JUDGMENT
Sanjay Kishan Kaul, J.
Page 2448
1. The Department of Telecommunications (DOT), respondent herein, entered into an Agreement with M/s. Sterlite Industries (India) Ltd., petitioner herein, on 17.12.1996 for supply of PIJF underground cables on deferred payment basis for a total value of Rs. 15.94 crores to the Calcutta Circle of Page 2449 DOT. The delivery period under the Contract as per Clause 7.0 (b) was prescribed as four months and the delivery had to be at site basis by rail/road as per Clause 7.0 (a). The total quantity to be supplied under the Agreement was 1,74,000 CKM with Calcutta Circle of DOT prescribed as the consignee.
2. The petitioner completed the dispatch of 1,29,417.20 CKM of PIJF cables up to 31.3.1997. An all India strike of Lorry Transporters Association took place from 31.3.1997 to 11.4.1997 and the petitioner claimed that though it was ready and willing to supply the cables, on account of the strike there was stoppage of supply of raw material to the factory of the petitioner, which raw material was required for production of cables. It was further claimed that the material, which was already dispatched was held up at different points due to the lorry transporters strike and the factory of the petitioner had to be closed down for 11 days during the aforesaid period of time. The finished goods were also stated not to be transported due to the strike. The petitioner, thus, claimed that the force majeure clause would apply since the conditions were beyond the control of the petitioner. The petitioner vide letter dated 15.4.1997 requested for extension of delivery schedule by at least 25 days. The request was considered and the extension was granted up to 10.5.1997 without application of liquidated damages. The aforesaid letter reads as under:
Sub :Extension of Delivery period of the Balance quantities of PIJF Cables under Deferred payment Agreement
Ref. :Your No. SIIL SLD 04.08 dated 15.04.97
Dear Sir,
Please refer to your letter as stated in connection with the above subject.
The case was put up to the Competent Authority for consideration and I am directed to convey the following decision in the matter :
The delivery period of the balance quantity of stocks which could not be sent on account of nationwide transport strike is extended up to 10-05-1997 without application of LD Clause as per provisions under Clause No. 21, Viz Force Majeure Condition, in the Purchase Agreement.
All other terms and conditions of the said Purchase Agreement remains unchanged.
3. It is not disputed that the cables were supplied by the petitioner during the extended period of time. The matter was, however, raked up again after a lapse of almost two and a half years vide letter dated 22.9.1999. The background to the said letter apparently was an internal communication dated 10.11.1998. The letter reads as under:
Subject :Procurement of PIJF U/G Cable on deferred payment terms ‘Extension of delivery’ under Force Majeure.
Withdrawal of extension and regulation of prices.
In respect of the authorisation of procurement of PIJF U/G Cable vide this office letter No. 80-88/PIJF-3/DEP/Instructions/96 dated 22-11-1996 circles had entered into agreements with respective firms.
2. A case regarding applicable prices was referred to this Directorate for extension in delivery granted under Force Majeure Clause. A few circles had Page 2450 granted extension in dates of delivery under Force Majeure Clause No. 21 of the deferred payment agreement on account of All India Truck Transporters strike during April, 1997.
3. This case was examined and the following is intimated for implementation by all the concerned circles.
a) The extension under Force Majeure for this strike is not justified in view of the alternate medium of transport specified in the deferred payment agreement, i.e., Rail Transport.
b) In case any circle has granted extension in delivery under Force Majeure for any of the agreements under above authorisation on account of the above-referred transport strike to you be withdrawn immediately.
c) The excess payment, if any, due to above may be recovered immediately through adjustment of any of the outstanding payments to such a firm.
4. It may be noticed at this stage that the case that was referred to the Directorate for extension of delivery period is not the case of the petitioner. It was, however, found that since the clause in the Contract provided for delivery both by road or rail, the extension was not justified and thus any Circle, which had granted extension of delivery period under the force majeure clause should withdraw the same immediately and the excess payment be recovered through adjustment of outstanding payments to such firms. It is in pursuance to the aforesaid letter that on 22.9.1999, the demand was raised on the petitioner in the following terms:
NOTICE
Notice is hereby given to you
1) that Department of Telecommunications has entered in to an agreement with M/s. Sterlite Industries (India) Ltd. on deferred payment basis vide No. SP/PIJF/J/DFP/96-97/16 dt. 17.12.96
2) that the delivery schedule are up to 16.04.97
3) that your firm had failed to maintain delivery schedule and applied for extension without application of L/D
4) that this office had granted extension up to 19.06.97 under ‘Force Majeure’ without application of L/D, which subsequently has been withdrawn by DOT vide No. 80-88/PIJF-3/HP/96 (pt) dt. 10.11.98 resulting in excess payment of Rs. 28,81,725/-.
