GEEP INDUSTRIAL SYNDICATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) By means of this application i.e. IA.2627/98. objections are filed to the award dated 16/09/1993 under Sections 30 and 33 of the Arbitration Act, 1940. The main objection is to that part of the award whereby claim of the claimant was rejected. The petitioner had claimed Rs.3,39,388/- which was, according to him, wrongfully withheld by the respondent. The petitioner had also claimed interest @ 18% per annum on this amount. The contract between the parties was for supply of 5,33,350 numbers of batteries of one specification and 12,98,800 numbers of batteries of another specification. The supply was governed by standard terms and conditions which are annexed by the petitioner along with the Statement of Claim filed before the Arbitrator. Clause 11 of these conditions related to guarantee/warranty as per which contractor declared that batteries shall be in accordance with relevant specification and particular quoted therein subject to deviation/relaxation so granted to them and included in the rate contract. This was to be so, notwithstanding the fact that the batteries were to be accepted after inspection. The batteries supplied had also to meet performance parameters under specific controlled condition as per relevant specifications with agreed deviation/relaxation. For the purpose of ascertaining the discharge life after storage sample performance is set on the sample batteries picked up at the random from the calendar months, production quantity was to be carried out under the controlled condition specified in the specification. This clause further provided for compensation if failure was observed by the inspecting authority after storage based on specific condition.

(2.) The amount of the compensation -for such lot was to be worked out on the basis of proportionate percentage loss of service life observed on the representative samples kept at CIPS, Bangalore under controlled conditions in accordance with the following formulae;- "percentage loss in discharge life after storage of shelf life sample X quantity of each X price of each item." For batteries, the representative samples of which have given discharge life of 50% and above but lose than the specified life, the compensation should be made applicable for the effaced life proportionate to rejection in discharge life as per the existing formula. Where the discharge life of the shelf life samples from a lot is f ply-id -.to ' b less than 50'%, of the specified life during the testing at AHSP the compensation to be given by the contractor should be 8.5'(r) of the value of the batteries from the affected lot issued to the units and not available in stock at the depot and in the case of batteries from that lot are available/still in stock at the depot these should be replaced by the manufacturer free of cost or full compensation be paid for these batteries. Applicable to the times; for which no valid TC held by the firm at the time of conclusion of R/C and firm(c) are desired to 'submit requisite number of samples for test certificate at the time of commencement of supplies. In case the TC sample(c) submitted by the Firm for revalidation of test certificate do not meet the storage test specified in the relevant specification they shall be liable to pay penalty for the entire quantity .involved against orders placed and supplies made." A(c) failure was observed during inspection of the samples and according to the respondent there was loss of service life, compensation in terms of Clause 11 was worked out and a sum of Rs.3,39,388/- was deducted by the respondent from the claim due to the petitioner. It is the refund of this amount which was claimed by the petitioner by filing the statement of claim before the Arbitrator as mentioned above. while disallowing this, claim Arbitrator has recorded as under:-

(3.) The main objection of the petitioner in JA.2627/98 is that the learned Arbitrator has held that respondents are entitled to damages on the basis of reasonable pre-estimate of loss. According to him, there could not be pre-estimate of loss inasmuch as under the provisions of Sections 73 and 74 of the Contract Act, it was necessary for the respondent to prove the actual loss. Since the Arbitrator has given the reasons which are legally untenable there is error apparent on the face of the award and such an award is liable to be7set aside in view of the Judgment of the Supreme Court in the case of M/s. Aloki Prasad and others versus Union of India reported in AIR 1960 SC 588. A closer scrutiny of the matter would expose the hollowness of this argument. Admittedly, the amount which was deducted by the respondent was as per the ^formula contained in Clause 11 of the Contract. As per this Clause, petitioner had given guarantee in respect of the performance and life of the batteries. If the batteries got discharged prematurely and without completing the life as per the guarantee, naturally it would amount to breach of the guarantee as stipulated in Clause 11. Clause 11 only prescribes what would be the loss in such a case. The total batteries supplied, in this case itself were more than 18 lakhs in numbers. Therefore, the respondent is not expected to prove the loss with reference to each and every battery. That is why Clause 11 provided the formula as per which test could be carried on the sample batteries in the manner stated in the Clause and the loss which Is mentioned is to be worked out on the basis of proportionate percentage in loss of service life observed on the samples. This is, in the given situation, reasonable and only practical formula provided in the contract itself and the petitioner was bound by the terms of this contract. To put it simply, the petitioner had given the guarantee of particular duration in respect of batteries supplied by him. He is to be paid based on this guaranteed life of the batteries. If the life of the batteries is less than guaranteed period, the respondent are permitted to A reduce the cost proportionately. That is what the formula contained in the contract prescribes and that is quite reasonable and valid clause. In other words, for reduced life reduced cost is paid. The Arbitrator, therefore, rightly observed in the award that it is reasonable pro-estimate of loss in the light of various technical tests and formula laid down in Clause 11. I do not find any merit in the objections raised by the petitioner to the award. IA. 2627/98 is accordingly dismissed. Objections to the award having been rejected, Judgment in terms of award is hereby passed. Award is made the rule of the Court. Decree shall follow accordingly. Suit stands disposed of.