Calcutta High Court
Kalimata Ispat Industries Pvt. Ltd vs Union Of India & Ors on 24 January, 2017
Author: I. P. Mukerji
Bench: I. P. Mukerji
ORDER SHEET
AP 166 OF 2005
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
KALIMATA ISPAT INDUSTRIES PVT. LTD.
Versus
UNION OF INDIA & ORS.
......
BEFORE:
The Hon'ble JUSTICE I. P. MUKERJI Date : 24th January, 2017.
Mr. Raja Basu Chowdhury, Mr. T. Chakraborty, Mr.K. Saha, Mr. A. Singh...for petitioner.
Mr. M.P. Gupta...for respondents.
The Court : This arbitral award dated 11th May,2005 is challenged by the contractor on principally two grounds.
The first head of challenge is on account of a claim for Rs.12,24,876.10 made by the claimant/petitioner invoking the price variation clause or on account of damages for increase of price of raw materials, labour etc. during the extended period of the contract. This claim was disallowed in the award in question.
Put very shortly, on 14th September, 1993 the parties entered into a contract whereunder the respondent was to supply 2,00,000 nos. of Elastic Clips to the railways from the date of approval till 7th October, 1994. The approval was to be made by RDSO, an agency of the railways. This approval was made on 8th March, 1994.
The contract could not be performed by the claimant within the stipulated time. Either party has blamed the other party for this delay in performance of the contract. According to the claimant the RDSO which was the agency for inspecting the goods took an inordinately long time in inspecting the goods. According to the railways the goods of the claimant were defective and that they were responsible for the delay.
However, what is most important is that by their letter dated 29th September, 1994 the railways had extended the time to effect delivery till 31st 2 December, 1994 subject to some stringent terms and conditions. No extra amount could be claimed by the claimant on account of the rise in price or extra expenditure on and after 7th October, 1994. The claimant could not insist on any price escalation clause in the original contract after the said date.
Had the claimant/petitioner performed the extended part of the contract without any protest, this court would have had no hesitation in holding that it accepted the novated terms. On 8th October, 1994 the claimant wrote back stating in some detail that they were not responsible for the delay. They pleaded with the railways that they be allowed to complete the contract without the conditions imposed in the letter of 29th September, 1994.
The petitioner was able to complete the contract by the extended date, 31st December, 1994. There is no dispute about this.
The basic issue, which was required to be considered by the learned arbitrator in deciding the heads of claim was whether there was novation or alteration of the original contract by the exchange of these two letters dated 29th September, 1994 and 8th October, 1994. The learned arbitrator has not answered this question. If for example it was held by him that there was substitution of a new contract between the parties or a contract was altered, then the claim of the claimant on account of damages or price escalation would have failed. On the contrary, if it was held that there was no unilateral modification of the contract because of the objection of the claimant then all the terms and conditions of the original contract would have been operative and the claim on price escalation may have become entertainable.
Furthermore, if the question of damages and/or price variation could be considered by the arbitrator the party responsible for the delay had to be identified, the extent of delay and the damages suffered for it properly determined by the learned arbitrator. Instead of determining this the learned arbitrator has held "that delay in inspection by RDSO is responsible for delay in supplies is not fully substantiated".
This is no finding at all.
For all those reasons the award in respect of claim [a] is set aside and the claim remanded to the self-same arbitrator to re-determine the same considering 3 the above observations within three months of receipt of this order by making and publishing a supplementary award.
The next ground of the petitioner is on account of interest. Clause 16[2] of the General Conditions of Contract of the railways prohibits grant of interest. Therefore, there is no infirmity in the award refusing the interest upto the date of the award but from the date of the award the learned arbitrator ought to have granted interest as provided under section 31[7][b] of the Arbitration and Conciliation Act, 1996, at the rate of 18% per annum simple interest till payment.
The claimant/petitioner shall be entitled to interest at the rate of 18 % per annum simple interest on the awarded sum from the date of the award, i.e. 11th May, 2005 till the date of payment. The award is modified to the above extent.
In case the learned arbitrator has demitted office or is not available, the parties will take steps for appointment of a new arbitrator to determine claim (a) of the petitioner.
This application is, accordingly, disposed of.
(I. P. MUKERJI, J.) Pkd.