IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
F.A.O. No. 1097 of 1985
Date of Decision : November 06, 2008
Punjab State Electricity Board, Patiala
.....Appellant
Versus
M/s Bombay Conductors and Electricals Ltd.
.....Respondent
CORAM : HON'BLE MR JUSTICE T.P.S. MANN
Present : Mr. J.P.S. Sandhu, Advocate
for the appellant
Mr. I.K. Mehta, Senior Advocate with
Mr. M.S.Kohli, Advocate
for the respondent.
T.P.S. MANN, J.
Against the award dated 29.8.1983 delivered by Shri S.N.
Khosla, sole Arbitrator, the appellant filed its objections, which were
dismissed by learned Additional Senior Sub Judge, Patiala on 11.6.1985
and the aforementioned award made rule of the Court. The appellant is
now before this Court in an appeal under Section 39 of the Indian
Arbitration Act, 1940.
Vide purchase order-cum-contract agreement dated
11.9.1978, the appellant-Board placed an order for manufacture and
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purchase of 1300 K.Ms. of A.C.S.R. Zebra Conductors etc. at the rate of
Rs.23,820/- per K.M. F.O.R. destination with the respondents, M/s
Bombay Conductors and Electricals Limited, Ahmadabad. Clause 2 of
the agreement provided that the price of the material to be supplied by the
respondent was subject to variation depending upon the base price, there
being no ceiling to the price variation. The supply was to commence
within two months from the date of receipt of purchase order by the
respondent and to be completed at the rate of 300 K.Ms per quarter.
When the respondent could not supply the contracted material in time, the
date for supply of the same was extended for a period of six months by
the appellant-Board. All other terms and conditions remained unchanged.
The respondent, however, could not supply the material by the extended
date and again applied for extension of time for completion of its part of
the agreement. On 27.4.1981, the appellant-Board again extended the time
for supply of the material upto 30.6.1981 without levy of any penalty. It
was, however, mentioned in the letter issued on 27.4.1981 that the rate of
conductors to be supplied shall be as prevelent during March, 1981 before
the price rise. The respondent fulfilled its part under the agreement within
stiuplated period. The appellant-Board claimed that vide its letter dated
27.4.1981 the respondent was entitled to the price of the material supplied
as was prevalent during March, 1981 and not entitled to any further price
increase. However, the respondent felt that the price of raw material was
enhanced by the Government of India on 27.3.1981 and in view of Clause
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2 of the agreement, it was entitled to the enhanced rate from the appellant-
Board. In view of the arbitration clause in the agreement dated 11.9.1978,
the matter was referred to the sole Arbitrator to be appointed by the Board
and consequently Shri S.K. Khosla was appointed as such, who entered
upon the arbitration reference on 30.10.1982. On the basis of the material
placed before him by the parties, the Arbitrator held that the respondent
was entitled to recover a sum of Rs. 9,42,214.08 p. from the appellant-
Board in lieu of the price increase in the raw material. This amount was
calculated on the basis of the stipulation contained in Clause 2 of the
agreement regarding the price variation. The appellant-Board was ordered
to pay the aforementieond amount to the respondent within a period of
two months from the date of the award, failing which future interest at the
rate of 12% per annum was also liable to be paid.
The stand of the appellant-Board while filing its objection
was that the award was against the law and facts and had been announced
after the expiry of the period of limitation. The Arbitrator had ignored
various clauses of the agreement. It was pleaded that the extension of
delivery schedule was made by the appellant-Board on the specific
condition that variation in price rise would not be allowed and the
respondent would have no right to claim any increase due to price rise of
the material.
The respondent opposed the objection petition by filing its
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reply stating therein that the impugned award was perfectly just and valid.
It was also pleaded that the delay in submission of the award was due to
unreasonable attitude adopted by the Board and its officials.
Learned Additional Senior Sub Judge, Patiala vide order
dated 24.7.1984 framed the following issues :-
1. Whether the award is liable to be set aside on
the ground as alleged in the objection
petition? O.P. Objector.
