Delhi High Court
M/S. Francis Klien (P.) Ltd. vs Union Of India on 13 July, 1995
JUDGMENT Devinder Gupta, J.
1. These are objections on behalf of the respondent Union of India to the award made on 30.12.1991 by Shri I. C. Achuthan, Additional Legal Adviser to the Government of India, Ministry of Law, Justice and Company Affairs, Department of Legal Affairs. Shastri Bhawan, New Delhi, who was appointed as the sole arbitrator by the Director General of Supplies and Disposal, Office of the Directorate General of Supplies and Disposal, New Delhi to enter upon reference and make award in accordance with law respect to the disputes which had arisen between the parties.
2. The award is a speaking award and the objection to the same are that it is liable to be set aside since the arbitrator has misconducted himself and the proceedings. It is alleged that the arbitrator has given findings which are inconsistent and has come to the conclusions which are inconsistent with the findings and has also arrived at his decision by ignoring material documents. The arbitrator has also given wrong interpretation to law of contract especially the law of equity and damages. According to the objections the arbitrator came to the conclusion that the claimant was responsible for the delay but proceeded to contradict himself and recorded inconsistent finding that there has been no undue delay on his part. Thus, according to the objector the award is vitiated and is liable to be set aside. It is further alleged that it was not necessary to prove that there was undue delay on the part of the claimant. The delay on the part of the claimant to make supply itself was sufficient which would enable arbitrator to proceed to make award of liquidated damages in accordance with law. The facts of the case are :
3. Claimants tender dated 13th August, 1974 was duly accepted and the advance acceptance of tender was communicated on 31st January, 1975. The claimant was to supply heavy duty Broach Refiling machine and gun tube against total cost of Rs. 9 lakhs, delivery period of which, as per terms of advance acceptance of tender was 12/14 months after receipt of order, i.e., 31st March, 1976. Formal acceptance of tender dated 17.3.1975 was sent to the claimant which also contained similar clause as regards the delivery period, namely, 12/14 months after receipt of order and all technical and commercial clarification i.e., by 31.3.1976. It is the admitted case of parties that though this delivery schedule was not adhered to and delivery admittedly was made by the claimant to the respondent beyond 31.3.1976, the ultimate consignee of the goods was the General Manager. SSB/IFGP Kalpi Road, Kanpur-9. Due to the delay in the supply, liquidated damages were imposed on the claimant by the respondent to the tune of Rs. 6,87,8961.58 which, according to the respondent, was on account of additional amount of customs duty and more cash out in rupee as a result of adverse variation in exchange rate during the period of delay in deliver. Though according to the respondent amount of liquidated damages towards the loss incurred by the respondent on account of adverse variation in the exchange rate during the period of delay in delivery resulting in more cash out in rupee, as per terms of the agreement @ Rs. 2 per month works out to Rs. 8,26,044/- but respondent limited their claim to liquidated damages only to the actual loss of Rs. 6,87,861.58 and to that extent the respondent withheld the amount payable to the claimant. Claimant disputed the respondent's action in imposing liquidated damages and withholding the amount, therefore dispute was raised which was referred for adjudication through the process of arbitration.
4. Claimant's case has been that though the advance acceptance of tender was communicated on 17th March, 1975 but the date of delivery mentioned therein, namely, up to 31.3.1976 was patently wrong since the acceptance also provided 12/14 months for the supply to be made. On receipt of advance acceptance of tender clarifications (technical and commercial) were sought and the respondent through its letter dated 7.7.1975 requested the claimant to ensure that the supply should be as per description mentioned therein. It is stated that this description was not in consonance with the description mentioned in the advance acceptance of tender, which necessitated in the respondent issuing amendment letter dated 2.8.1975 which according to the claimant was unilateral amendment. There was change in the specification as regards the technical date. This amendment according to the claimant, was technically wrong and the error were pointed out by the claimant to respondent on 27.8.1975. Consequently the respondent on 11.12.1975 made second amendment. On 5.4.1976 the delivery date was extended up to 30th June, and technical data was unilaterally changed. The entire delay, according to the claimant, was, thus, attributable to the Union of India and not to the claimant. Letter dated 21st June, 1976 was also issued by the respondent in which the respondent admitted that there has been change in the technical data. Unilateral amendments were also made when on 4.8.1976 when respondent also extended the date of delivery up to 30.9.1976. Thus, according to the claimant imposition of damages by the respondent was patently wrong.