5)…
5. The aforesaid gave rise to the disputes between the parties. The Agreement dated 17.12.1996 contains an arbitration clause No. 25 for reference of disputes to sole arbitration of the Director General of DOT or an officer appointed by him. The matter went to Court in OMP No. 298/1999 and the learned single Judge of this Court passed an order on 3.11.1999 directing the respondent to take steps for reference of disputes to arbitration for determination regarding levy of liquidated damages. The Director General, DOT, in view thereof passed an order on 25.1.2000 appointing Shri H.C. Goyal, Chief General Manager, Telecom Factory, Calcutta as the sole arbitrator in the following terms:
Page 2451
Government of India
Ministry of Communications
Department of Telecommunications
Sanchar Bhawan, 20, Ashoka Road
New Delhi-110001.
No. 80-73/SIIL/OMP-298/99-VLF dated 25-01-2000
ORDER
1. Subject: Appointment of Arbitrator for determination of disputes between M/s. Sterlite Industries India Ltd. and Department of Telecommunications for Supply of 1.74 LCKM PIJF-3/U/G Cables under deferred payment agreement No. SP/PIJF/3/DFP/96-97/16 dated 17-12-96 to Calcutta Telephone Distt. – Reg. levy of liquidated damages against the supply of cables during extended period.
Whereas, in OMP No. 298/99 in the High Court New Delhi, the Hon’ble Justice Mr. S.N. Kapoor has passed an order on 03-11-1999 to take steps for referring the dispute to the Arbitrator for determination regarding levy of liquidated damage charges for the cables supplied during the extended period of delivery.
2. The undersigned, in exercise of powers under Clause-25 to deferred payment agreement No. SP/PIJF/3/DFP/96-97/16 dated 17-12-1996, hereby nominate and appoints Shri H.C. Goyal, Chief General Manager, Telecom Factory, Calcutta for determination and adjudication of the said dispute so far arbitrable.
3. The award shall be given at the earliest possible time. The venue of the arbitration shall be the office of CGM (TF), Calcutta or any office in Calcutta, as may be fixed at the discretion of the Arbitrator.
4. The CGM Calcutta Telephone Distt., Calcutta is authorised to nominate an officer of appropriate level who is fully conversant with the case to represent the case on behalf of CGM Telephones Calcutta Respondent No. 1 and DOT Respondent No. 2.
(Anil Kumar)
Director General
Department of Telecom,
Sanchar Bhavan, New Delhi.
To,
Shri H.C. Goyal, He is requested to kindly Chief General Manager, finalise the case within Telecom Factory, four months.
3-A, Chowringhee Place,
Calcutta-700013.
6. The arbitrator entered upon reference and the claim was filed by the respondent before the arbitrator. The claim, however, was not confined to the aspect of liquidated damages, which had earlier given rise to the disputes. The liquidated damages claimed was for Rs. 12,19,970/-, on account of delayed supply but a further claim was made on account of price variation.
Page 2452
7. The second aspect arises on account of the opening of the new tender for PIJF underground cables on 25.3.1997. There were certain doubts regarding applicable prices and thus a clarification was issued by the DOT dated 16.7.1997. A distinction was made in terms of the said clarification in respect of the Agreements entered upon prior to 25.3.1997 (which is so in the present case) and the subsequent Agreements. In respect of prior Agreements, the prices were to be calculated as per Clause 5.5 of the Agreement while in respect of subsequent Agreements, the applicable prices were to be the lower of the existing prices as per the Agreement or the prices finalised in the new tender enquiry opened on 25.3.1997 pending finalisation of prices. In pursuance to the tender opened on 25.3.1997 provisional prices were to be calculated @ 70% of the existing prices. The letter also provided that for the extension of delivery period, if any, in respect of Contracts entered upon into prior to 25.3.1997, the prices would be regulated in terms of the mechanism provided for post 25.3.1997 contracts. The letter reads as under:
F. No. 80-33/PIJF-3/96/VLF
DEPARTMENT OF TELECOM
(VLF CELL)
315, Sanchar Bhawan,
20, Ashoka Road,
New Delhi-110001.
