Delhi High Court
Manmohan Singh Harmohinder Singh vs Hotel Corporation Of India And Ors. on 9 March, 2006
Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul
JUDGMENT Sanjay Kishan Kaul, J.
Page 1265 IA No. 6175/1999 IN CS (OS) No. 813A/1999 IA No. 6176/1999 IN CS (OS) No. 814A/1999
1. The disputes between the parties relate to the two contracts for supply of fruits and vegetables by the petitioner to the respondent. Since there were two separate contracts, two separate references were made to the same Page 1266 Arbitrator who made and published the Awards. Both the Awards are by the same Sole Arbitrator, Shri A.K. Garde and both were made on the same date, i.e., 28.08.1998 and common submissions have been advanced and, thus, they are being dealt with by a common order.
2. An invitation to tender was issued dated 22.06.1982 inviting sealed quotations on fixed rate contract basis for various items to be supplied to Chefair, a unit of the respondent, which inter alia included fresh vegetables and fresh fruits. The period for which such quotations were invited for the said two items was from 01.10.1982 to 31.03.1983. The tender documents contained the conditions of the tender. The relevant clauses are as under:
PRICE and PERIOD
2. Your prices should remain fixed for a period of 6 months from the date of our acceptance of your quotation and no increase in price, whatsoever, will be allowed, irrespective of the change in our requirements TERMINATION
22. We, during the side period, reserve the right to cancel the contract without giving notice / giving a month's notice but without assigning any reason for cancellation.
3. The petitioner was the lowest tenderer and was invited further for negotiations in terms whereof the petitioner reduced the price for vegetables by 8% and gave discount in the price of oranges by Rs.0.90 per dozen and in the price of apples by Rs.0.50 per kg.
4. The letter communicating the acceptance of the contract was, however, issued on 09.10.1982 and reads as under:
Dear Sirs, Under instructions from our Headquarters, please note that you have been awarded contract for the supply of Fruits and Vegetables to us for the period from 1st October, 1982 to 31st October, 1982.
2. Please confirm your acceptance by 14th October, 1982.
5. A reading of the aforesaid letter shows that the petitioner was asked to make supplies only for a period of three months as against the original period of six months envisaged. The petitioner was, thus, aggrieved and addressed the letter dated 13.10.1982 in response to the said letter protesting against the reduction of the time-period of contract from six months to three months and stating that the prices quoted by the petitioner were as per the period of six months envisaged. However, the petitioner did not refuse to accept the contract, but continued to make supplies up to 31.12.1982. The respondent awarded a fresh contract to a third-party for the period 01.01.1983 to 31.03.1983.
6. The petitioner thereafter filed petitions under Section 20 of the Arbitration Act, 1940 (hereinafter to be referred to as, 'the Arbitration Act') in respect of the two contracts and the matter was referred to the sole arbitration of Shri A.K. Garde in respect of both the contracts. The Arbitrator, however, found no merits in the claim of the petitioner and dismissed the same. The petitioner Page 1267 aggrieved by the same has filed two sets of objections under Sections 30 and 33 of the Arbitration Act in respect of the two Awards dealing with the contracts for supply of vegetables and fruits.
7. A perusal of the Awards shows that various claims were made by the petitioner, but the basis of the claims was that the contract awarded to the petitioner was for a validity period of six months which had been reduced to three months without the consent of the petitioner. The observations in this behalf made in the Awards are reproduced hereunder:
3. ... It was conceded by the claimant and respondent during arguments in hearings that the various claims would merit consideration only if the period of contract was held to be valid for 6 months from 01.10.1982 to 31.03.1982 and not otherwise particularly as the claims in controversy are related to this question. In other words, the crux of the dispute is whether the contract for supply of materials was for 6 months as claimed by claimant or 3 months as asserted by the respondent.
8. The result of the aforesaid is that the controversy was extremely limited and the only question to be considered was whether the contract awarded to the petitioner was for six months and was reduced to three months or whether the contract awarded was only for three months.
