Delhi District Court
(1)Birla Cable Limited vs Mahanagar Telephone Nigam Limited on 18 December, 2017
IN THE COURT OF MS. ASHA MENON: DISTRICT &
SESSIONS JUDGE (SOUTH DISTRICT) SAKET: NEW DELHI
(1) CISARBTN3132017
CNRDLST 010033372017
(1)Birla Cable Limited,
(Formerly known as Birla Ericsson Optical Limited)
Registered office at:
Udyog Vihar, P.O. Chorhata,
Rewa 486006 (M.P.)
Also At:
2nd Floor, WingB, Commercial Plaza,
Radisson Hotel Delhi, National Highway No.8,
Mahipalpur, New Delhi110037 .....Petitioner.
Versus
Mahanagar Telephone Nigam Limited,
Through its AGM (MPC)
3rd Floor, Lobby2,
Mahangar Door Sanchar Sadan,
9, C.G.O Complex, Lodhi Road,
New Delhi110003 ....Respondent.
Date of Institution: 28.11.2008
Judgment reserved on: 16.11.2017
Judgment pronounced on: 18.12.2017
(2)CISARBTN3132017
CNRDLST010033422017
M/s Vindhya telelinks Limited
Having its Registered Office at
Udyog Vihar, P.O. Chorhata
Rewa (M.P.)486006
And business office interalia at:
4th Floor, UCO Bank Building,
Parliament street
CISARBTN3132017 & CISARBTN3122017 Page 1 of 36
New Delhi110001
Through Mr. Sandeep Chawala, Vice President
& Commercial Attorney ....Petitioner
Versus
Mahanagar Telephone Nigam Limited,
Through its AGM (MPC)
3rd Floor, Lobby2,
Mahangar Door Sanchar Sadan,
9, C.G.O Complex, Lodhi Road,
New Delhi110003 ....Respondent.
Date of Institution: 07.10.2009
Judgment reserved on: 16.11.2017
Judgment pronounced on: 18.12.2017
JUDGMENT
The two objection petitions have been filed under Section 34 of the Arbitration & Conciliation Act, 1996 by Birla Cable Limited (Formerly known as Birla Ericsson Optical Limited) and Vindhya Telelinks Limited against the respondent Mahanagar Telephone Nigam Limited before the Hon'ble High Court of Delhi. Pursuant to Notification No. 27187/DHC/Orgl. Dated 24.11.2015, as amended vide letter dated 25.07.2016 received from the High Court of Delhi, the aforesaid petitions have been transferred to this Court and are accordingly being disposed off.
This judgment will dispose of two objection petitions filed under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act).
The first petition u/s. 34 of the Act was filed by Birla Cable Limited against Mahanagar Telephone Nigam Limited challenging the Award dated 16.07.2008 passed by the Sole Arbitrator.
CISARBTN3132017 & CISARBTN3122017 Page 2 of 36The second petition u/s. 34 of the Act was filed by M/s Vindhya Telelinks Limited against Mahanagar Telephone Nigam Limited for setting aside the Award dated 10.06.2009 passed by the Sole Arbitrator. Since the issues raised and the arguments advanced are common in both the objections, the two petitions are taken up together and shall be disposed of by this common judgment.
FACTS OF THE PETITION OF BIRLA CABLE LIMITED The facts as set out in the petition filed by Birla Cable Limited are that the petitioner is a company incorporated under the Companies Act, 1956 having its registered office and factory at Udyog Vihar, P.O Chorhata, District Rewa, Madhya Pradesh and was engaged in the business of manufacturing and supply of various types of telecommunication cables including polyethylene insulated jelly filled underground cables (PIJF U/G Cables). The respondent is a Government of India Undertaking and is a company incorporated under the provisions of the Companies Act, 1956 and engaged inter alia, in the business of planning, establishing, developing, providing, operating and maintaining the telecommunication services for the National Capital Territory of Delhi and Mumbai.
The respondent had floated a tender enquiry no.
MTNL/2080 (66))/20042005/2004MM/PIJF dated 12.05.2004 for procurement of PIJF U/G Telecom Cables. The petitioner responded to this by submitting an offer which was accepted by the respondent and thereafter, the respondent issued the following two Purchase Orders on the petitioner:
(a). P.O. No. AGM (MPC)/MM128/PIJF/P.O./2004 2005/BEOL/34 dated 19.08.2004 for supply of 178 Kms. of 100/0.5(A) Cables.
CISARBTN3132017 & CISARBTN3122017 Page 3 of 36(b). P.O. No. AGM (MPC)/MM128/PIJF/P.O./2004 2005/BEOL/46 dated 27.08.2004 for supply of 20/0.5(A) Cables.
It is further stated that the tender documents containing the General (Commercial) Conditions of Contract (Section III) and the Purchase Orders form the contract between the parties. As per Clause 9 of the Purchase Orders the entire supply was to be completed as per Clause 3 of the said Purchase Orders which prescribed that 25% of the ordered quantity was to be completed within two months from the date of the issuance of the Purchase Order and the balance quantity was to be supplied within next two months thereafter. As such the entire supply was to be completed within a period of four months from the date of the respective Purchase Orders. The PIJF U/G Cables were required to meet the latest TEC generic requirement No. GR/CUG 01/03 August 2003 with update amendments. As per Clause 8.2 of the Purchase Order the price quoted by the petitioner and accepted by the respondent were based on Copper Wire Rod (basic) per Metric Ton @ Rs.1,78,189/ (excluding Excise Duty) as prevailing in the month of May, 2004 as detailed in Clause 6 of Section IV of the tender document.
It is further submitted by the petitioner that as per Clause 16 of the General (Commercial) Conditions of Contract (Section III) of the tender documents and Clause 12 of the Purchase Orders the provisions for liquidated damages was made applicable. It was further submitted that PIJF Cables which were required to be supplied under the tender were to meet the latest specifications and the petitioner was required to obtain PQT Clearance/Bulk Production Clearance after obtaining the TAC (Type Clearance Certificate). It was submitted that CISARBTN3132017 & CISARBTN3122017 Page 4 of 36 since the specification of the PIJF Cables required by the respondent was a fresh specification, hence the petitioner applied for the Type Approval Certificate, which was issued on 09.09.2004. As per the procedure the petitioner was then to take PQT Clearance/Bulk Production Clearance after obtaining the TAC which was immediately applied by the petitioner but PQT/Block Clearance was issued only on 30.10.2004 i.e. after more than two months from the date of the purchase order. This fact was immediately brought to the notice of the petitioner/respondent vide its letter dated 04.10.2004. It also requested for refixation of the delivery schedule enabling the petitioner to get all the required approvals and PQT done in time as the time to be taken for grant of the said clearance and certificate was beyond the control of the petitioner.