2. Whether the respondent is entitled to interest
as adjudicated in the award and also future
interest till the recovery of the amount ?
O.P.R.
3. Relief.
On the basis of the evidence and the material placed on the
record, learned Additional Senior Sub Judge, Patiala held that the award
was perfectly just and valid and the objections raised by the appellant-
Board were totally misconceived. Accordingly, the objections were
dismissed and the award made rule of the Court.
Learned counsel for the appellant has submitted that when the
request of the respondent for extension of time was granted by the
appellant-Board on 27.4.1981, it was specifically stated in its letter of the
even date that there would be no additional financial liability and the rates
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as prevalent during March, 1981 before the price rise announced by the
Government of India shall be applicable for the supply of the raw
material. Therefore, the respondent was not entitled to charge the price of
the material as per its own whims or fancies.
Initially in the agreement dated 11.9.1978 it was stipulated
between the parties, that the price of the material to be supplied by the
respondent was subject to variation depending upon the base price of the
raw material and there was to be no ceiling to the price variation. When
the respondent failed to supply the contracted material even by the
extended date and again applied for extension of time for completion of
its part of the agreement, its requests was accepted by the appellant-Board
on 27.4.1981 by extending the time for supply of the contracted material
upto 30.6.1981. At that time, it specified that such an extension was
without levy of any penalty and also without any additional financial
liability and the rates applicable for the supply of conductors was to be as
prevalent during March, 1981 but before the price rise as announced by
the Government of India. All other terms and conditions of the original
purchase order-cum-agreement were to remain the same. This implied
that any increase in the price of the raw material, was to be borne by
the appellant-Board in view of the specific mention made in Clause 2
of the agreement, which specified that there was to be no ceiling
to the price variation in case of any increase in the price of the raw
material within the extended time as granted by letter dated 27.4.1981.
F.A.O. No. 1097 of 1985 -6-
Even before the extension of time, as granted by appellant-Board on
27.4.1981, there was sharp increase in the price of the raw material in
view of Central Government notification dated 27.3.1981. Once the
appellant-Board had undertaken to bear any price esclation of the raw
material, it could not later on, on its own discretion, avoid paying higher
price to the respondent and, that too, in view of the Central Government
notification. The clause incorporated by the appellant-Board in its letter
dated 27.4.1981 regarding the price to be paid as prevalent during March,
1981, was an arbitrary and one sided step taken by it to the determinent of
the respondent. There was no clause in the original agreement that the
appellant-Board could change the terms and conditions of the same
without taking the respondent into confidence. Initially, it was agreed
between the parties that the price of the material was subject to variation
depending upon the base price of the raw material and there was to be no
ceiling to the price variation. None of the parties could unilaterally change
the said term and condition. On the other hand, the request made by the
respondent-Board for extension of time was duly entertained and accepted
by the appellant-Board. To that an extent, the original agreement could
be valid but no terms and conditions as relating to the price of the material
to be supplied. The stipulation regarding avoidance of financial
implication so made by the appellant-Board in its letter dated 27.4.1981
was, thus, rightly found to be not justified.
Another argument on behalf of the appellant is that the award
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was delivered by the Arbitrator after the expiry of the period of limitation,
therefore, the same could not have been made the rule of the Court.
As is apparent from the records, the Arbitrator entered upon
arbitration reference on 30.10.1982 when the first arbitration meeting took
place. The period for giving award was extended from time to time. Last
of all, on 6.2.1983, it was extended upto June, 1983. However, on
16.6.1983, the appellant-Board sought an adjournment of the case to
July, 1983. The proceedings were adjourned to 3.7.1983 when, once
again, similar request was made for some other date. It is, thus, made out
that the Arbitrator had to post-pone the proceedings on the basis of the
various requests made by the appellant-Board from time to time. No
material is available on the file to show that the respondent delayed the
proceedings pending before the Arbitrator.
No other point arises for consideration. The appeal is without
any merit and, therefore, dismissed.
( T.P.S. MANN )
November 06, 2008 JUDGE
satish
Whether to be referred to the Reporters : YES / NO