UNIVABS SLEEPERS PVT LTD Vs. UNION OF INDIALABIC

JUDGEMENT

(1.) This order shall govern disposal of Arbitration Appeal No.43 of 2017 as well as Arbitration Appeal No.46 of 2017 arising out of common order dated 21.3.2017 passed by Commercial Court, deciding application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996") filed by M/s. Univabs Sleepers Pvt. Ltd. (MJC No.7/2016) as also application under Section 34 of the Act of 1996 filed by Union of India (MJC No.16 of 2016).

(2.) The Union of India and M/s. Univabs Sleepers Pvt. Ltd. both have preferred the aforesaid separate appeals which were clubbed together and heard analogously.

(3.) M/S. Univabs Sleepers Pvt. Ltd. entered into contract with the Union of India through its competent authority on 2.2.2006 for manufacture and supply of Monoblock Prestressed Concrete Sleepers for Broad Gauge. The contract was initially for a period of two years and one month, to be reckoned from 26.12.2005 to 25.01.2008. Under the contract, M/s. Univabs Sleepers Pvt. Ltd. was to manufacture and supply of 255000 (two lakh fifty five thousand) number of sleepers. Later on, the quantity of supply was enhanced by further quantity of 76500 (seventy six thousand five hundred) number of sleepers and the period of contract was further extended up to 31.12.2008. Dispute arose between the parties when the manufacturer failed to supply required quantity of sleepers as per time schedule, to Union of India. While according to manufacturer/supplier, the main operative reason was that the nominated source for supply of cement failed to supply requisite quantity of cement to the manufacturer/supplier, Union of India maintained that manufacturer/supplier failed to maintain its manufacturing process of sleepers and was taking shelter of a false excuse of non-supply of cement in requisite quantity from the nominated source. Finally, the Union of India terminated the contract and claimed liquidated damages, aggrieved by which, the manufacture/supplier invoked arbitration clause under the contract and Reference was made for arbitration to the Sole Arbitrator under the terms of contract. Initially, while seeking reference of dispute, the manufacturer/supplier had raised only 6 claims, but while submitting its claim before the Arbitrator, the supplier added 5 more claims making as many as 11 claims against Union of India. The Union of India filed its written statement and also raised counter claims and prayed for liquidated damages alleging that the manufacturer/ supplier committed breach of contract in failing to supply sleepers as per the contracted schedule of supply. The Arbitrator, vide its Award, rejected all the claims of the manufacturer/supplier as well as Union of India. Aggrieved by the Award, the manufacturer/supplier as well as Union of India both preferred separate applications under Section 34 of the Act of 1996 before the Commercial Court. The Commercial Court held that in so far as Claimant's additional claims No.1,3, & 8 (a & b) and 11 are concerned, the Arbitrator was obliged under the law to adjudicate those claims and could not have rejected on the ground that in the letter making reference of dispute to the Arbitrator, those claims were not included. On Claimant's claims No.2 & 6, the Commercial Court held that the Arbitrator acted perversely and in violation of fundamental policy of law in not awarding damages despite having recorded a finding that the Union of India was guilty of breach of contract, due to which, the supplier/claimant had suffered loss. The findings on supplier's/claimant's claim No.4, 5, 7 & 10 recorded by the Arbitrator were not interfered with by the Commercial Court.