According to the petitioner the respondent ignored the letter of the petitioner and instead issued a show cause notice with regard to the purchase order dated 19.08.2004 as to why the PIJF Cables have not been supplied within the delivery schedule. The petitioner again vide letter dated 21.12.2004 requested the refixation of the delivery period with regard to the Purchase Order dated 19.08.2004. The respondent vide letter dated 04.01.2005 extended the delivery period of one month from the date of issuances of the said letter with regard to the Purchase Order dated 19.08.2004 belatedly. However, the respondent illegally, arbitrarily threatened to impose the liquidated damages.
With regard to the Purchase Order dated 27.08.2004, the petitioner completed the supply within the original delivery period of four months from the date of the Purchase Order. After the supply of CISARBTN3132017 & CISARBTN3122017 Page 5 of 36 the PIJF Cables under both the Purchase Orders, the petitioner raised the bills. However, the respondent illegally, arbitrarily and contrary to the express terms of the Purchase Orders withheld a sum of rs.8,00,223/ allegedly to be recovered as the liquidated damages and on account of price variation in respect of both the aforesaid Purchase Orders. The details of the said deduction have been mentioned as under:
_________________________________________________________ Sl. No. P.O.No. & Date DEDUCTIONS (Rs.) LD PV Total
1. P.O. No. AGM (MPC)/MM 426795/ 222346/ 649141/ 128/426795/PIJF/P.O./2004 2005/BEOL/34 dated 19.08.2004 for supply of 100/0.5(A) Cables.
2. P.O. No. AGM (MPC)/MM 100898/ 50184/ 151082/ 128/PIJF/P.O./20042005/ BEOL/46 dated 27.08.2004 for supply of 20/0.5(A) Cables.
Total: 527693/ 272530/ 800223/ _________________________________________________________ According to the petitioner they informed the respondents that the respondents had wrongly withheld a sum of Rs.6,49,141/ and Rs.1,51,082/ against both the Purchase Orders dated 19.08.2004 and 27.08.2004 respectively and requested for the release of the amount immediately. No response was given by the respondent and as the respondent wrongfully withheld the sum of Rs.8,00,223/ , the petitioner vide notice dated 28.05.2005 invoked the arbitration agreement. Thereafter, vide letter dated 03.06.2005 the respondent refused to pay the said amount. Accordingly, the petitioner filed the statement of claim before the Ld. Sole Arbitrator. The CISARBTN3132017 & CISARBTN3122017 Page 6 of 36 respondent filed a reply and the petitioner a rejoinder thereto.
Vide the impugned Award dated 16.07.2008 the Sole Arbitrator decided the matter against the claimant/petitioner holding that no case for refund of the deduction made by the respondent was made out and the claim have no merit. Accordingly, the claim was dismissed.
Aggrieved, the petitioner has filed the present objections against the said Award dated 16.07.2008 submitting that the Award was against public policy and was therefore, liable to be set aside. The grounds taken inter alia, are that: it was violative of the provisions of Section 28(3) of the Act; that Clause 12 of the Contract was a penal clause being a clause in terrorem and, therefore, cannot be enforced unless the respondent proved to have suffered actual loss and therefore, the Award was contrary to the terms agreed between the parties; that the Ld. Arbitrator had completely ignored the three Awards passed by different Arbitral Tribunals unanimously holding that the first portion of clause 12.2 was a penal clause and the respondent was not entitled to claim any liquidated damages unless the actual loss suffered was proved beyond any shadow of doubt; that the Ld. Arbitrator erred in applying the ratio of the judgment in 'Hind Construction Contractors Vs. State of Maharashtra', (1979) 2 SCC 70 and that time was not intended to be of the essence of the contract as the contract between the parties contained clause relating to imposition of penalty and extension of time; that the Ld. Arbitrator erred in not adjudicating the dispute with recourse to Sections 73 and 74 of the Indian Contract Act, 1872 which specifically provided that compensation/damages could be awarded only if the loss was suffered CISARBTN3132017 & CISARBTN3122017 Page 7 of 36 as per the case of the breach of the contract whereas in the present case the respondent had made no effort to prove the loss; that the Ld. Arbitrator failed to distinguish between two clauses of Clause 12.2 and to notice that the first part was a penalty clause without actual loss or harm whereas the second part provided for liquidated damages if substantial harm has been caused and that therefore, the mere penalty without actual loss could not have been recovered under Clause 12.2; that the Ld. Arbitrator failed to take into account the admitted fact that as per the agreement entered into by the petitioner and the respondent the petitioner has in fact supplied the entire quantity of cables within the original or extended delivery period thereby providing no occasion for the respondent to recover any liquidated damages from the petitioner and, therefore, the Ld. Arbitrator had committed grave mistake in passing the Award; that the Ld. Arbitrator erred in concluding that time was of the essence of the contract as the agreement between the parties contained the Clauses for imposing of penalty as well as extension of time and the very fact that the time was actually extended in the instant case proved that the time was not essence of the contract in the present matter; that the respondent was not entitled to invoke the price variation clause in respect of the supply made against the Purchase Order dated 27.08.2004 and, therefore, the petitioner was entitled to recover the said amount of Rs.2,72,530/ wrongfully withheld by the respondent; that the Ld. Arbitrator had incorrectly interpreted the Clause 12 and Clause 11.5 and thus the findings of the Ld. Arbitrator were contrary to the fact. On all these grounds, it was prayed that the Award dated 16.07.2008 be set aside.
CISARBTN3132017 & CISARBTN3122017 Page 8 of 36FACTS OF THE PETITION OF M/S VINDHYA TELELINKS LTD The facts as set out in the petition filed by M/s Vindhya Telelinks Limited are that the petitioner is a company incorporated under the Companies Act, 1956 having its registered office and factory at Udyog Vihar, P.O Chorhata, District Rewa, Madhya Pradesh and was engaged in the business of manufacturing and supply of various types of telecommunication cables including polyethylene insulated jelly filled underground cables (PIJF U/G Cables). The respondent is a Government of India Undertaking and is a company incorporated under the provisions of the Companies Act, 1956 and engaged inter alia, in the business of planning, establishing, developing, providing, operating and maintaining the telecommunication services for the National Capital Territory of Delhi and Mumbai. The respondent had floated a tender enquiry no. MTNL/2080 (66))/20042005/2004 MM/PIJF dated 12.05.2004 for procurement of PIJF U/G Telecom Cables. The petitioner responded to this by submitting an offer which was accepted by the respondent and thereafter, the respondent issued the following four Purchase Orders on the petitioner:
(a). P.O. No. AGM (MPC)/MM128/PIJF/P.O./2004 2005/VTL/30 dated 19.08.2004 for supply of 117 Kms. of 200/0.5(A) Cables and 60.4 Kms of 1200/0.5 (A) cables.