9. The factual matrix is not in dispute inasmuch as the tender which was floated envisaged supplies to be made for a period of six months. However, the advertisement itself provided that the tender should be submitted in the prescribed form and the terms and conditions of tender can be collected. The petitioner submitted the tender in pursuance thereto. The tender also envisaged that the prices should remain fixed for a period of six months as per clause 2 of the terms and conditions of the tender which prescribed the price and the period. Though the petitioner was the lowest tenderer, negotiations were held on more than one occasion and ultimately the petitioner agreed to reduce the price. The principal stand of the petitioner is that during this negotiation period, the petitioner was given to understand by the Members of the Tender Committee (for short, 'T.C.') of the respondent that the contract period would be six months. The records produced by the respondent showed that the petitioner was found to have quoted higher rates and, thus, a decision was taken to negotiate with the lowest party being the petitioner. The respondent took the stand that the recommendations of the T.C. have to be accepted by the competent authority and, thus, though the T.C. recommended the award of the contract to the petitioner for six months, the same was approved by the competent authority only for three months. It is in view thereof that the respondent communicated its acceptance of the contract only for a period of three months in terms of the letter dated 09.10.1982. The petitioner was required to confirm the acceptance by 14.10.1982 in terms of the said letter. The purchase order was issued on 14.10.1982 referring to the fact that the same was in pursuance to the standing order for the period 01.10.1982 to 31.12.1982. The supplies were made by the petitioner accordingly.
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10. The petitioner did, of course, protest but never took the stand that it was not willing to make the supplies or that the prices quoted by the petitioner should not remain binding if the contract was to run for a period of three months only. It was, thus, held by the Arbitrator that the petitioner accepted the contract for three months.
11. In my considered view, the aforesaid findings of the Arbitrator cannot be said to be fallacious. The petitioner had the option to reject the request of the respondent to enter into an arrangement for supply only for three months or to have resoled from the prices on that ground, but the petitioner continued to make supplies. The legal position under the Indian Contract Act, 1872 (hereinafter to be referred to as, 'the Contract Act') have, thus, to be considered where the public advertisement was an invitation to tender. The petitioner made an offer in pursuance thereto and the acceptance was complete only on 09.10.1982 as per the communication of the respondent. If the acceptance was at variance with the offer made by the petitioner, it was open to the petitioner not to have made supplies on that ground. The petitioner, on the other hand, continued to make supplies under the said arrangement.
12. A material factor taken note of by the Arbitrator and, in my considered view, is also of importance is clause 22 of the terms and conditions. The said clause envisages that the respondent has a right to cancel the contract without giving notice / giving a month's notice, but without assigning any reasons for cancellation. Thus, if the respondent has the right to cancel the contract during its currency, it can hardly be said that it is not open to the respondent to have entered into the contract for a shorter period at the inception stage. Needless to say that the option was available to the petitioner at that stage to have rejected the same as not being in terms of the offer made by the petitioner in pursuance to the invitation to tender. The records produced by the respondent also showed the rationale why the period was kept only for three months since even after negotiations, it was found that the prices quoted by the petitioner were on the higher side. The prices were found to be higher than for the corresponding period of the last year. The T.C. sent its recommendation to the competent authority and the period apparently was reduced to three months in the background of the higher prices quoted by the petitioner and other parties which submitted the tender.
13. One other factor taken note of by the Arbitrator is that in terms of clauses 3 and 4 of the conditions, the quantities were indicated to be approximate and were subject to increase and decrease. The order was also capable of being divided amongst two or more parties at the sole discretion of the respondent. Thus, quantities were approximate and were subject to increase and decrease. The understanding pleaded by the petitioner in the discussions with the respondent of the prices being for a contract of six months and only six months was not substantiated by the petitioner.
14. Be that as it may, as noticed above, it was open to the petitioner to have refused to accept the contract for the period of three months on the ground that the offer made in pursuance to the invitation to tender was for six months. Page 1269 This did not happen and the petitioner made supplies. I am in agreement with the finding arrived at by the Arbitrator that the option to the petitioner was to accept the terms of the letter dated 09.10.1982 or withdraw its offer or to rescind the contract. The supplies made by the petitioner must, thus, deemed to be an acceptance of the condition of three months of contract. Since this was the only question to be considered by the Arbitrator, the Arbitrator found that the claims of the petitioner were not sustainable though each claim has been even independently scrutinized and considered.
