Delhi District Court
M/S Astral Cables Ltd vs Union Of India on 30 January, 2016
1
IN THE COURT OF MS SUJATA KOHLI, ADDITIONAL
DISTRICT JUDGE, CENTRAL DISTT. TIS HAZARI COURTS,
DELHI
Arbt. No. 02/14/07
M/s Astral Cables Ltd.,
7A/44, WEA, Karol Bagh,
New Delhi. ...... Plaintiff
Versus
1. Union of India,
Through Secretary,
Ministry of Urban Development,
Nirman Bhawan,
New Delhi.
2. Chief Engineer (E)
Central Public Works Department,
Border Flood Lighting Zone,
Vidyut Bhawan, Shankar Market,
New Delhi.
3. Sh. Divakar Garg,
Arbitrator,
Govt. of India,
Ministry of Urban Development,
3rd Floor, Room no.316,
Indraprastha Bhawan,
New Delhi-110002. .........Defendants
ARBT No.02/14 page no.1 of 25
2
Date of filing of the suit :16.04.2007
Date of reserving the Judgment/Order :18.01.2016
Date of passing the Judgment/Order :30.01.2016
Objection petition under section 34 of Arbitration and
Conciliation Act for setting aside the award dated 19th of
February, 2007 passed by the respondent no.3 whereby the
claim petition of the petitioner was dismissed as no claim by
way of an ex-parte order.
JUDGMENT
1. This objection petition has been filed by the claimant against the impugned award dated 19-02-2007, whereby the claim petition of the objector /petitioner was dismissed as no claim, by way of an ex-parte award.
2. The facts as stated in brief, are that claimant Company is involved in the manufacturing of XLPE Insulated PVC Cables and other related products having its factory at Greater Noida.
3. In 2001-2002, respondent no. 2 i.e. the Chief Engineer , CPWD , New Delhi invited tenders for providing ARBT No.02/14 page no.2 of 25 3 insulated cables to be used in flood lighting along Indo- Pak border over a stretch of 34 km. in Gujarat sector.
4. Petitioner submitted the tender and was successful, and an order dated 11-01-2002 was placed whereby the claimant / petitioner was to supply cables of the specified description, total for 25 km and an agreement was executed to this effect. The petitioner / objector in terms of the agreement, manufactured the said cables and completed the order. The products were inspected by the officials of respondent no. 1 and 2 as well as representative of DGS&D, who was associated with the inspection.
5. After approval of the material, petitioner supplied the material of the requisite quantity at the desired site and same was duly accepted by the respondent no. 2 without any protest or pointing out to any kind of defect. Delivery was completed by 29th June, 2002 as per the scheduled time given in the agreement. Respondent no. 1, in terms of the bills raised by the claimant, made the entire payment for the material supplied.
ARBT No.02/14 page no.3 of 25 4
6. However, the grievance of the petitioner/claimant was that the amount deposited by him by way of security / guarantee at the initial stage i.e. Rs. 2,17,246.00 was not returned to the petitioner/claimant, inspite of the expiry of the guarantee period i.e. one year from the date of delivery. The said guarantee was towards the performance and the quality of the material against manufacturing defect and was to last for one year from the date of delivery of the goods at the destination. Despite repeated reminders / requests as well as personal visits , respondent no. 2 did not refund the amount.
7. As per the agreement, all disputes were referable to arbitration and arbitrator was to be appointed by respondent no.
2. Having no other alternative, petitioner/claimant approached the respondent no. 2 and invoked the arbitration clause. He made an application for appointment of arbitrator on 16-08-2004 and respondent no. 2 appointed Shri A. K. Singhal, as sole Arbitrator to decide the dispute.
8. As per the petitioner / claimant, he filed a statement ARBT No.02/14 page no.4 of 25 5 of claim as well as documents before the Arbitrator. Respondent also filed their counter statement of facts. Copy of the claim petition as filed and the counter statement were taken on record by the said arbitrator and copy thereof has been annexted as P-1 and P-2 respectively.
9. Proceedings before Arbitrator were conducted on 14-02-2006 and matter was adjourned to 20-02-2006 for 2 p.m.. The petitioner / claimant intimated to the respondent at that stage that all future correspondence on this dispute should be made to the petitioner / claimant at the new address i.e. as under :
Mr. Rajesh Narang, Advocate, D-12, Ashoka Niketan, Near Yamuna Sports Complex, Delhi-110092.