(b). P.O. No. AGM (MPC)/MM128/PIJF/P.O./2004 2005/ VTL/53 dated 10.09.2004 for supply of 27 Kms. of 800/0.5 (UA)Cables.
(c). P.O. No. AGM (MPC)/MM128/PIJF/P.O./2004 2005/ VTL/57 dated 13.09.2004 for supply of 156 Kms. of 200/0.5 (A)Cables.
(d). P.O. No. MTNLMUM/DWPE/GM(MM)/1628/ VTL/0405 dated 06.09.2004 for supply of 3.2 Kms. of 1200/0.5 (A)Cables and 12.4 Kms. of CISARBTN3132017 & CISARBTN3122017 Page 9 of 36 800/0.5(UA) Cables.
It is further stated that the tender documents containing the General (Commercial) Conditions of Contract (Section III) and the Purchase Orders form the contract between the parties. As per Clause 9 of the Purchase Orders the entire supply was to be completed as per Clause 3 of the said Purchase Orders which prescribed that 25% of the ordered quantity was to be completed within two months from the date of the issuance of the Purchase Order and the balance quantity was to be supplied within next two months thereafter. As such the entire supply was to be completed within a period of four months from the date of the respective Purchase Orders. The PIJF U/G Cables were required to meet the latest TEC generic requirement No. GR/CUG 01/03 August 2003 with update amendments. As per Clause 8.2 of the Purchase Order the price quoted by the petitioner and accepted by the respondent were based on Copper Wire Rod (basic) per Metric Ton @ Rs.1,78,189/ (excluding Excise Duty) as prevailing in the month of May, 2004 as detailed in Clause 6 of Section IV of the tender document.
It is further submitted by the petitioner that as per Clause 16 of the General (Commercial) Conditions of Contract (Section III) of the tender documents and Clause 12 of the Purchase Orders the provisions for liquidated damages was made applicable. It was further submitted that PIJF Cables which were required to be supplied under the tender were to meet the latest specifications and the petitioner was required to obtain PQT Clearance/Bulk Production Clearance after obtaining the TAC (Type Clearance Certificate). It was submitted that since the specification of the PIJF Cables required by the respondent CISARBTN3132017 & CISARBTN3122017 Page 10 of 36 was a fresh specification, hence the petitioner applied for the Type Approval Certificate, which was issued on 09.09.2004. As per the procedure the petitioner was then to take PQT Clearance/Bulk Production Clearance after obtaining the TAC which was immediately applied by the petitioner but PQT/Block Clearance was issued only on 30.10.2004 i.e. after more than two months from the date of the purchase order. This fact was immediately brought to the notice of the petitioner/respondent vide its letter dated 28.10.2004. It also requested for refixation of the delivery schedule enabling the petitioner to get all the required approvals and PQT done in time as the time to be taken for grant of the said clearance and certificate was beyond the control of the petitioner.
It is submitted that the petitioner duly complied with the terms of the agreement and completed the supplies within the original delivery period. Thereafter, in respect of the Purchase orders the petitioner raised the bills. However, the respondent illegally and arbitrarily and contrary to the expressed terms of Purchase Order withheld a sum of Rs.34,36,695/ allegedly towards the recovery of liquidated damages and on account of price variation in respect of the purchase orders. The details of the said deductions have been mentioned as under: _________________________________________________________ Sl. No. P.O.No. & Date DEDUCTIONS (Rs.) LD PV Total
1. P.O. No. AGM (MPC)/MM128/ 10,58,780/ 7,22,043/ 17,80,823/ PIJF/P.O./20042005/VTL/30 dated 19.08.2004 for supply of 117 Kms. of 200/0.5(A) Cables and 60.4 Kms of 1200/0.5 (A) cables.
CISARBTN3132017 & CISARBTN3122017 Page 11 of 362. P.O. No. AGM (MPC)/MM128/ 3,46,234/ 2,51,888/ 5,98,122/ PIJF/P.O./20042005/ VTL/53 dated 10.09.2004 for supply of 27 Kms. of 800/0.5 (UA)Cables.
3. P.O. No. AGM (MPC)/MM128/ 3,34,206/ 1,53,820/ 4,88,026/ PIJF/P.O./20042005/ VTL/57 dated 13.09.2004 for supply of 156 Kms. of 200/0.5 (A)Cables.
4. P.O. No. MTNLMUM/DWPE/GM 5,40,894/ 28,830/ 5,9,724/ (MM)/1628/VTL/0405 dated 06.09.2004 for supply of 3.2 Kms. of 1200/0.5 (A)Cables and 12.4 Kms. of 800/0.5(UA) Cables.
Total: 22,80,114/ 14,77,707/ 34,36,695/ _________________________________________________________ It is submitted that the petitioner informed the respondents that the respondents have wrongly withheld a sum of Rs.17,80,823/, Rs.5,98,122/, Rs.488,026/ and Rs.5,69,724/ against the Purchase Orders dated 19.08.2004, 10.09.2004, 13.09.2004 and 06.09.2004 respectively and the petitioner requested the respondent to immediately release the wrongly withheld amount of Rs.34,36,695/. The respondents despite repeated requests failed, neglected and avoided to pay the wrongfully withheld amount of Rs.34,36,695/. The petitioner vide notice dated 08.11.2005 invoked the arbitration agreement contained in the Purchase Orders and the tender documents. On 30.11.2005, the respondent vide their letter refused to pay the said amount.
The petitioner filed its claim before the Ld. Sole Arbitrator and the respondent also filed its Statement of Claim. It is further stated that the petitioner filed an application u/s. 151 CPC before the Ld. Arbitrator submitting that the hearing may be adjourned till the decision of the Hon'ble High Court of Delhi in the petition u/s. 34 of the Act filed by its associate company M/s Birla Cable Limited CISARBTN3132017 & CISARBTN3122017 Page 12 of 36 against the Award passed by the same Ld. Sole Arbitrator. However, the application was rejected. Thereafter, the petitioner filed an application u/s. 12 and 13 of the Act before the Ld. Sole Arbitrator submitting that the Ld. Arbitrator was on the regular panel of the respondent having been appointed by the respondent in numerous cases and that the arbitrator was required to disclose the circumstances giving rise to a justifiable doubt as to the independence and impartiality of the Ld. Arbitrator and as no such disclosure had been made either at the time of the accepting the appointment or even during the proceedings as required u/s. 12 of the Act and further as the Ld. Arbitrator had already decided the issue against the petitioner and as the Ld. Arbitrator would not pass an Award contrary to the Award passed in the case of M/s Birla Cable Limited and as there existed circumstances which gave rise to justifiable doubt in the mind of the claimant as to the independence and impartiality of the Arbitrator, the petitioner requested the Ld. Arbitrator to withdraw from the case. However, the application was dismissed without even issuing any notice.
