AMBICA PROCESSING INDS Vs. UNION OF INDIA

JUDGEMENT

(1.) Under a rate contract dated June 6, 1984 for supply of fumigation covers, the Central Warehousing Corporation, (in short referred to as "CWC"), placed two supply orders upon the petitioner for the supply of 1,353 fumigation covers at the rate of 8,374 per cover inclusive of excise duty, insurance, etc. but exclusive of sales tax FOR destination rail head. According to CWC, there was delay in the supply of the said fumigation covers and it, therefore, decided to recover liquidated damages at the rate of ten per cent. of the entire contract value from the petitioner. The petitioner disputed this levy of liquidated damages and sought disputes to be referred to an arbitrator. Certain other amount was also claimed by the petitioner. These disputes, including the levy of liquidated damages were referred to the arbitration of Mr.B.S. Ramaswamy, respondent No.2. CWC also preferred a counter claim of Rs.2,899.00 towards undercharges, wharfage, etc.

(2.) The arbitrator, after hearing the parties, made and published his award on October 20, 1989 holding that clause X 7(i), as it existed in the contract, was vague and the quantum of pre- determined liquidated damages was arbitrary and unregulated and the same amounted to a penalty by any standard. The arbitrator, therefore, held the levy of liquidated damages as unjustified but awarded only a sum of Rs.39,679.18 paise as compensation for breach of the contract by Ambica for delay in the supply of material. The counter-claim of CWC to the extent of Rs.2,889.00 was also allowed by the arbitrator.

(3.) On the said award having been filed in the Court, CWC has filed objections thereto challenging the same on the ground that the arbitrator had completely gone beyond his jurisdiction and reference while making the award and has thereby committed misconduct and error of jurisdiction in enlarging the scope of reference by making award contrary to the agreement. Though no specific objection has been taken by CWC, however during the course of arguments, it was also argued by learned counsel for CWC that the matter about levy of penalty under clause X 7(i) could not be made subject-matter of arbitration as the same was an excepted matter within the meaning of clause XVI of the agreement. The contention is that decision of the Corporation for levy of penalty Under clause X has been made final and could not be made a subject-matter of reference before the arbitrator. As it was a purely legal question, I had allowed the parties to argue this point as well.