award cannot be counted from 20. 4. 1992 when the Arbitrator wrote letter to the parties. As per the Objector"s own admission first hearing was fixed for 9. 9. 1992 and, therefore, period will have to be calculated from this date. Further, without protest, the Objector duly attended and participated in the hearings fixed by the Arbitrator. The record also shows that extensions were given to the arbitrator for making and publishing the Award and the last extension was given on 6. 9. 1993 which was for the period from 16. 8. 1993 to 15. 12. 1993. The Award in question is made on 14. 12. 1993, namely, within the extended period and, therefore, it is not without jurisdiction. As far as notice of making and signing the Award is concerned, record further reveals that a registered letter dated 24. 1. 94 is written by the Arbitrator to the Objector informing about making of the said Award. ( 12 ) IN this scenario, I do not find any merit in these objections which are accordingly dismissed. This IA stands disposed of. CS (OS)No. 852/94. As a consequence, Award dated 14. 12. 1993 made and published by the learned Arbitrator is hereby made a Rule of the Court. ( 12 ) IN this scenario, I do not find any merit in these objections which are accordingly dismissed. This IA stands disposed of. CS (OS)No. 852/94. As a consequence, Award dated 14. 12. 1993 made and published by the learned Arbitrator is hereby made a Rule of the Court. NDPL shall also be entitled to interest @ 6% per annum from the date of Award till its payment. Decree be drawn accordingly.