It is further submitted that the Ld. Arbitrator without appreciation of the facts as well as the law has passed the Award dated 10.06.2009 rejecting the claims, contrary to the law laid down by the Hon'ble Supreme Court. It is submitted that the Ld. Arbitrator had wrongly observed that the respondent were entitled to liquidated damages since Clause 12 of the Purchase Order provided recovery of the liquidated damages and had also wrongly observed that the time was of the essence of the contract, in spite of the fact that the agreement between the parties explicitly provided that in certain CISARBTN3132017 & CISARBTN3122017 Page 13 of 36 contingencies extension of time would be available to the petitioner and in view of the judgment of the Hon'ble Supreme Court in 'Hind Construction Contractors Vs State of Maharashtra', (1979) 2 SCC 70 the observations of the Ld. Arbitrator were "per se in curium". It is further stated that the Award was also contrary to the terms of the agreement between the parties. The Award and the orders dismissing the two applications have been challenged in the present petition u/s. 34 of the Act submitting that it was against the law laid down by the Hon'ble Supreme Court in 'Hind Construction Contractors' (supra) and 'Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd.', 2005 (3) SCC 705.
The Award dated 10.06.2009 has been challenged on the following grounds inter alia, that the Ld. Arbitrator had erred in dismissing the application filed by the petitioner for awaiting the decision of the Hon'ble High Court in the case of Birla Cable Limited; that the Ld. Arbitrator erred in dismissing the application filed by the petitioner u/s. 12 and 13 of the Act in limine; that the Ld. Arbitrator erred in not adjourning the matter till the disposal of the petition u/s. 34 of the Act by the Court; that the Ld. Arbitrator had already made up his mind before delivering the Award; that there was a justifiable doubt as to the independence or impartiality of the Ld. Arbitrator; that the Ld. Arbitrator had not disclosed his interest as required u/s. 12(1) (2) of the Act whereas he ought to have withdrawn from the arbitration; that the Award dated 10.06.2009 was against public policy; that the Award dated 10.06.2009 was in violation of the provisions of Section 38(3) of the Act and was thus against public policy; that the Ld. Arbitrator erred in holding that the respondents are entitled to CISARBTN3132017 & CISARBTN3122017 Page 14 of 36 liquidated damages merely because Clause 12 of the Contract provided for the recovery of the liquidated damages in case of the nonsupply of the goods during the stipulated period whereas it was apparent that Clause 12 of the Purchase order read with Clause 16 of the Special Conditions of the contract made it evident that the Clause was penal in nature and a clause in terrorem; that Clause 12 of the Contract was a penal clause being a clause in terrorem and, therefore, cannot be enforced unless the respondents proved to have suffered actual loss and therefore, the Award was contrary to the terms agreed between the parties; that the Ld. Arbitrator had completely ignored the three Awards passed by different Arbitral Tribunals unanimously holding that the first portion of clause 12.2 was a penal clause and the respondent was not entitled to claim any liquidated damages unless the actual loss suffered was proved beyond any shadow of doubt; that the Ld. Arbitrator erred in applying the ratio of the judgment in 'Hind Construction Contractors Vs. State of Maharashtra', (1979) 2 SCC 70 and that time was not intended to be of the essence of the contract as the contract between the parties contained clause relating to imposition of penalty and extension of time and the very fact that time was extended in this case showed that time was not of essence of the contract; that the Ld. Arbitrator failed to distinguish between two clauses of Clause 12.2 and to notice that the first part was a penalty clause without actual loss or harm whereas the second part provided of liquidated damages if substantial harm has been caused and that therefore, the mere penalty without actual loss could not have been recovered under Clause 12.2; that the Ld. Arbitrator failed to take into account the admitted fact that as per the agreement entered into by the CISARBTN3132017 & CISARBTN3122017 Page 15 of 36 petitioner and the respondents, the petitioner has in fact supplied the entire quantity of cables within the original or extended delivery period thereby providing no occasion for the respondent to recover any liquidated damages from the petitioner and, therefore, the Ld. Arbitrator had committed grave mistake in passing the Award; that the Ld. Arbitrator had failed to appreciate that the petitioner could get the Type Approval Certificate only on 09.09.2004 and 21.09.2004 and thereafter, the petitioner was to obtain PQT Clearance/Bulk Production Clearance which was issued on 29.10.2004 for 200 pair cables and 1200 pair cables and 24.11.2004 for 800 pair cables and the petitioner was granted the PQT Clearance only on 29.10.2004 and 24.11.2004 that is after two months of the issue of the Purchase Orders and still the petitioner supplied the entire quantity of cables within the original delivery period of four months thereby providing no occasion for the respondent to recover any liquidated charges from the petitioner.
Thus, it was submitted that the recovery of the liquidated damages by the respondent for an additional sum of Rs.22,80,114/ was illegal and contrary to Section 73 & 74 of the Contract Act and had been wrongly withheld by the respondent and the claimant was entitled to recover the said amount. It is further submitted that the respondent had wrongly recovered a sum of Rs.7,22,043/ against the Purchase Order dated 19.08.2004, a sum of Rs.2,51,888/ against the Purchase Order dated 13.09.2004 and a sum of Rs.1,53,820/ against the Purchase Order dated 06.09.2004 by wrongfully applying the price variation clause despite the fact that the cables were supplied within the original period of four months. It is submitted that the Ld. Arbitrator failed to appreciate that the respondent had not made any CISARBTN3132017 & CISARBTN3122017 Page 16 of 36 submission substantiating its action in recovering the price variation. Thus, it was submitted that the Ld. Arbitrator had committed serious error in interpreting Clause 12 and 11.5 of the Contract. Thus, it was prayed that the Award dated 10.06.2009 be set aside. REPLIES OF THE MAHANAGAR TELEPHONE NIGAM LTD Replies were filed by the Mahanagar Telephone Nigam Limited (MTNL, for short) in both the petitions. There is no dispute regarding the contract between the parties. However, it is submitted that at the time of issuance of tender itself all prospective bidders were informed about the TAC (Type Approval Certificate) which they would be required to obtain with respect to the supply of cables and it was misconceived to allege that these specifications of PIJF cable was fresh specifications which were issued to the petitioner only on 09.09.2004. The respondent submitted that it was for the petitioner to ensure that it met the required specification in the tender on time.
