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2020 DIGILAW 274 (CAL)

Union Of India v. Radha Chemicals

2020-02-25

MOUSHUMI BHATTACHARYA

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JUDGMENT Moushumi Bhattacharya, J. - The present challenge is to an Award dated 28th February, 2007 of a learned Sole Arbitrator who was the Deputy Chief Materials Manager, Sales, Eastern Railway as on the date of delivery of the Award. The petitioner Union of India/Eastern Railways was the respondent in the arbitration proceedings. The issue before the Arbitrator was supply of chemical compounds within a certain time frame by the respondent herein (claimant before the Arbitrator) to Eastern Railways against three tranches of supplies contained in 25, 31 and 32 "Letters of Order" (term used by the learned Arbitrator in the Award) from November, 1987 to October 1989. By the impugned Award, the respondent herein was awarded three separate amounts payable by the Railways to the respondent/supplier together with interest for the period during which the respondent's money was blocked with the Railways. The counter-claim of the Railways did not find favour with the learned Arbitrator. 2. Ms. Aparna Banerjee, learned counsel for the petitioner Eastern Railways grounds her challenge to the Award primarily on facts. According to counsel, the respondent was selected as the successful bidder in the tender inviting quotations from various suppliers for supply of chemical compounds. Although Letters of Orders were issued by the petitioner to the respondent for the period 1987 to 1989 in respect of the tenders, according to counsel, they were merely acceptance letters and were not purchase orders for supply of materials. Counsel submits that this would be evident from the fact that the respondent did not deposit the security deposit for the issue of formal purchase orders. Counsel relies on several paragraphs of the Indian Railway Standard Conditions of Contract (IRS Conditions of Contract) which were part and parcel of the tenders and on paragraphs 102 and 104 in particular, which define the terms "acceptance" and "contract" respectively and that a formal agreement must be accepted and acted upon by the parties. Paragraphs 500 and 501 provide for security deposit after receipt of a Letter of Order. Counsel also relies on Clauses 629, 713 and 714 of the Indian Railway Code which, inter alia, provide for a specific procedure for purchase of materials by the railway authorities and also on paragraph 1301 of the IRS Conditions of Contract for the requirement of inspection of the material to be supplied before they are actually delivered to the Railways. Counsel also relies on Clauses 629, 713 and 714 of the Indian Railway Code which, inter alia, provide for a specific procedure for purchase of materials by the railway authorities and also on paragraph 1301 of the IRS Conditions of Contract for the requirement of inspection of the material to be supplied before they are actually delivered to the Railways. Counsel submits that the respondent sent the chemical compounds to the petitioner without any of the aforesaid conditions being followed and without inspection being taken of the materials. Counsel submits that most of these chemical compounds were rejected by the Railways. 3. The second point urged by counsel is that the claims of the respondent were barred by limitation. It is submitted that in deciding the issue of limitation in favour of the respondent the Arbitrator did not take into account that the claims filed in the arbitration proceedings should have been filed within the statutory period of limitation as the issue of nonpayment of bills was for the period between 1987-1989. Counsel relies on M/s Rashtriya Chemicals & Fertilizers Vs. M/s Chowgule Brothers, 2010 AIR(SC) 3543 for the proposition that an Arbitrator cannot make an Award against the specific terms and conditions of the contract between the parties and on several decisions on the point of limitation including Commissioner, M.P. Housing Board Vs. M/s Mohanlal and Company, 2016 14 SCC 199 , M/s Consolidated Engineering Vs. The Principal Secretary, 2008 7 SCC 169 . On the point of pre-reference and pendente lite interest counsel relies on M/s Sree Kamtachi Amman Constructions Vs. Divisional Railway Manager, 2010 AIR(SC) 3337 . 