BHARAT SANCHAR NIGAM LIMITED Vs. BWL LTD

JUDGEMENT

(1.) The petitioner floated a tender on 16.04.1999 for supply of 6F Armoured Optical Fibre Cables (hereinafter to be referred to as, 'the cables') along with required accessories in proportional quantities for Indian Manufacturer of Optical Fibre Cables. The tender submitted by the respondent and four other companies was accepted and advance purchase order was issued by the petitioner on 11.08.1999 for supply of 871 kms. of the cables. The total value of contract awarded to the respondent was Rs.5,56,61,562.17.

(2.) In terms of the tender notice, the respondent gave a performance security of Rs.23,14,000/-. The respondent was issued a purchase order on 16.09.1999 for the said quantity of 871 kms. of cables along with accessories. The contract stipulated that the respondent was required to secure a Type Approval ensuring technical quality and specification from Tele-Communication Engineering Centre (for short, 'TEC'), Department of Tele-Communication within 3 months from the date of issue of purchase order and the supplies were to be completed within 7 months from the date of the purchase order. The supplies were, thus, required to be completed before 15.04.2000. In view of the fact that the contract for supply of such cables was issued for the first time, special inspection to assess suitability of infrastructure of the respondent's factory for production of the cables was envisaged. Various quality control specifications were also provided. One of the conditions was that the date of delivery was the essence of contract (Condition 16.1 of the General Conditions of the Contract).

(3.) The respondent applied for infrastructure assessment and Type Approval on 15.12.1999 and deposited the amount of fee with TEC for infrastructure assessment. Since the respondent was awaiting the approval, on 28.03.2000, a communication was addressed by it to the petitioner for extension of time for delivery and such extension was granted on 27.04.2000 by extending the delivery period to 28.06.2000. However, liquidated damages were also levied simultaneously and the respondent reduced the payment term from 95% of the price to 75% on delivery stipulating that the extension of delivery would be treated as the last extension. It may be noticed that the respondent was also executing the contract for supply of another type of cables called Aerial cables. The respondent sought a second extension on 21.06.2000 as the Type Approval had not come from TEC, but there was no response from the petitioner. The respondent again requested the petitioner for extension of delivery up to October, 2000 on 07/08.07.2000 on account of TEC approval being awarded. Finally on 21.07.2000, TEC asked the respondent to deposit Rs.65,000/- as fee for testing the cables and issuing Type Approval, which was immediately deposited by the respondent. At the stage when the matter was still pending with TEC, the petitioner on 24.07.2000 informed the respondent that on account of failure to complete the supply of cables on or before 28.06.2000 the purchase order was short-closed with immediate effect. The petitioner further encashed the bank guarantee of Rs.23,14,000/-. The respondent thereafter issued a legal notice to the petitioner alleging breach of contract and claimed compensation of Rs.1,71,92,613/- along with interest @ 24% p.a. from 24.07.2000. The same was not replied to and, thus, a notice dated 04.04.2001 was issued invoking the arbitration clause under the contract between the parties and seeking appointment of an arbitrator. As no arbitrator was appointed, proceedings were initiated by the respondent before the Delhi High Court and in those proceedings, Justice S.B. Wad (Retd.) was appointed as the Sole Arbitrator.