10. According to the petitioner / claimant, the change of address was duly notified and both the parties had signed the arbitration proceedings. The copy of the order sheet of Ld. Arbitrator dated 14-02-2006 has been relied upon by the ARBT No.02/14 page no.5 of 25 6 petitioner/claimant hereas as Annexure P-3.
11. Thereafter shri A.K. Singhal, the Ld. Arbitrator resigned from the role of the arbitrator and he had taken over as a chief Engineer in PWD Zone III. Petitioner claims that he visited the office of the Arbitrator , but no sitting was conducted.
12. It is alleged that, ultimately, on 12-05-2006, when the petitioner again visited the office of the said arbitrator, he was delivered in person, a copy of the letter dated 12-05-2006 and was informed thereby that Shri A. K. Singhal had relinquished the charge as Arbitrator.
13. It was further stated therein, that next date of hearing would be intimated in due course.
14. It is the claim of the petitioner that thereafter he never received any summons or notice about any hearing before any Arbitrator whatsoever for a very long time. He further claims that on 16-08-2006, he applied to respondent no. 2 under Right to Information Act to find about the fate of the claim pending before the Arbitrator and said letter was forwarded by respondent no. 2 ARBT No.02/14 page no.6 of 25 7 vide their letter dated 26-10-2006 to respondent no. 1 i.e. Ministry of Urban Development, Central Government for supplying the requisite information. The copy of the said letter is Annexure P-5.
15. Petitioner further claims that vide letter dated 8-11-2006, respondent no. 2 vide their letter dated 18-10-06 forwarded by respondent no. 1 vide letter dated 24-11-2006 stated that in place of the previous Arbitrator namely Shri A.K. Singhal, new Arbitrator namely Shri Divakar Garg i.e. respondent no. 3 had been appointed in terms of Clause 14 of the agreement.
16. Petitioner claims that no proceedings or any date fixed before the said Arbitrator had ever been intimated to the petitioner. Copy of the letter above is relied upon as Annexure - P-6.
17. Upon receipt of the said letter , petitioner approached the office of new Arbitrator to find out the fate of the claim and the next date of hearing therein but he was informed once again ARBT No.02/14 page no.7 of 25 8 that as and when the date of hearing is fixed, same shall be communicated to the petitioner.
18. It is a case of the claimant that despite lapse of three months , petitioner did not receive any information whatsoever.
19. Petitioner further claims that finally on 09-03-2007 when he visited the office of respondent no. 2 again, he was informed that respondent no. 3, new Arbitrator had already passed an ex-pare award i.e. on 19-02-2007 i.e. impugned award herein.
20. Petitioner claims to have made a request in writing for being supplied with a copy of award and thereafter respondent no. 1 sent a copy alongwith the forwarding letter dated 23-02-2007. Petitioner also applied for certified copy of the award which was supplied to him on 09-04-2007 and thereafter without any unnecessary delay the present petition came to be filed .
21. According to the petitioner, though the award has been passed after proceedings ex-parte but , it has been passed ARBT No.02/14 page no.8 of 25 9 on merits.
22. Thus, the main grievance of the objector herein is that he was not afforded any opportunity to be heard and without hearing him, the award passed.
23. The petitioner has relied heavily upon the previous order sheet dated 14-02-2006 i.e. before the previous Arbitrator, wherein he had specifically furnished the new address for correspondence with the petitioner, and to highlight that no notice was ever issued by the Arbitrator, or by respondent no. 1 and 2 at the given new address at any point of time. The observation of the new Arbitrator to the effect that claimant did not appear to be interested in the case was absolutely misconceived and contrary to the record.
24. As per the comments submitted on behalf of government department, respondent no. 1 and 2, certain facts were undisputed i.e. date of commencement of the agreement, date of actual completion, amount of performance guarantee, Engineer- In-charge, the consignee, the destination for delivery, ARBT No.02/14 page no.9 of 25 10 date of receipt of first consignment, expiry date of guarantee period.
25. The dispute was only regarding the release of performance guarantee after the expiry of guarantee period i.e. 12 months from the date of delivery at the specified storage point and reference was had at page no. 105, Clause No. 3.16 (b) of the agreement.
26. It was not disputed that cables as supplied under the agreement were used by a wing of respondent no. 2 at the assignee place.
