UOI Vs. INDIA METALS

JUDGEMENT

(1.) The appellant/Northern Railways placed a purchase order dated 11.10.1991 on the respondent for supply of MS Tie Bars. The respondent failed to supply part quantity of 40672 tie bars despite extensions and thus the appellant cancelled the purchase order at the risk and cost of the respondent on 20.09.1993. The risk purchase tender was invited on 03.11.1993 in terms of the IRS conditions of contract and risk purchase, in which the respondent also participated. However, the risk purchase tender was not finalized and the case was Closed with no risk purchase order being placed.The appellant, however, forfeited the respondent's security deposit of Rs 1 lac towards general damages and asked the respondent to deposit the balance general damages. Against their total claim, outstanding payments of the respondent were withheld totaling to Rs 3,83,537/-. This became subject matter of dispute which was referred to arbitration in terms of the arbitration clause.

(2.) The General Manager, Northern Railways being the designated authority appointed Mr S.C. Goel, Ex-Chief materials Manager(s), Northern Railways as the sole arbitrator who made and published his award dated 22.01.2002. The arbitrator found that no doubt the respondent had failed to supply the full quantity ordered and risk purchase tender was invited for the balance quantity but then the tender was closed and no risk purchase order was placed with the result that the appellant had incurred no extra expenditure. The appellant in fact did not require the balance quantities as it emerged in the arbitration proceedings. The arbitrator has also opined that as per terms and condition no. 12 of appendix 'A' to the instructions to the tenders of P. Way Fittings which formed a part of the tender and contract documents of this case, the appellant had two options in case of delays in supply of material: to purchase material from elsewhere at the risk and cost of the contractor or penalize the contractor for each such default for the undelivered portion of any supply in terms of IRS Conditions of contract and those supplemented in Pamphlet No. 1 (instructions to the tenderers). The appellant took recourse to the first option and initiated risk purchase which was later dropped since there was no demand for the balance tie bars to be procured for the trade. In such an eventuality the question of adopting the route of penalizing through general damages later on did not arise. This is also the reason why the arbitrator rejected the counter claim of the appellant despite having found that the respondent was in breach of the original contract. The arbitrator awarded the sum withheld by the appellant of Rs. 3,83,537/- to the respondent with interest at 12% per annum from the dates security deposit was forfeited and payment bills were withheld to the date the amount is paid.

(3.) The respondent initiated proceedings for filing the award in court and making it rule of the court under Section 14 and 17 of the Arbitration Act, 1940 (hereinafter referred to as the said Act), which was registered as CS(OS) No. 249A/2002. The appellant filed objections as IA No. 5100/2002 under Sections 30 and 33 of the said Act. In terms of the impugned order dated 16.12.2005 the objections have been dismissed and the award has been made the rule of the court with the modification that the entitlement to pendente lite and future interest is at 9% per annum instead of 12% per annum.