In respect of the objections filed by the Birla Cable Limited, the respondent denied that these facts had been brought to the notice of the respondent vide letter dated 04.10.2004 or that vide the said letter a request for refixing of the delivery schedule to enable the petitioner to get all the required approval of PQT in time and it is submitted that in view of the petitioner failure to supply the cables on time, a show cause notice was issued. It was further submitted that keeping in view the need of the material, the delivery schedule was re fixed vide respondent's letter dated 04.01.2005. It was denied that the petitioner vide letter dated 21.12.2004 had requested for refixing of the delivery period with regard to the Purchase Order dated 19.08.2004 and denied that the extension letter dated 04.01.2005 was issued CISARBTN3132017 & CISARBTN3122017 Page 17 of 36 belatedly. It was submitted that the decision to impose liquidated damages was as per the terms and conditions agreed between the parties.
It was further stated that the delay in delivery period with respect to the purchase order dated 27.08.2004 was clearly brought out before the Arbitral Tribunal by filing a detailed chart, which has not been disputed by the petitioner. It has been submitted that though the communication dated 17.05.2005 written by the petitioner was a matter of record, it was denied that the amount of Rs.8,00,223/ had been wrongly withheld or had to be returned to the petitioner.
In respect of M/s Vindhya Telelinks Limited, the respondent submitted that all bidders including the petitioner were put to notice that they would be liable to pay the liquidated damages in terms of the contract on their failure to adhere to the prescribed delivery schedule and were also informed about the Type Approval Certificate and PQT to be got done in time. It was stated that there was delay in supplying the material within the original delivery schedule. It has further submitted that the details of the deductions on account of the liquidated charges were clearly brought out in various communications which were in accordance with the various terms and conditions of the purchase orders issued by the respondent. It was denied that the respondent had withheld any amount wrongly and there was no question of the refund of the sum of Rs.34,36,695/ since the deductions are in accordance with the terms and conditions of the purchase orders.
It was further stated in the replies submitted by the respondent MTNL to both the objection petitions, that merely because CISARBTN3132017 & CISARBTN3122017 Page 18 of 36 some other Arbitral Tribunal had passed an Award in favour of the petitioner it did not mean that the present Arbitral Tribunal was also bound to pass a similar Award and the previous Awards had no bearing on the present cases. It was denied that the Awards were illegal or erroneous or in conflict with public policy. It was reiterated that the Arbitral Tribunal had rightly held that the time was of essence of the contract as specific delivery schedule had been informed to the petitioner and extension was granted subject to liquidated damages. The respondent also submitted that it was entitled to price variation in terms of the contract.
In response to the other objections raised by M/s Vindhya Telelinks Limited, the respondent submitted that merely because an identical matter had been challenged in the Hon'ble High Court it would constitute no reason for the arbitrator to stay the arbitral proceedings. Further, merely because the Ld. Arbitrator had come to a conclusion and passed an Award in the case of an associate company it would not mean that the arbitrator was not independent and impartial. Such an interpretation would mean that no Court could hear a matter where it has decided a matter against a litigant in the past. Moreover, the mere fact that the Ld. Arbitrator had been appointed in other matters by the respondent would not mean that the arbitrator was not independent or impartial. Therefore, it was submitted that both the applications were rightly dismissed by the Ld. Arbitrator. For these reasons, the respondent prayed that both these sets of objections be dismissed.
ARGUMENTS The arguments of the Ld. Counsel for the petitioner CISARBTN3132017 & CISARBTN3122017 Page 19 of 36 centred around the interpretation to the Clause 12.2 of the terms and conditions of the Contract. According to the Ld. Counsel the Clause provided for two separate contingencies one was a simpliciter short/delayed supply and the other was a short/delayed supply which hampered the system. It was in the latter case that there was legal injury and therefore, there was no need to prove actual damages. However, in the first case, the provision was in terrorem and was actually a penalty.
It was submitted that there was delay in the performance of the contract but the delay was attributable to the Mahanagar Telephone Nigam Limited. Further no loss had been caused to the Mahanagar Telephone Nigam Limited. Therefore, the penalty clause could not be enforced. The Ld. Counsel submitted that the Ld. Arbitrator had failed to distinguish the two parts. Further, despite other Awards being brought to the notice of the Ld. Sole Arbitrator in these matters, where the Arbital Tribunal had concluded that a similar provision was a penalty clause and without proof of actual damages the award of reasonable compensation based on the penalty clause could not have been passed, the Ld. Arbitrator in the instant cases allowed the Mahanagar Telephone Nigam Limited to retain the claimed amount.
It was submitted that such an interpretation of the Ld. Arbitrator was against public policy as it was against the law as provided u/s. 73 and 74 of the Contract Act as well as the decision of the Hon'ble Supreme Court in 'Fateh Chand Vs Balkishan Dass', (1964) 1 SCR 515 and Maula Bux Vs Union of India (1969) 2 SCC
554. Relying on the judgment of the Hon'ble Supreme Court in 'Oil & CISARBTN3132017 & CISARBTN3122017 Page 20 of 36 Natural Gas Corporation Limited Vs Saw Pipes Limited', (2203) 5 SCC 705, it was submitted that the Award was perverse and contrary to establish law and was liable to be set aside.
The further contention in respect of M/s Vindhya Telelinks Limited was that the Ld. Sole Arbitrator had not disclosed that he was a panel arbitrator. He had already given an Award in favour of the Mahanagar Telephone Nigam Limited therefore, disclosure was essential. Since the disclosure was not made the entire proceedings were initiated and, therefore, the Award was liable to be set aside and another arbitrator be appointed.
The Ld. Counsel for the respondent/Mahanagar Telephone Nigam Limited however, submitted that the scope of interference u/s. 34 of the Act was extremely limited. Reliance has been placed on the judgment of the Hon'ble Supreme Court in case 'Associate Builders Vs Delhi Development Authority', (2015) 3 SCC 49 to point out that only where the Award was in conflict with public policy that the Court could looked into the Award. Furthermore, what was the meaning of the word 'perverse' was specifically explained in this case and the parameters were not fulfilled in the present two matters.
