ENNORE PORT LIMITED Vs. HINDUSTAN CONSTRUCTION COMPANY LIMITED

JUDGEMENT

(1.) THE facts giving rise to the present appeal are as follows :- THE appellant Port Trust awarded a contract to the first respondent with reference to rock quarrying and transportation. THE appellant retained a particular sum as liquidated damages on account of breach of contract by the first respondent by not supplying the rock within the stipulated time. This matter was considered by the Dispute Review Board which held that the Department was not justified in retaining the amount towards liquidated damages. Ultimately the dispute was referred to Arbitral Tribunal.

(2.) THE contention of the first respondent was that the present appellant was not entitled to withhold any amount on account of delay in supply of rocks as no injury had been caused.

(3.) LEARNED counsel appearing for the appellant has placed strong reliance on Section 74 of the Indian Contract Act and contended that in view of such specific provision, it was not necessary for the appellant to prove that any loss had been caused. LEARNED counsel has also placed strong reliance upon the decision of the Supreme Court reported in 2003 (2) CTC 282 (OIL & NATURAL GAS CORPORATION LTD., v. SAW PIPES LTD.). In the said case, the appellant Oil & Natural Gas Corporation, had engaged the respondent company in the business of supplying equipment for Offshore Oil exploration and maintenance. As per the terms and conditions the goods were required to be supplied on or before 14.11.1996. The respondent had requested for extension of 45 days time as he could not complete the contract beyond its control. The appellant by 4th December, 1996, extended time with a specific statement that the amount equivalent to liquidated damages for delay in supply of pipes would be recovered from the respondent. Thereafter the appellant made payment for the goods supplied by deducting certain amounts as liquidated damages. Ultimately the matter was referred to the Arbitral Tribunal. The Tribunal found that the reasons given by the supplier for delay were not tenable, yet the Arbitral Tribunal held it was for the appellant ONGC to establish that they had suffered any loss because of the breach committed by the respondent in not supplying the goods within the prescribed time limit and since no such loss could be proved by ONGC, the Tribunal held that ONGC had wrongfully with-held the amount. Challenge to such award having been failed before the High Court, the matter came to the Supreme Court in appeal. One of the contentions raised by the appellant was to the effect : " (1) the award is vitiated on the ground that there was delay on the part of respondent in supplying agreed goods/pipes and for the delay, appellant was entitled to recover agreed liquidated damages i.e. a sum equivalent to 1% of the contract price for whole unit per week of such delay or part thereof. (2) the award passed by the arbitrator is on the face of it illegal and erroneous as it arrived at the conclusion that the appellant was required to prove the loss suffered by it before recovering the liquidated damages. He submitted that the arbitral tribunal misinterpreted the law on the subject; (3) in any set of circumstances, the award passed by the arbitrator granting interest on the liquidated damages deducted by the appellant is, on the face of it, unjustified, unreasonable and against the specific terms of the contract, namely, clause 34.4. of the agreement, which provides that on disputed claim , no interest would be payable."