27. According to respondent no. 2, their officer asked the concerned wing BFLD-III, Barmer to intimate about the performance of the cables vide their office letter no. 25 (S.O.)/BFLD/Tharad/324 dated 07-08-2003 and also issued reminders thereon in September and November, 2003, vide letter no. 767 dated 19-11-2003. The said wing BFLD-III, Barmer ,responded / informing that cables in question were of very poor quality in as much as , at many places insulation on ARBT No.02/14 page no.10 of 25 11 the cables was reported missing and in some places even taping was found.
28. The poor quality of faulty cables under BFLD-III, Barmer was intimated on 29-12-2003 as being 1100 mtr. which was later on corrected to 2203 m. vide his letter no.190 dated 11.03.2004. BFLD-Tharad had also commissioned the size of cables in the month of May/July, 2003 and within 2-3 months, the cables had started failing, and up to February, 2004, 1174 m length cables of 3 ½ x 25 sq. mm size was also noticed to be defective.
29. As such up to February, 2004, total quality of faulty cables under both the divisions was informed to be 3377m i.e. 2203 m for the devision of BFLD-Barmer and 1174 m for the division of BFLD-Tharad. As per the agreed costs of length of cables @ Rs.86.8980 m arises as Rs.2,93,455/-.
30. As per the respondent department, they requested a number of times to the contractor vide their various letters dated 31-12-2003, 12-12-2003, 31-12-2003, 10-02-2004, 03-03-2004, ARBT No.02/14 page no.11 of 25 12 17-03-2004 and 22-04-2004 requesting him to replace the defective cables, but contractor failed to respond. It has been alleged by the concerned government department that on 03-07-2004, the contractor also inspected the faulty cables at the site but still he did not respond to the inspection so conducted by him and kept on insisting for release of his performance guarantee.
31. Further alleged that, the department got a sample of failed cables tested for some of the tests specified as per IS standard 1998, part I in March / April, 2004 to find out the cause of failure at the two divisions. The cables were found to be failing at alarmingly high rate, resulting into huge expenditure being incurred on replacement of cables. A repeated interruption of electric supply to flood lights at Indo-Pak Border i.e. 25% to 30% cables had failed within 2 and 8 months of commissioning against a normally considered life of U.G. Cables as being about 20 longs years or more.
32. According to the respondent no. 1 and 2 , the result ARBT No.02/14 page no.12 of 25 13 showed that the cables for testing were defective, for which it was recommended vide their office letter dated 17-06-2004, that the total cost of faulty cables under the agreement i.e. Rs. 2,17,245/- be recovered from the petitioner, by way of forfeiting the performance guarantee of the firm under the agreement.
33. Respondent also denied any liability for interest on the security amount unpaid / forefitted, on the ground that the agreement did not provide for any payment or any interest for the period 29-06-2003 to 16-08-2004. Same was their reply with respect to the claim, with respect to telephone & postage, and with respect to site visit.
34. In the impugned award, after having proceeded ex- parte against the claimant, the new Arbitrator gave his findings on the claim on merits as well as and regarding performance guarantee and the claim therefore, the new Arbitrator referred to page 133 of the agreement which provides as under :
With reference to the above mentioned letters it is to intimate that (I) Performance Guarantees pertaining to your office has already been handed over to your office from ARBT No.02/14 page no.13 of 25 14 time to time. However, Bank Guarantee register has been reviewed again and handing over notes has also been seen and it has been observed that performance guarantees in respect of both the agreements referred above is not available in this office."
35. Ld. Arbitrator took into account several letters issued by the respondent to the petitioner, as already referred above, he also took into consideration, the test certificate of Sri Ram Institute For Industrial Research, brought in support by the respondent and came to the conclusion that it stood established that the wires used not as per the specifications and that they did not perform satisfactorily during the guarantee period of 18 months. Ld. Arbitrator also concluded that the petitioner failed to replace the defective cables, inspite of repeated requests of the department and thus the claim was rejected.
36. In view of these findings, as a consequence the claim under the other head was naturally rejected.
37. Thus main grievance of the petitioner/objector happens to be firstly that he was never notified about the ARBT No.02/14 page no.14 of 25 15 appointment of new Arbitrator, in as much as, he never received any notice whatsoever at the new address furnished by him before previous Arbitrator.