It was further submitted that the factual findings could not be interfered with by the Court while dealing with the objections u/s. 34 of the Act. The Arbitrator was the sole interpretor of the terms of the contract and the Court could not interfere with such interpretation. It was submitted that the Clause 12.2 provided for liquidated damages in graded manner and was a genuine estimate of loss and, therefore, the Ld. Arbitrator had rightly passed the Award CISARBTN3132017 & CISARBTN3122017 Page 21 of 36 and it called for no interference. Since the deductions made by the respondent were in terms of the Clause 12.2 which was not a penalty but was the agreed liquidated damages, no proof of actual damages had to be given and the conclusion drawn by the Ld. Arbitrator was fully lawful and legal and inkeeping with the policy of the country.
Thus, relying on the judgment of the Hon'ble Supreme Court in 'Oil & Natural Gas Corporation Limited Vs Saw Pipes Limited', (2203) 5 SCC 705, the ld. Counsel for the respondent submitted that no ground for interference was made out. It is further pointed out that the Arbitrator no doubt had been appointed in other cases but the petitioner itself had through its letter invited the same sole arbitrator to arbitrate the second case in M/s Vindhya Telelinks Limited referring to the fact that he was the sole arbitrator in the Birla Cable Limited. Thus, there were no merits in the objections now taken to the appointment of the Ld. Arbitrator in the second case and there was no cause to seek his recusal.
The Ld. Counsel for the objector/petitioner however, reiterated that what was under challenge was not the interpretation of clauses, since the Clause 12.2 could be subjected to only one interpretation and what was in question was the application of the same. It was further submitted that the objections were also covered u/s. 34 (2A)of the Act as there was patent illegality on the face of the Award, as the first part of the Clause 12.2 was a penalty clause and could not be interpreted in any other way and the conclusions drawn by the Ld. Arbitrator were liable to be set aside as no loss has been established before the Ld. Arbitrator.
CISARBTN3132017 & CISARBTN3122017 Page 22 of 36DISCUSSION Under Section 12 of the Act the arbitrator is bound to disclose any conflict in interest. Such a disclosure can be made at any time in the course of the arbitration. Reliance has been placed on the judgment of Hon'ble Supreme Court in 'Shakti Bhog Foods Limited Vs Kola Shipping Limited & Another', 2012 LawSuit(Del) 2147. In that case it had been held that conflict of interest had occurred when the arbitrator in that case had failed to disclose that he had acted as co arbitrator of respondent no.1 in relation to a dispute between respondent no.1 and the head owners of the same vessel involved in the same transaction. While the arbitrator has to disclose any previous engagement by one of the parties and such disclosure ought to be made in writing, there is a difference in the fact situation in the present objections. The Ld. Sole Arbitrator was already seized of the dispute between Birla Cable Limited Vs Mahanagar Telephone Nigam Limited when the subsequent dispute between M/s Vindhya Telelinks Limited Vs. Mahanagar Telephone Nigam Limited arose.
In the case covered by 'Shakti Bhog Foods Limited's case (supra) the petitioner had no knowledge of the conflict of interest. In the present matter when the second case arose between M/s Vindhya Telelinks Limited Vs. Mahanagar Telephone Nigam Limited it was M/s Vindhya Telelinks Limited who wrote a letter to the Mahanagar Telephone Nigam Limited on 08.11.2005 seeking the appointment of Mr. Justice Harbans Lal (Retd.) on the ground that a 'similar case' wherein similar law and facts are involved namely, Birla Cable Limited had been referred to him. The copy of the appointment letter was also enclosed. A further request was made to the CISARBTN3132017 & CISARBTN3122017 Page 23 of 36 Mahanagar Telephone Nigam Limited in the following words:
"If you so desire you can appoint Hon'ble Justice Harbans Lal (Retd.) as the Sole Arbitrator in the present dispute or any other retired High Court Judge".
In these circumstances clearly the present petitioner had waived any objections to the appointment of Hon'ble Justice Harbans Lal (Retd.) as the Sole Arbitrator in the dispute between M/s Vindhya Telelinks Limited Vs Mahanagar Telephone Nigam Limited. Just because the Ld. Sole Arbitrator returned the findings against the Birla Cable Limited in its dispute with Mahanagar Telephone Nigam Limited objection was raised regarding his impartiality. The same was rightly dismissed by the Ld. Sole Arbitrator. Impartiality certainly does not hinge on the opinion of the losing party or for that matter the successful party.
The other grouse of the petitioner in Vindhya Telelinks Limited's case is that an application made to the Ld. Sole Arbitrator to hold the Award till the decision in the objection petition filed by Birla Cable Limited was rejected unfairly, has also no merit. The objections filed were in an independent matter. Moreover, the Ld. Sole Arbitrator was not expected to wait for the disposal of the objections filed in 2008 which would have been dealt with in the course of the regular hearings of matters by the Hon'ble High Court. Such expectation has no reasonableness. The Ld. Sole Arbitrator therefore, rightly declined to withhold the Award till the disposal of the objections filed u/s. 34 of the Act against the other Award passed by the Sole Arbitrator in Birla Cable Limited's case.
Therefore, the dismissal of these applications has not CISARBTN3132017 & CISARBTN3122017 Page 24 of 36 vitiated the Award dated 10.06.2009 in Vindhya Telelinks Limited.
The Superior Courts have over a period of time repeatedly defined the scope of powers of the Court dealing with the objections filed u/s. 34 of the Act. In 'P.R. Shah, Shares and Stock Brokers Private Limited Vs B.H.H. Securities and others', (2012) 1 SCC 594 it was held as under:
"A Court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An Award can be challenged only under the grounds mentioned in Section 34(2) of the Act......"
Therefore, in the absence of any ground u/s. 34 (2) of the Act, it is not open to the Court to reexamine the facts to determine whether a different decision could be arrived at.
The Hon'ble Delhi High Court in State Trading Corporation of India Limited Vs Toepfer International Asia. PTE Limited has held as under:
"A Section 34 proceedings, which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. In our view, mere erroneous/wrong finding of fact by the Arbitral tribunal or even an erroneous interpretation of documents/evidence is noninterferable under Section 34 and if such interference is done by the Court, the same will set at naught the whole purpose of amendment of the Arbitration Act." Again, "The remedy provided in Section 34 against an arbitral award is in no sense an appeal. The legislative intent in CISARBTN3132017 & CISARBTN3122017 Page 25 of 36 Section 34 was to make the result of the annulment procedure prescribed therein potentially different from that in an appeal. In appeal, the decision under review not only may be confirmed, but may also be modified. In annulment, on the other hand, the decision under review may either be invalidated in whole or in part or be left to stand if the plea for annulment is rejected......."
"Section 34 is found to provide for annulment only on the grounds affecting legitimacy of the process of decision as distinct from substantive correctness of the contents of the decision......"