4. Mr. P. Chakraborty, learned counsel appearing for the respondent/supplier responds to the factual contentions raised on behalf of the petitioner in that the respondent supplied chemical components to the railway authorities in terms of the Letters of Orders issued by the Railways after completion of the tender process and upon the respondent being accepted as the successful bidder. Counsel submits that this was according to the prevailing practice and procedure by which the supplier would have to supply the materials against the Letters of Orders and issue of receipt notes, formal purchase order, raising of bills by the supplier would only be done after the Railways made payment to the supplier. Counsel submits that this was according to the prevailing practice and procedure by which the supplier would have to supply the materials against the Letters of Orders and issue of receipt notes, formal purchase order, raising of bills by the supplier would only be done after the Railways made payment to the supplier. Counsel submits that the Arbitrator, who was a high ranking official of the Indian Railways, was conversant with this practice/procedure and hence accepted that the agreement for supply of materials by the respondent to the petitioner Railways had been concluded and that the supplies were made under such concluded contract. Counsel submits that the respondent as the highest bidder did not put in the security deposit as the respondent was a Railway Registered Contractor from 1987-1989 by reason of which the condition of security deposit had been waived by the railway authority. Necessary documents to this effect had been presented by the respondent before the learned Arbitrator. Counsel submits that after having received and utilised a major portion of the goods supplied, the Railways did not have any reason to withhold bills for supply of such materials and this contention had been accepted by the Arbitrator. Counsel relies on several judgments including on Sunder Das Vs. Gajananrao, 1997 AIR(SC) 1686 , MMTC Limited Vs. Vedanta Limited, 2019 4 SCC 163 , M/s Bengal Coal Company Limited Vs. The Union of India, 1971 AIR(Cal) 219 on the question of limitation and there being a vital difference between a court in a Section 34 jurisdiction as opposed to a court of appeal under section 37 and on Associate Builders Vs. DDA, 2015 AIR(SC) 620 on the proposition of the Arbitrator being the master of facts. 5. The impugned Award dated 28th February, 2007 is of a nature where a court in a Section 34 jurisdiction should be absolutely disinclined to interfere. From a careful consideration of the Award, it is evident that the Arbitrator has engaged in a comprehensive and painstaking exercise of analysing each and every claim of the respondent supplier by dividing the claims into three groups. From a careful consideration of the Award, it is evident that the Arbitrator has engaged in a comprehensive and painstaking exercise of analysing each and every claim of the respondent supplier by dividing the claims into three groups. The basis of such division is the supply of chemical compounds against three groups of Letters of Orders issued by the petitioner Railways to the respondent supplier from November 1987 to October 1989 (25 in number), from June 1989 to September 1989 (31 in number) and from June 1989 to October 1989 (32 in number). The learned Arbitrator proceeded to divide the three groups into annexures "X", "Y" and "Z" of the statement of facts respectively. Upon analysing the documents furnished by the parties including the challans, brand of chemicals, quantity, purchase orders, receipt notes and bills, the Arbitrator proceeded to analyse the three annexures (X, Y, Z) against the claims raised by the respondent for the relevant period. The Arbitrator came to a specific finding that the prevailing practice involving supply of materials required the manufactures to supply materials in terms of the Letters of Orders first and purchase orders were to be issued by the respondent only after supplies were made and upon observing necessary formalities. The Arbitrator further found that in the instant case, the respondent supplier admittedly did not receive any payment from the petitioner Railways for the materials supplied against the Letters of Orders issued by the Railways as contained in annexures X, Y and Z. According to the Arbitrator, the materials were supplied by the respondent within the stipulated time and were received by the petitioner. The petitioner Railways also did not reject the materials or cancel the Letters of Orders/purchase orders within a reasonable period of time as stipulated in paragraph 1502 of the IRS Conditions of Contract with regard to a consignee's right to reject the materials within a reasonable period of time. Each of the findings is backed by documentary evidence including a reference to the procedure followed in respect of supply of chemical compounds. Where no such materials were produced, the Arbitrator verified the procedure from the official of the department as well as the staff of the Railways relating to the practice followed in the late 80s and early 1990s when the relevant supplies took place. All of the aforesaid factors have been mentioned in the impugned Award. Where no such materials were produced, the Arbitrator verified the procedure from the official of the department