38. Secondly, it is that when the respondent raised objection of defects, which was also beyond the expiry of the guarantee/ defect liability period, which according to the petitioner/objector was 12 months form the date of supply, and not 18 months. It was his contention that if the government department slept over after receiving of goods and chose to install them at a later stage, and then started pointing out the defect, it was no fault of the petitioner, and he cannot be held liable after the expiry of the guarantee period. Furthermore, in this context only, he also was aggrieved that he was never joined in any inspection or investigation stage by the respondent no.2. Thus, according to petitioner/objector, this impugned award is absolutely unjust, unfair on the face of it, arbitrary and absolutely against the public policy of India, in as much as claimant has been condemned unheard.
ARBT No.02/14 page no.15 of 25 16
39. On merit, reply submitted on behalf of the respondent in this petition was on the same lines i.e. that the products as supplied were found defective within the guarantee period, and that the defects were well intimated to the petitioner/objector by way of various letters, which inspite of the information received, petitioner/objector failed to replace, and accordingly in order to recover the part of the price, already paid, the respondent was justified to fortified the guarantee amount.
40. Secondly, on the point of petitioner's not having received any notice, all that, the respondent Nos.1 and 2 have submitted, is that, the address which was given by the petitioner/objector was confusing, for the reason that normally summons/notice are issued to the parties, and not to the advocates.
41. Thus, it comes out as an admission that a new address was very well furnished by the petitioner/objector for all future correspondences before previous Arbitrator itself, and the only justification that has been given by respondent government ARBT No.02/14 page no.16 of 25 17 department is that the address was confusing.
42. Upon perusal of the address as furnished by petitioner/objector, which does relate to advocate Sh. Rajesh Narang, Advocate, D-12, Ashoka Niketan, New Yamuna Sports Complex, Delhi-92, it cannot be made out, as to what can be confusing in this address, if notice had to be issued at the given address. It is not understandable as to why notice could not be issued to the advocate whose particulars were furnished. As per practice, and even rules with respect to CPC, as framed by our own Hon'ble High Court, and even otherwise all the times notices are being dispatched to Ld counsels for the parties, once the dispute is already pending. Since present dispute was already pending before previous Arbitrator, wherein even the statement of claim as well as counter statement, and also a rejoinder had already been filed by the parties, there was no justification for new arbitrator not to have issued notice at the admitted new address furnished by petitioner/objector before Ld. Arbitrator.
43. Claimant evidently deserves an opportunity to prove ARBT No.02/14 page no.17 of 25 18 his claim, and to contest the stand taken by respondent regarding defective goods. Evidently from the record, no notice was ever issued to the claimant/petitioner/objector at the new admitted furnished address by the new Arbitrator.
44. Principle of natural justice clearly seems to have been violated in the proceedings, on the basis of which this award came to be passed.
45. Infact, the original record of the proceedings before previous Arbitrator Sh.A.K. Singhal reflects the proceedings to have been conducted on 14.02.2006, wherein already the petitioner/objector/claimant was shown to have been duly represented by said Advocate Sh. Rajesh Narang. Therefore, he was counsel for the petitioner/objector whose presence was very well recorded in the order dated 14.02.2005.
46. Furthermore, the petitioner/objector in this claim also filed certain copies of documents which he claims to have been filed before previous Arbitrator. Copy of all the correspondences placed on record by petitioner do reflect to an extent that the ARBT No.02/14 page no.18 of 25 19 department was not being able to trace out the performa guarantee in question, and considerable period of delay had been caused at their end itself. Particularly, the letter dated 19.11.2003 would support this. Reference is had to certain extracts from said letter page no.91:
"With reference to the above mentioned letters it is to intimate that (i) Performance Guarantee pertaining to your office has already been handed over to your office from time to time. However, Bank Guarantee register has been reviewed again and handing over note has also been seen and it has been observed that performance guarantees in respect of both the agreements referred above is not available in this office.
47. Further reference is also had to copy of document at page 93 of the judicial file which is copy of inter departmental letter, and this is referring to replacement of defective cables, and shows that after completion of replacement of cables, the final position of the replaced cable length as per the records were 2203 metre, 975 metre and 300 metre.
48. This then would bely stand taken by respondents that they had intimated the petitioner/claimant/objector about defects, ARBT No.02/14 page no.19 of 25 20 and he did not replace them. It also highlights the aspect, that the department was indeed sleeping over the entire guarantee period, which had expired long ago, way back on 15.05.2003 itself, taking undisputed delivery date as 16.05.2002.
49. However, not wanting to substitute its own view on the material on record, this court u/s 34 having limited scope, is only concerned with the aspect that the petitioner/objector should not have been denied the opportunity to prove his version, and establish his entitlement to the claim.