5. The arbitrator went through the case of the parties vis-a-vis the evidence adduced before him. The evidence is in the shape of letters exchanged amongst parties. According to the arbitrator, advance acceptance of tender 31.1.1975 expressly stated that the contract is concluded. It was only formal acceptance of tender which was followed with detailed terms and conditions. In the formal acceptance of tender dated 17.3.1975 delivery period has been stated as 12/14 months after receipt of the order and all technical and commercial clarification, i.e., 31.3.1976. According to the arbitrator, the outer limit put under the advance acceptance of tender as also in the formal acceptance of tender was 31.3.1976 irrespective of the other period stated therein, namely 12/14 months. The arbitrator held that the claimant's contention that 14 months' period could be reckoned from the date of formal acceptance of tender which was to commence from the date of all technical and commercial clarifications was not justified. Thus, according to the arbitrator, the outer limit of delivery was 31.3.1976 and since delivery was not made by 31.3.1976 there was definitely a delay. This delay according to the arbitrator was not attributable wholly to the claimant but it was also due to the acts of respondent. According to the findings of the arbitrator the respondent was also not clear about its requirements and specifications when it floated the tender to purchase the stocks which necessitated in issuing certain amendments after the acceptance of claimant's tender and due to these amendments time was also extended for delivery firstly up to 30th June, 1976 and then it was extended up to 30th September, 1976. The arbitrator also held that the respondent under the contract had a right to levy liquidated damages for the delay involved in making the supplies but such a levy could be sustained by the respondent only if the delay was due to the conduct of the seller. From the facts, according to the arbitrator, it was not possible to record a finding that the claimant alone was responsible for the delay involved in the supplies of stores. In the absence of adequate evidence to establish that the claimant had unduly delayed the supply of stores, the arbitrator held that action of respondent in levying liquidated damages on the claimant could not be sustained and, thus, the respondent was also not justified in withholding the payment to that extent to the claimant.
6. The case of the objector is that after the arbitrator had come to the conclusion that there has been delay in making supplies, the arbitrator was not right in recording a finding that the same was also attributable to the respondent or that it was not undue delay on the part of the claimant. Reliance has been placed by the learned counsel for the objector on a decision of Supreme Court in K. P. Poulose v. State of Kerala and another , in support of its submission that under Section 30(a) of the Arbitration Act the award is liable to be set aside since the arbitrator has misconducted himself. It is by misconduct which is complete since the arbitrator on the face of it has arrived at inconsistent conclusion even on his own findings. Having gone through the award and also the record of the arbitrator, contention of the learned counsel for the objector cannot be accepted that the arbitrator has misconducted himself and the proceedings.
7. It is well established proposition of law that where reasons for giving the award are stated in the award and no error of law could not be pointed out in those reasons and these is no error of fact and the new taken by the arbitrator is a possible view to take and the arbitrator has made his mind known on the basis of which he has acted, that alone is sufficient to meet the requirements. The award in such like situation is not liable to be set aside. Under the law the arbitrator is made the final arbiter of the disputes between the parties. The award is not open to challenge on the ground that the arbitrator has reached a wrong conclusion or has failed to appreciate facts. Where the award is a reasoned one, the court cannot set aside the award merely on the ground that on the same facts it could have reached to a different conclusion. In Indian Oil Corporation Ltd. v. Indian Carbon Ltd. it was held that when the view taken by the arbitrator was a possible view to take and the arbitrator in a reasoned award has made his mind known on the basis of which he has acted, that alone is sufficient to meet the requirement and the award of the arbitrator on facts is not liable to be set aside. In the instant case finding has been recorded that though in the advance acceptance of tender and also in the formal acceptance of tender the outer limit was 31.3.1976 for the delivery to be made and there has been delay but delay was not wholly attributable to the claimant since the respondent was also equally responsible for the delay and for that also adequate reasons have been assigned in the award that even on the day of floating tender the respondent was not certain and clear as to their requirements and specifications. It was only after formal acceptance of tender was communicated to the claimant that necessity arose in issuing amendments to the specifications and on two occasions the respondent unilaterally on in other words of its own extended the delivery time. Damages, according to the terms of the contract, according to the arbitrator, could be imposed only if the delay was due to the conduct of the claimant and since there was no evidence on record that the delay was due to the conduct of the claimant, therefore, there is no force in the submission made by the learned counsel for the objector-respondent that the award is vitiated. The award is reasoned one. The objections which have been raised against the award are such which cannot indeed be taken into consideration within the limited ambit of challenge admissible under the scheme of Arbitration Act. Under the Act the arbitrator is made the final arbiter of disputes between the parties and the Award is not open to challenge on the ground that the arbitrator has reached a wrong conclusion and has failed to appreciate facts.
8. In Kaliyappan v. State of Kerala and others , the apex court held that the court has no jurisdiction for substitution of its own evaluation of conclusion on law or fact and to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or damages liable to be sustained was a decision within the competency of the arbitrator. In the instant case the arbitrator recorded a categorical finding that the claimant was not to be blamed and as per terms of the contract liquidated damages could not be imposed upon the claimant. In this view of the matter there is no force in the objections which are liable to be dismissed and are hereby dismissed.
9. In view of the dismissal of objections, the award of the arbitrator is made a rule of court and decree in terms of the award is passed. Decree sheet be drawn in accordance with law. Award shall form part of the decree Claimants shall also be entitled to interest on the awarded amount from the date of decree till payment @ 12% p.a.