"Annulment in the case of arbitration focuses not on the correctness of decision but rather more narrowly considers whether, regardless of errors in application of law or determination of facts, the decision resulted from a legitimate process."
The Hon'ble Supreme Court in 'Associate Builders Vs Delhi Development Authority' (2015) 3 SCC 49 held that " an arbitration award can be set aside under the Act only on the grounds mentioned u/s 34(2) (a) & (iii) and not otherwise". It was noted by the Hon'ble Supreme Court that none of the grounds contained in sub section (2)(a) of Section 34 dealt with merits of the decision rendered by an arbitral award. It was only when the award is in conflict with the public policy of India the Court could look into the merits of the arbitral award under certain specified circumstances.
Section 34 of the Arbitration & Conciliation Act, 1996 reads as under: CISARBTN3132017 & CISARBTN3122017 Page 26 of 36 "(2) An arbitral award may be set aside by the Court only if
(a) the party making the application furnishes proof that (I) a party was under some incapacity; or
(ii)the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii)the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv)the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on mattes beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b)the Court finds that
(i)the subjectmatter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii)the arbitral award is in conflict with the public policy of India.
After the amendment on 2015 the additional explanation and subsection 2(a) has been added which is as follows: (1) in subsection (2), in clause (b), for the Explanation, the following Explanations shall be substituted, namely: CISARBTN3132017 & CISARBTN3122017 Page 27 of 36 "Explanation 1 For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii)it is in contravention with the fundamental policy of Indian law; or
(ii)it is in conflict with the most basic notions of morality or justice.
Explanation 2For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(II) after subsection (2) the following subsection shall be inserted, namely:"
2(A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award;
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law oar by reappreciation of evidence."
In the present case the arguments have been centered on the arbitral award being in conflict with public policy of India (Section 34 (2)(b)(ii)) and of being vitiated by patent illegality apparent on the face of the Award (Section 34(2)A). The Hon'ble Supreme Court in 'Oil & Natural Gas Corporation Ltd.'s case (supra) had interpreted the phrase "public policy of India" used in the Section 34. It was held that an Award could be set aside, if it is contrary to :
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
Legality must go to the root of the matter and if the CISARBTN3132017 & CISARBTN3122017 Page 28 of 36 illegality is of a grave nature it can be said that the Award is against Public Policy. It was held that the Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such an Award was also held to be opposed to public policy and required to be adjudged void.
Similarly, the Hon'ble Supreme Court in "Associate Builder's case (supra) explained what was the fundamental policy of the Indian Laws, interest of India, justice or morality and patent illegality while cautioning that when a Court was applying 'public policy' test to an arbitration award, it did not act as a Court of appeal and consequently errors of fact cannot be corrected. It was further held that a possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of the evidence relied upon which he delivers his arbitral award and that once it was found that the arbitrator's approach is not arbitrary or capricious then he was the last word on the facts.
Ld. Counsel for the objector submitted that the awards in question were perverse as they disregarded the orders of the superior Courts and was perverse as it allowed the Mahanagar Telephone Nigam Limited to recover liquidated damages which were actually in the nature of penalty. On the other hand, Ld. Counsel for the respondent submitted that none of the tests laid down in the 'Oil & Natural Gas Corporation Ltd.'s case (supra) were satisfied by way of the present challenge.
From the aforegoing discussion, it is clear that when this Court is dealing with the objections u/s. 34 of the Act, this Court cannot sit as a Court in appeal and has only a limited role, merely to CISARBTN3132017 & CISARBTN3122017 Page 29 of 36 see whether the Award passed is against the 'public policy' of India or is patently illegal or perverse. The present case is one where the decision hinges on the interpretation of Clause 12.2 of the Purchase Orders and Clause 16.2 of the General (Commercial) Conditions of Contract and Clause 13.2 ( in one Purchase Order in relation to Vindhya Telelinks Limited).
Before proceeding further, it may be noted that before considering the question whether the Ld. Arbitrator had come to the conclusion in violation of the statute and the judgment of the Hon'ble Supreme Court that actual loss was not required to be proved; it is necessary to consider the Clauses itself, as that question would depend on the interpretation of the Clause. The submissions of the Ld. Counsel for the petitioners that it was not the interpretation of the Clause but its application that was in question by means of the present objections is rhetorical. The arguments before this Court had also been on how to interpret the Clauses in question and not its application.
Thus, while the Ld. Counsel for the respondent submitted that the Clause 12.2 provided for graded liquidated damages, the ld. Counsel for the petitioner argued that the Clause had two parts, one which was a pure penalty and the other which provided for liquidated damages. It was therefore, the contentions of the Ld. Counsel that since the part applied in the present cases by the respondent was the first part as there was no material hampering to the installation and commissioning of the system and was merely delay in supply of stores/consignment actual proof of loss had to be proved before the penalty could be invoked or a reasonable compensation granted to the CISARBTN3132017 & CISARBTN3122017 Page 30 of 36 respondent. Therefore, all these submissions made on the basis of 'Fateh Chand's case and Maula Bux's case (supra) and Section 73 and 74 are not determinative of the question as to whether the Award is perverse as it is first to be determined whether the conclusion of the Ld. Arbitrator that the Clause was not a penalty Clause was wrong.
The Clause for liquidated damages is mentioned as Clause 16.2 in the General (Commercial) Conditions of Contract and the same is reproduced in all the purchase orders (except one) as Clause 12.2. In one Purchase Order dated 06.09.2004 the Clause is 13.2. This Clause is reproduced as under: "Should be supplier fails to deliver the store or any consignment thereof within the period prescribed for delivery, the purchaser shall be entitled to recover 0.5% of the value of the delayed supply for each week of delay or part thereof for a period upto 10(TEN) weeks and thereafter at the rate of 0.7% of the value of the delayed supply for each week of delay or part thereof for another TEN weeks of delay. In the case of package supply where the delayed portion of the supply materially hampers installation and commissioning of the systems, L/D charges shall be levied as above on the total value of the concerned package of the PO. Quantum of L/D assessed & levied by the purchaser shall be final and not challengeable by the supplier. However, when supply is made within 21 days of QA clearance in the extended delivery period, the consignee may accept the stores and in such cases the LD shall be levied upto the date of QA clearance."
