UNION OF INDIA (UOI) Vs. DAULAT RAM INDUSTRIES

JUDGEMENT

(1.) THIS petition under Sections 34, 28(3) and 6(6) of the Arbitration & Conciliation Act, 1996 has been preferred by the petitioner to assail an award dated 18th October 2005 on the ground that the award passed by the learned Arbitrator was contrary to the terms of the contract and was violative of the public policy of India and was liable to be set aside.

(2.) BRIEF facts relevant for the purpose of deciding this petition are that the petitioner entered into a contract with the respondent for supply of 180 numbers of Dynamic Braking Resistors (DBR) @ Rs. 5,48,000/ - per DBR used in locomotives of Indian Railways. The total value of the contract was Rs. 9,86,40,000/ -. The contract provided that the delivery was to commence within one month and 60% of quantity was to be supplied by 31st March 2000 or earlier and the balance 40% quantity was to be supplied between 1st April 2000 and 30th April 2000 but not later than 30th April 2000. The petitioner reserved its rights to take the delivery of 40% quantity as well during the current financial year i.e. up to 31st March 2000 or earlier. The petitioner, vide an option clause reserved its right to increase/ decrease the quantity up to 30% of the ordered quantity during the currency of the contract.

(3.) THE learned Arbitrator observed that vide letter dated 30th April 2001 while granting extension the petitioner provided for liquidated damages for delayed supply as per the original contract and also gave conditional extension at the quoted price for Chitranjan Locomotive Works but concluded that while condition of levying damages was in accordance with the contract but condition of price variation was applied unilaterally by the petitioner. The learned Arbitrator relied upon Arosan Enterprises Limited v Union of India 1999 9 SCC 449 wherein the Supreme Court observed that when the contract itself provides for extension of time, the same cannot be termed to be the essence of the contract and default howsoever in such a case does not make a contract voidable. The learned Arbitrator observed that the contract between the petitioner and the respondent did not become voidable due to supply of 24 DBRs after 31st March 2001. A failure of the claimant to supply 24 DBRs was subject to paragraph 702 of the IR Indian Railways standard conditions of the contract and if the reasons indicated for extension of time beyond 31st March 2001 were not admitted as the reasonable ground, on IRS 800, a default on the part of the claimant in complete delivery shall be established. The purchaser under such circumstances without prejudice to his other rights could recover from the claimant liquidated damages @ 2% of the prices of the store which claimant failed to deliver. The Arbitrator, therefore, allowed the claim of the respondent of the price of DBR @ Rs. 5,48,000/ - for 24 Nos. DBRs.