as well as the staff of the Railways relating to the practice followed in the late 80s and early 1990s when the relevant supplies took place. All of the aforesaid factors have been mentioned in the impugned Award. With regard to the security deposit, the Arbitrator found that the respondent supplier was allowed to supply the materials to the Railways in terms of the practice prevailing at that particular point of time. The Arbitrator found that the documents produced by the petitioner Railways were inconsistent with the stand taken by the petitioner Railways. The Arbitrator recorded his satisfaction of the fact that materials had been supplied by the respondent to the petitioner but that no payment had been released by the petitioner on account of such supplies. The claims awarded have been tabulated under three tables (X, Y and Z) containing details of the Letters of Orders, challans and the amount claimed. In awarding the sums, the Arbitrator has taken into account the unreasonable delay on the part of the petitioner Railways in rejecting materials which had a shelf-life despite the stipulation contained in paragraph 1502 of the IRS Conditions of Contract. The Arbitrator noted that the petitioner Railways failed to indicate any valid reasons for non-payment of bills even where purchase orders were available and further that the petitioner Railways could not show any valid ground for rejecting the materials beyond the stipulated period of time. The learned Arbitrator accordingly awarded Rs.7,89,844.50/- for Annexure X, Rs.7,58,013/- (instead of Rs.11,23,043/- as claimed by the respondent) for Annexure Y and Rs. 11,12,582.50/- in respect of Annexure Z. 6. For the claim in relation to interest, the Arbitrator found that although the respondent supplier has a right to an Award for interest for the money which was kept blocked with the petitioner Railways without any reason, the rate of interest at 18% as claimed by the respondent was not rational and hence awarded simple interest at 14.4% per annum on the sums awarded in respect of the amount against annexures X, Y, Z from 3.2.1993 till 31.12.2000. The Arbitrator also allowed interest at 12% on Rs.21,60,440/- from 1.1.2001 till the date of publication of the Award. 7. The Arbitrator also allowed interest at 12% on Rs.21,60,440/- from 1.1.2001 till the date of publication of the Award. 7. The learned Arbitrator rejected the plea of limitation taken on behalf of the petitioner Railways by referring to the respondent consistently pursuing payment of the bills raised on the Railways. The Arbitrator also took into account the fact of a Writ Petition being filed by the respondent in 1993 which remained pending before this Court until 2002 after which the respondent was constrained to file an application in 2005 under Section 11 of The Arbitration and Conciliation Act, 1996. It was further noted that the petitioner Railways had continued to assure the respondent of payment to the respondent supplier all through the relevant period and had not raised the plea of limitation in its Statement of Defence or at the time of hearing. The claims made by the petitioner in its counter-claim were rejected on the ground that overcharging of the goods supplied by the respondent ceased to be relevant once the offer of the respondent was accepted by the competent authority as would be evident from the Letters of Orders. 8. For the extensive reasons given by the Arbitrator for each finding, this court sees no ground for interfering with the conclusions of the learned Arbitrator. There is nothing in the Award which can be said to attract any of the grounds under Section 34 of the 1996 Act for upsetting the factual findings or conclusions of the Arbitrator or on the ground of the impugned Award being perverse, patently illegal or contrary to the fundamental policy of Indian law. The impugned Award is replete with reasons which are supported by documents and the minute details to which the learned Arbitrator has gone into is commendable, to say the least. 9. The primary finding that the respondent supplier did not receive any payment for the chemicals supplied to the petitioner Railways from November, 1987 to October 1989 despite the petitioner Railways having accepted most of the materials supplied, cannot be interfered with on any of the available grounds under Section 34 of the Act. That being the case, this court sees every reason to uphold the Award and dismiss A.P.171 of 2007. 10. A.P. 171 of 2007 is accordingly dismissed without any order as to costs. That being the case, this court sees every reason to uphold the Award and dismiss A.P.171 of 2007. 10. A.P. 171 of 2007 is accordingly dismissed without any order as to costs. Urgent Photostat certified copy of this Judgment, if applied for, be supplied to the parties upon compliance of all requisite formalities.