50. Petitioner objector should have been allowed an opportunity, to be heard before the new Arbitrator, so as to be considered while passing of the award. Infact the petitioner/objector also deserves an opportunity to lead evidence on the material, if so required.
51. In the present case, the delivery of goods on the given date was undisputed, the department ha already paid the price of the goods even. Expiry of guarantee period even was not disputed being for 12 months, though the Arbitrator has taken it ARBT No.02/14 page no.20 of 25 21 as 18 months.
52. Once again the petitioner/objector deserves an opportunity to show and substantiate his stand that the guarantee period was 12 months, and not 18 months. He deserves an opportunity to establish that the goods were not defective or that whatsoever goods were defective, he had already replaced or that he had not been intimated about the defects during continuance of the defect liability period.
53. All this exercise does not appear to have been done as per the original record of new Arbitrator.
54. Returned envelope along with record of Arbitrator are only at the same old address at Greater Noida, originally furnished. None of the envelopes is pertaining to new address admittedly furnished by the petitioner/objector on record before previous Arbitrator.
55. In the given set of facts and circumstances, new Arbitrator should not have proceeded ex-parte against the claimant/petitioner, and it seems that he has failed to consider ARBT No.02/14 page no.21 of 25 22 the proceedings which took place before previous Arbitrator, wherein new address had been very well furnished by the petitioner/objector.
56. Reference is had to proceedings:
20.02.2006 no proceedings.
12.05.2006 one proceeding stated to be before previous arbitrator, but under the signatures of PS to the previous Arbitrator, only recording that the previous arbitrator had relinquished the charge and the dates fixed in the said claim stood cancelled. Thereafter there are no proceedings before previous Arbitrator.
57. New Arbitrator chose to ignore the said proceedings, and simply got issued notice in a mechanical manner at the previous address.
58. This matter, no doubt relates to a sensitive assignment of flood lights at Indo Pak Border over long stretch, and indeed the work was involving much significance for the government department, and needed perfection, but at the same ARBT No.02/14 page no.22 of 25 23 time, it does not give right to the government department to sit over, throughout the guarantee period in question, and thereafter to wake up and start pointing defects to the petitioner/objector.
59. It did not even allow them to not bring to the notice of the new Arbitrator, new address furnished by claimant/petitioner/objector, and to have got the notice issued to the petitioner/claimant at new address. Respondent has simply described the new address as a confusing address, which on the face of it is unjustified and shows a deliberate attempt on the part of the government department to have got the claimant/petitioner out of the proceedings before the new Arbitrator to the extent that claimant had to file a query under RTI to find out the status of his claim, and even then he was not readily given the requisite information.
60. Impugned award is in conflict with the public policy of India in as as much as claimant/petitioner has been condemned unheard without affording him any opportunity to be heard.
61. Matter only called for ensuring the service of the ARBT No.02/14 page no.23 of 25 24 claimants/petitioner at the available address on record i.e. of Sh. Rajesh Narang, Advocate, and then to have proceed in accordance with law, giving opportunity to both the parties to adduce evidence and to establish their claim or defence as case may be. Award at hand, on the face of it is unjust, arbitrary, and a gross violence of principle of natural justice.
62. Accordingly, the objection petition stands allowed, whereby the award No.ARB/DG/144 dated 19.02.2007 passed by Sh. Divakar Garg, Arbitrator, Govt. of India is set aside. However, under Section 34 (4) of the Arbitration & Conciliation Act, the dispute is remanded back to the same Arbitrator for adjudication in accordance with law after affording fair opportunity to both the parties to lead evidence, and to be heard on their respective claims/case. Ld. Arbitrator is directed to consider the material which may be brought on record by the parties, and thereafter to pass a fresh award.
63. Parties are directed to appear before Sh. Divakar Garg, Ld. Arbitrator at Room No.C-316, 3rd Floor, Ministry of ARBT No.02/14 page no.24 of 25 25 Urban Development, Indraprastha Bhawan, IP Estate, near Vikas Minar, ITO, New Delhi on 15.02.2016 at 2.00pm.
64. Record of Ld. Arbitrator be returned immediately along with copy of the detailed order.
File of main objection petition be consigned to record room.
Announced in the open court on the day of 30th January, 2016 (SUJATA KOHLI) Additional District Judge, Central District, Delhi.
ARBT No.02/14 page no.25 of 25