Delhi High Court - Orders
M/S Container Corporation Of India Ltd vs M/S Texmaco Limited on 12 March, 2021
Author: C.Hari Shankar
Bench: C.Hari Shankar
$~4 (Original Side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 85/2021
M/S CONTAINER CORPORATION OF INDIA LTD
..... Petitioner
Through: Mr.Naveen R.Nath, Advocate.
versus
M/S TEXMACO LIMITED ..... Respondent
Through:
CORAM:
HON'BLE MR. JUSTICE C.HARI SHANKAR
ORDER
% 12.03.2021
IA No.3164/2021 (Codonation of Delay)
1. Issue notice.
2. Response, if any, be filed within four weeks with an advance copy to the learned counsel for the applicant / petitioner who may file rejoinder within two weeks thereafter.
3. Renotify for hearing and disposal on 24th May, 2021.
IA No.3165/2021 (Exemption)
1. Subject to the petitioner filing certified copy of the award as soon as it becomes available, exemption is granted for the present.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (COMM.) 85/2021 Page 1 of 7 Signing Date:14.03.2021 22:15:362. The application is disposed of.
IA No.3166/2021 (Exemption)
1. Subject to petitioner filing legible copies of the documents on which it seeks to place reliance within four weeks from today, exemption is granted for the present.
2. The application is disposed of.
OMP (COMM) 85/2021 & IA No.3167/2021 (Section 36(2) & (3) of the Arbitration and Conciliation Act, 1996.
1. I have heard Mr. Naveen Nath, learned counsel for the petitioner and gone through the submissions made in the application which seeks ad interim stay of the operation of the impugned award.
2. The impugned award has been passed by a majority of two arbitrators to one. The petitioner has been directed to pay to the respondent an amount of ₹ 2,22,45,538/- representing the amount deducted from the bills of the respondent towards liquidated damages for delay in supply of rakes to the petitioner along with interest at the rate of 12 % from the date of deduction.
3. The respondent had contended, before the learned Arbitral Tribunal, that the delay in supply of rakes was because of delay in supply of wheel sets by the petitioner.
4. Learned counsel for the petitioner has emphasized the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (COMM.) 85/2021 Page 2 of 7 Signing Date:14.03.2021 22:15:36 arguments which were urged by the petitioner before the learned Arbitral Tribunal, to contest the respondent's claim for payment of the amount of liquidated damages deducted by the petitioner.
5. The first submission was that the respondent had accepted the revised delivery schedule for supply of rakes as proposed by the petitioner.
6. On this, the learned Arbitral Tribunal has referred to a communication dated 25th March, 2008 from the petitioner to the respondent "which sets out the revised schedule" and the communication dated 2nd April, 2008 from the respondent to the petitioner to opine that there was no acceptance by the respondent of the revised schedule as proposed by the petitioner. Mr. Naveen Nath has taken me through the said communications. He has also invited my attention to the communication dated 2nd February, 2009 from the respondent to the petitioner. I am not able to find, prima facie, any unequivocal acceptance, in these communications, by the respondent, of the revised delivery schedule as proposed by the petitioner. As such, the finding of the learned Tribunal that there was no acceptance by the respondent of the revised delivery schedule is, at best, a matter of interpretation of these communications and does not, in my view, reflect any perversity as would, prima facie, merit interference with the impugned award.
7. The second submission of Mr. Naveen Nath relates to Clause 5.0 of the contract agreement read with the "Foot Notes" in the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (COMM.) 85/2021 Page 3 of 7 Signing Date:14.03.2021 22:15:36 Schedule of Requirements contained in Section V of the contract. Clause 5.0 of the contract stipulates that the delivery programme shall be in accordance with the Schedule of Requirements, Section V Foot note 'a' in Schedule V reads as under:
"The time limits for supply of each of rake has been brought out in the table above. Commensurate number of Wheel sets for the projected quantity of manufacture of wagons as per schedule shall be made available to the Supplier at least one month in advance. Supply of each rake should be made within the Scheduled delivery dates within 1 month of of availability of wheel sets whichever is later. Irrespective of the delivery date, the supplier will not be entitled to any escalation or any other compensations beyond the date of delivery of the rake as laid down in the Programme of Delivery, Schedule of Requirements (Section V)."