Dated: 16-07-1997
Subject:Procurement of 107 LCKM PIJF U/G Cables on deferred payment terms Applicable rates for supplies after the opening of the new tender for PIJF U/G Cable on 25-03-1997.
Ref:DOT Letter No. 80-33/PIJF3/DFP/INSTRUCTIONS/96-VLF dated 22-11-1996
As certain Telecom Circles/vendors have raised doubts regarding applicable prices for the 107 LCKM of PIJF U/G Cable allocated vide this office letter referred above, the matter has been examined and the following is intimated with respect to the price(s) of the supplies on deferred payment.
(a) In respect of agreement(s) entered into prior to 25-03-1997 and for the supplies as per the stipulated delivery schedule mentioned in the DFP agreement the prices as per Clause 5.5 of the agreement shall apply. For extensions in delivery period, if any, the applicable prices shall be regulated as mentioned in para (b) below.
(b) In respect of agreement(s) entered into on or after 25-03-1997, if any, the applicable prices shall be the lower of the existing prices per the agreement (i.e., the prices per TE No. 14-21/94-MMT (MMS), subject to CD reduction) or the prices finalised in the new TE for PIJF U/G cable opened on 25-03-1997. Till such time the prices under the new tender opened on 25-03-1997 are finalised, provisional prices calculated @ 70% of the existing prices shall be used. The prices may be firmed up once the prices in the new tender are finalised.
(MANOJ ANAND
Director (PFC)
Page 2453
All Head of the Telecom Circles/IFAs concerned.
All vendors concerned.
8. The aforesaid letter was followed up with another letter dated 9.3.1998, which communicated the decision of the DOT to make one time payment in respect of all outstanding and balance installments in respect of Agreements entered into by the firms with various Telecom Circles in respect of Equated Quarterly Amount (EQA). The cut off for this one time payment was prescribed as 31.3.1998.
9. The arbitrator went into the aforesaid disputes.
10. It may be noticed that during the pendency of the arbitration, soon after the first arbitration proceedings, the arbitrator was transferred to Mumbai, as the Chief General Manager and thus issued a letter in December, 2000 to the petitioner informing it of the aforesaid fact and intimating that the venue would continue to be Calcutta. The arbitrator was thereafter transferred to Jabalpur and this was duly informed to the petitioner vide letter dated 16.5.2001. This fact is being mentioned since petitioner took a stand before the arbitrator and which is also the plea advanced before this Court, that the arbitrator could not have proceeded with the arbitration after transfer in view of the wordings of the arbitration clause and another person was liable to be appointed. The petitioner filed an application before the arbitrator to this effect dated 29.5.2001 but this request did not find favor with the arbitrator as per the order dated 9.11.2001. The petitioner inter alia also raised the plea about the arbitrator going beyond the subject matter of dispute/the order of reference since the arbitrator was appointed only on the issue of the levy of liquidated damages and could not thus have adjudicated on the aspect of the balance claim on account of price variation.
11. The arbitrator made and published the award dated 29.112004 making an award in favor of the respondent for the sum of Rs. 12,19,970/- on account of liquidated damages, a sum of Rs. 88,51,612/- on account of recovery of excess payment for prolongation of work, interest @ 11.25% per annum from 18.5.2001 till date of award and @ 18% per annum from 30.11.2004 till realisation. The parties were left to bear their own costs.
12. The petitioner aggrieved by the same has filed the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the said Act).
13. Learned Counsel for the petitioner contended that the scope of the objections fell within the parameters of a challenge to an award under the said Act as enunciated by the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. . Learned Counsel contended that inter alia the provisions of Section 34(2)(a)(iii) would come to the assistance of the petitioner as the petitioner was prevented from presenting the case on account of there being violation of principles of natural justice. In this behalf learned Counsel also drew strength from the observations made in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. case (supra). Page 2454 Learned Counsel further contended that the arbitrator had gone into disputes not contemplated by the arbitration in view of the nature of reference made and thus the award could be challenged under the provisions of Section 34(2)(a)(iv) of the said Act. It is also alleged that the award was contrary to the terms of the contract and was thus open to scrutiny in view of the provisions of Section 28(3) of the said Act.