15. The Arbitrator has taken note of an important fact that the petitioner's case is not based on the breach of contract, but on remoteness of damages as it was not their case that the material was prepared and stored for six months on the basis of any specific communication given by the respondents. The so-called loss was notional. The same was based on the premise that if the petitioner had supplied for six months, profits would have accrued to the petitioner for this period of time. The letter dated 09.10.1982 was, thus, considered to be at best a counter-offer changing the period to three months which the petitioner failed to either specifically accept or reject. The petitioner continued to make supplies in pursuance thereto. Since no breach of contract was found on the part of the respondent, it was held that the petitioner cannot get damages under Section 73 of the Contract Act.
16. As noticed above, the submissions of learned counsel for the petitioner before this Court also revolved around the same focal point that the petitioner was granted a contract for six months period of time which, in my considered view, has been rightly rejected by the Arbitrator. In this behalf, clause 22 dealing with the right of the respondent to even cancel the contract during its currency has material bearing. The petitioner had only the option to either accept or reject the offer of the respondent made vide letter dated 09.10.1982.
17. Sections 3 and 4 of the Contract Act deal with the communication / acceptance and revocation of proposals and as to when the communication is complete. An advertisement of the nature issued by the respondent is an invitation to make offer. The tender when submitted is an invitation or proposal. The unconditional acceptance on the part of the respondent after negotiation would have resulted in a concluded contract. The respondent, however, issued the letter dated 09.10.1982 which could be described as a counter-offer. It was for the petitioner to accept or reject the same. The petitioner made supplies in pursuance to the said offer though objecting to the latter, but never either specifically accepted or rejected the same. The letter dated 09.10.1982 clearly required the acceptance by the petitioner. The petitioner, on the other hand, responded to the same vide letter dated 13.10.1982 making certain grievances and setting forth its case for the contract to be continued for six months, which was never acceptable to the respondent. The purchase order placed on the petitioner referred to the stipulated time-period as per the respondent. Thus, there was no concluded contract between the parties for the petitioner to make supplies for a period of six months apart from the right of the respondent to rescind the same as per clause 22.
Page 1270
18. The Arbitrator has also taken note of the fact that for the purposes of determination of damages under Section 73 of the Contract Act, the present case was not one where the petitioner had taken steps in pursuance to the contract for purchasing supplies and storing them for supply for six months, but was based on the principal of loss of profit which would have accrued to the petitioner, had the contract continued for a period of six months. It is in view thereof that it was found that such compensation could not be given for any remote or indirect loss or damage sustained by reason of breach in view of the provisions of Section 73 of the Contract Act, which reads as under:
73. Compensation for loss or damage caused by breach of contract. - When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
...
19. It must also be kept in mind that the aforesaid findings have been considered in detail despite the fact that the scope of scrutiny by this Court is not a court of appeal and this Court is not to reappraise the material and the evidence on record. This Court is not to substitute its own decision with that of the Arbitrator and even if the Arbitrator has come to a conclusion different from the one which this Court would arrive at on the basis of the given facts and evidence, the same would be no ground for interference. So long as the view taken by the Arbitrator is a plausible view though not the only correct view, the award calls for no interference. In this behalf, reference may be made to the judgment of the Supreme Court in M/s Sudarsan Trading Co. v. Govt. of Kerala ; Gujarat Water Supply and Sewage Board v. Unique Erectors (Gujarat) (P) Ltd. and Anr. ; Food Corporation of India v. Joginderpal Mohinderpal and Anr. ; and Arosan Enterprises Ltd. v. Union of India and Anr. .
20. In view of the aforesaid, I find no merits in the objections which are dismissed.
Page 1271 CS (OS) No. 813A/1999 CS (OS) No. 814A/1999
21. In view of the objections having been dismissed, the Awards both dated 28.08.1998 of the Sole Arbitrator, Shri A.K. Garde are made Rule of the Court leaving the parties to bear their own costs.
22. Decree-sheets be drawn up accordingly.