UNION OF INDIA Vs. A L RALLIA RAM

JUDGEMENT

(1.) This is an appeal with certificate under Article 133 (1) (c) of the Constitution against the order of the High Court of Punjab in First Appeal No. 75 of 1961 confirming the order of the Subordinate Judge, Delhi, refusing a motion to set aside an award directing payment by the Union of India of Rs. 3,26,251/6/3 costs and future interest at 41/2 - per cent to the respondent.

(2.) In August 1946 the Chief Director of Purchases (Disposals), Food Department, Government of India, invited tenders for purchasing the stock of American cigarettes lying in Calcutta, Karachi, Delhi and Agra. The respondent submitted his tender offering to purchase the entire stock at a uniform rate of Re. 18/3 per packet of 20 cigarettes. The total value of the stock offered at the rate amounted approximately to Rs. 39 Lakhs. The Government of India accepted the tender. The acceptance letter (with which was enclosed Form F. D.(M) 70 setting out the general conditions of contract, was signed by the Chief Director of Purchases. Condition No. 13 in Form F. D. (M) 70 contained an arbitration clause.

(3.) The respondent took delivery of 29,93,597 packets of cigarettes and paid Rs. 17,78,573 /6/4 but on inspection he found that some cigarettes were mildewed and unfit for use. A Board of Survey appointed by the Government of India to inspect the undelivered stock reported that cigarettes of the value of Rs, 6,58,458/- were wholly "unfit for issue" for the remaining cigarettes the Board recommended reduction in price at certain rates. The respondent did not agree to accept the goods on the revised terms reported by the Board and requested the Government of India to agree to a uniform reduction of 50 percent in price on the cigarettes delivered to him as well as those still lying with the Government. The Government of India thereafter decided to cancel the contract in respect of the undelivered cigarettes, and offered to take back from the respondent, out of the stock of cigarettes delivered such as "were in their original packing and could be identified:subject to the condition that no claim will be made by the respondent in respect of freight, storage, rents, charges or any other expenses incurred by the respondent in connection with the cigarettes taken back by the Government. The respondent accepted the offer made by the Government reserving his right "to claim incidental expenses" 24,13,500 packets of cigarettes in the original packing were then returned by the respondent and between June 13,1947 and February 8, 1948, Rs. 14,54,215/7/- were refunded to him by the Government of India.