The Ld. Arbitrator in deciding the claim of Birla Cable Limited held that the contention of the petitioner, being the claimant CISARBTN3132017 & CISARBTN3122017 Page 31 of 36 before it, that as there was no evidence regarding any loss having been suffered, the liquidated damages cannot be imposed could not be accepted in view of Clause 12 of the Contract which clearly laid down/provided that in case supplies are not made during the stipulated period as originally fixed or extended, the respondent would be entitled to the liquidated damages according to the formula provided in Clause 12. It was further held that the contention was not sustainable as there was clear stipulation regarding the levy of liquidated damages in case of non supply or delayed supply of contracted goods. The same observations were made while the disposing of the claim of Vindhya Telelinks Limited that Clause 12 provided for the recovery of liquidated damages on the basis of the formula.
While dealing with the claim of Vindhya Telelinks Limited three Awards were placed before the Ld. Arbitrator one dated 12.03.2003 in Haryana Telecom Limited Vs MNTL, Award dated 19.06.2007 in Haryana Telecom Limited Vs Union of India and Others and Award dated 07.08.2007 in Haryana Telecom Vs Union of India and Others, whereas the respondent relied on the observations of the Hon'ble Supreme Court in Oil & Natural Gas Corporation Ltd.'s case (supra). Considering these Awards and judgment relied upon by the parties, the Ld. Arbitrator concluded that even as per the judgment of the Hon'ble Supreme Court, in case of a breach of contract, the Court may award the amount of compensation as agreed to by the parties at the time of the contract, if it was a case of genuine preestimate of damages by the parties and that the same can be upheld as a reasonable compensation. It was concluded by the Ld. Sole Arbitrator that the parties had agreed that in case of delay the purchaser was CISARBTN3132017 & CISARBTN3122017 Page 32 of 36 entitled to liquidated damages on the basis of formula as specifically laid down in Clause 12.2 and in view of the terms of the contract, the provision of liquidated damages cannot be held to be penalty and was a clear preestimate of damages in case of delay in supply and liquidated damages that the respondent was entitled to on the basis of the formula, cannot be held to be unreasonable compensation.
By relying on the Awards passed in the aforementioned cases, the Ld. Counsel for the petitioner has submitted before this Court that the Ld. Arbitrator had erred. According to the Ld. Counsel the Clause reproduced hereinabove had two parts, which was the view taken by the previous Arbitral Tribunals.
It was the contention of the Ld. Counsel that the Ld. Sole Arbitrator ought to have followed the conclusions in the Awards passed in Haryana Telecom's cases by the various Arbitral Tribunals that the language of a similar Clause in those contracts providing for a payment of damages for mere delay at a particular rate was a penalty clause.
There is no merit in this submissions of the Ld. Counsel as Awards passed by one Arbitral Tribunal are not binding in nature and act as a precedent for other Arbitral Tribunals. Moreover, the Ld. Sole Arbitrator has relied on the observations made by the Hon'ble Supreme Court in 'Oil & Natural Gas Corporation Ltd.'s case (supra) to hold that the Clause provided for a genuine preestimate of the damages as in the present case it was clearly understood by the parties to the contract that time was essence of the contract and the delivery period was specifically provided for and in case of delay both parties agreed that the purchaser was entitled to liquidated damages on the CISARBTN3132017 & CISARBTN3122017 Page 33 of 36 basis of a formula as specifically laid down in Clause 12.2.
The reasoning given for arriving at such a conclusion cannot be discarded as "perverse" or against "public policy". Even if two views are possible, the adoption of one view by the arbitrator per se would not constitute perversity. The very words used in the Clause 12.2 are explicit. Delayed supplies would be resulting in payment of liquidated damages. The Ld. Sole Arbitrator rightly described the terms as providing for a "formula' which clearly was agreed to by the parties. The loss on account of delay was assessed at the time of the contract and the graded method of determining the liquidated damages on the basis of value was agreed to. Therefore, no part of the clause is a penalty. In fact the arguments before this Court has been that by not calling upon the respondents to prove actual damages the Award was perverse. But when the Ld. Arbitrator has come to a conclusion that the Clause 12.2 provided for liquidated damages for reasons given and was not in the nature of a penalty, the Award does not suffer from any perversity just because no evidence of loss was brought on record, as there was no need to prove actual damage/loss if the clause was not in the nature of a penalty.
Arguments were also addressed on the question of the Ld. Arbitrator holding that there was delay and also awarding price variation. In fact there is no dispute that there was delay in supplies. Moreover, a Court does not sit in appeal over the Award of an Arbital Tribunal by reassessing or reappreciating the evidence as was held by the Hon'ble Supreme Court in 'P.R. Shah, Shares and Stock Brokers Private Limited's case (supra). In that case the Hon'ble Supreme Court also held that it was not possible to reexamine the facts to find CISARBTN3132017 & CISARBTN3122017 Page 34 of 36 out a different decision could be arrived at which is what is being sought by means of the present objection petitions.
Once the Ld. Arbitrator came to the conclusion that Clause 12.2 provided for liquidated damages, the question of the need for proof of actual damages does not arise and, therefore, the citations in this regard call for no further discussion as to how damages/penalty ought to have been calculated. It may be also mentioned that the judgment of the Hon'ble High Court in 'Haryana Telecom Limited Vs Union of India and Another, AIR 2006 Delhi 339 is distinguishable on facts, as the Clause that required interpretation was different and facts regarding the acceptance of delayed delivery were also different. In the present case Clause 12.2 (13.2 in one Purchase Order) clearly underlines the necessity to adhere to the supply schedule. The Clause 12.2 provided for the acceptance of the delayed supplies by grading the damages for different short supplies payment of which would regularise such delayed supplies unlike in the case of Haryana Telecom Limited (supra) and also does not provide for any other authority to approve of the delayed supplies.
It has been repeatedly held by the Hon'ble Supreme Court including in 'M/s Construction & Design Services Vs. DDA' decided on 04.02.2015, where it has been reiterated that where a genuine preestimate has been provided for there, was no need to prove actual damages.
In the light of this aforegoing discussion, therefore, the objections filed by Birla Cables Limited to the Award dated 16.07.2008 and the objections filed by Vindhya Telelinks Limited, to the Award dated 10.06.2009 being devoid of merits are dismissed.
CISARBTN3132017 & CISARBTN3122017 Page 35 of 36The records of the Ld. Arbitrator be returned alongwith a copy of the judgment.
The original judgment be placed on the records of Birla Cable Limited's case CISARBTN3132017 and copy be placed on the records of Vindhya Telelinks Limited's case bearing no. CIS ARBTN3122017.
The files be consigned to the Record Room.
Announced in open Court
today i.e. 18.12.2017 (ASHA MENON)
District & Sessions Judge (South)
Saket/New Delhi.
CISARBTN3132017 & CISARBTN3122017 Page 36 of 36