8. Mr. Nath emphasizes that Foot note 'A' provided for delay in supply of wheel sets but mandated supply of rakes by the respondent positively within 30 days of the wheel sets being made available. This time period, Mr. Nath submits, was not negotiable. In this context, Mr. Nath, has also invited my attention to Clauses 21.4 and 35 of the General Conditions of the Contract ("GCC") which read as under:
"21.4 The delivery date/dates of the rake/rakes as stipulated in the Programme of Delivery, Schedule of Requirements, Section-V of the bid document shall be extended to a maximum of 30 days from the receipt of the commensurate number of wheel sets at the Supplier's premises, without levy of liquidated damages if there is delay in the supply of wheel sets, which is a Free Supply Item."
"35. Time for and date of delivery - The essence of the Contract.Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (COMM.) 85/2021 Page 4 of 7 Signing Date:14.03.2021 22:15:36
The time for and the date specified in the Contract or as extended for the delivery of the wagons shall be deemed to be the essence of the Contract and delivery must be completed not later than the date(s) so specified or extended."
9. In view thereof, Mr. Naveen Nath submits that the petitioner was entitled to invoke Clause 22.1 of the GCC and levy liquidated damages in accordance therewith. Clause 22.1 reads as under:
"Subject to Clause 21.3, 21.4 and 24, if the Supplier fails to deliver any or all of the Goods within the time period(s) specified in the Contract, the Purchaser shall, without prejudice to its other remedies under the Contract, deduct from the Contract Price, as liquidated damages, a sum equivalent to 0.5 percent of the delivered price of the delayed Goods or unperformed Services for each week or part thereof of delay until actual delivery or performance, up to a maximum deduction of 10 percent of the delayed Goods or Services contract price. Notwithstanding the provisions of this clause, the Purchaser may terminate the contract for any breach of contract as stipulated in Clause-23."
10. On the aspect of entitlement of the petitioner to levy liquidated damages in accordance with the governance of contract, the majority award, through the reasoning of Panigrahi, J ( in paras 112 and 113 of the impugned award), relies on the position in law that liquidated damages could not, of its own volition, be deducted by a party to a contract from the amounts due to the other inasmuch as the entitlement to such liquidated damages required adjudication by a competent forum whether by arbitration or otherwise. In this behalf, Panigrahi, J. has relied upon the judgments of the Supreme Court in State of Karnataka v. Shree Rameshwara Rice Mills 1, State of 1 (1987) 2 SCC 160 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (COMM.) 85/2021 Page 5 of 7 Signing Date:14.03.2021 22:15:36 Karnataka v. K. Krishnappa Naidu and Co.2 and Executive Engineer, Thungabhadra Reservoir Division, Munirabad v. V.S.Thippa Reddy3 and of this court in UOI v. Tejinder Kumar Dua 4.
11. This again is a conscious view, in law, adopted by the learned Arbitral Tribunal, and the extent to which this court could exercise its jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, to interfere therewith, would have to be examined when the matter is finally heard.
12. In view thereof, I am of the opinion that no case for grant of complete stay of the impugned order can be said to exist. At the very least, the issue is highly arguable.
13. In view thereof, issue notice returnable on 24th May, 2021. Response, if any, be filed within four weeks with advance copy to the learned counsel for the applicant/petitioner who may file rejoinder thereto, if any, within two weeks thereof. Subject to the petitioner depositing with the Registrar General of this Court the principal amount of ₹ 2,22,45,538/- within four weeks from today, the enforcement of the impugned arbitral award shall stand stayed till the next date of hearing. The amount so deposited shall be kept in an interest bearing fixed deposit.
14. The Registry is directed to requisition the record of the Arbitral 2 (1987) 2 SCC 160 3 (1987) 2 SCC 160 4 (2013) 200 DLT 60 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (COMM.) 85/2021 Page 6 of 7 Signing Date:14.03.2021 22:15:36 Tribunal before the next date of hearing and also furnish complete electronic copies thereof to both the parties.
C.HARI SHANKAR, J MARCH 12, 2021 dm Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (COMM.) 85/2021 Page 7 of 7 Signing Date:14.03.2021 22:15:36