UNION OF INDIA Vs. A L RALLIA RAM

JUDGEMENT

(1.) THIS is an appeal by the Union of India against the order of a Sub Judge at Delhi rejecting the Government's application for setting aside an arbitration award and making the award delivered by the Umpire after a difference between the arbitrators for the payment of Rs. 3,26,251-6-3 with costs and further interest at the rate of 41/2 per cent per annum in favour of the claimant, Mr. A. L. Rallia Ram, a rule of the Court.

(2.) THE history of the case is as follows: In August 1946 the Chief Director of Purchases (Disposals) of the Food Department of the Government of India invited tenders for the purchase of the entire stock of American cigarettes lying with the Government. THE claimant's tender for the purchase of the whole stock at Rs. 0-8-3 per packet of 20 cigarettes was accepted by the acceptance note Ex. P. 9 dated the 9th of September, 1946, the total purchase price being Rs. 38,93,933-7-9. THE stocks were lying in Assam and Calcutta and delivery was to be taken at Calcutta in five in stalemates against payment of instalments, and there is no doubt that the claimant actually paid a sum of over Rs. 17,70,000 to the Government. He actually took delivery of a large quantity of the cigarettes but owing to the peculiar conditions at Calcutta at that time when there were communal disturbances and proper arrangements were difficult he had to take delivery somewhat hurriedly and without having the opportunity for even the limited inspection which he was allowed under the terms of the contract. He claimed in fact that the stock of cigarettes should have been properly surveyed by the Government before any deliveries were taken and that on a proper inspection of the cigarettes he found that a very large quantity of them were mildewed or in fact infected with insect or otherwise in a poor condition.

(3.) THE learned Solicitor General first attacked the award on the ground that it contained errors of law patent on the fact of the record. In particular it was contended that the Umpire had clearly made a mistake in respect of his interpretation of the combined effect of clause 4 of the general conditions of contract and clause 6 of the terms contained in the letter of acceptance of the tender, and also that the Umpire had clearly erred in allowing interest, which actually was not allowed as interest but as damages on the principle that after the cancellation of the contract by the Government the claimant was entitled to be indemnified for all the expenses incurred by him in connection with the contract, and these included the interest which he himself had to pay to the Bank from whom he borrowed Rs. 17,00,000 which he actually deposited with the Government, and part of which was ultimately refunded to him.