14. The scope of scrutiny of an award by a Court is circumscribed by the provisions of the said Act. The nature and extent of such scrutiny has been elucidated by the Supreme Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. case (supra), which, in fact, enlarged the scope of scrutiny as compared to what was understood earlier. Learned Counsel for the petitioner was thus called upon to deal with the specific aspect forming subject matter of the challenge, so that the counsel for the respondent only responds to the same with the result that the Court would be called upon to adjudicate in respect of those specific aspects. Learned Counsel for the petitioner, thus, made submissions on different aspects on which the petitioner sought to impugne the award.
15. The first aspect canvassed by learned Counsel for the petitioner was that the arbitrator was not empowered to continue in that capacity after his transfer from Calcutta in view of the provisions of Clause 25 while learned Counsel for the respondent, on the other hand, submitted that the portions of Clause 25 relied upon by the learned Counsel for the petitioner were enabling provisions and it was not a case of appointment by designation but appointment by name of Mr. Goyal with only his designation specified thereafter.
16. In order to appreciate the aforesaid contention, the arbitration clause itself would have to be perused, which reads as under:
25. ARBITRATION:
25.1. In the event of any question, dispute or difference arising under this Agreement or in connection therewith except as to matter the decision of which is specifically provided under this Agreement, the case shall be referred to sole arbitration of the Director General of Department of Telecommunications or in case his designation is changed or his office is abolished, then in such case, to the sole arbitration of the officer for the time being entrusted whether in addition to the functions of the Director General, Department of Telecommunications or by whatever designation such officer may be called, (hereinafter referred to as the ‘said officer’) and/if the Director General or the sole arbitration or some other person appointed by the Director General or the ‘said officer’ is unable or unwilling to act as such, to the sole arbitration of some other person appointed by the Director General or the said officer.
There will be no objection to any such appointment that the arbitrator is Government servant or that he has to deal with the matter to which the Agreement relates or that in the course of his duties as Government servant, he has expressed views on all or any of the matter under dispute. The award of the arbitrator shall be final and binding on the parties. In Page 2455 the event of such arbitrator to whom the matter is originally referred, being transferred or vacating his office or being unable to act for any reasons whatsoever such Director General or the said officer shall appoint another person to act as arbitrator in accordance with terms of the Agreement and the person so appointed shall be entitled to proceed from the stage at which it was left out by his predecessors.
25.2. The arbitrator may from time to time with the consent of parties enlarge the time for making and publishing the award. Subject to aforesaid the Indian Arbitration Act, 1940 and the rules made there under, any modification thereof for the time being in force shall be deemed to apply to the arbitration proceeding under this clause.
25.3. The venue of the arbitration proceedings shall be the office of Director General, Department of Telecommunications at New Delhi or such other places as the arbitrator may decide.
17. There is no dispute that Mr. Goyal, the arbitrator was a person so appointed by the Director General, DOT in exercise of the powers conferred under Clause 25. In case that the appointed officer being unable or unwilling to act, some other person can be also appointed in place of the earlier arbitrator. The second paragraph of Clause 25 also provides that in case of an arbitrator to whom the matter is originally referred, being transferred or vacating his office or being unable to act for any reasons whatsoever, the Director General shall appoint another person to act in accordance with the terms of the Agreement. It is this aspect of transfer which is sought to be emphasised by learned Counsel for the petitioner to contend that the arbitrator is deemed to have vacated his position as an arbitrator on his transfer and another person was liable to be appointed in his place.
18. I am unable to accept the aforesaid contention of the learned Counsel for the petitioner. Clause 25 has to be read as a whole. The first part deals with the inability or unwillingness of the arbitrator to act and the replacement to be provided. The second paragraph is only an elucidation of the said aspect and gives the authority to the Director General to appoint a replacement arbitrator. The second paragraph, in fact, amounts to a waiver on the part of other contracting party from raising any objections on account of such replacement being provided. It was possibly envisaged that in case of transfer also the arbitrator may not be able to act and thus the Director General must be empowered to provide a replacement arbitrator. This is what has been provided in the second paragraph of Clause 25.1. This clause would not mandate that even if the arbitrator is willing to continue and the Director General is willing to permit him to continue the arbitrator must necessarily vacate office and a new arbitrator be appointed. Such an interpretation would do violence to the wordings and intent of the provision made in the arbitration clause. It may be noted that the arbitrator had even sought instructions from the Department but was asked to continue. The petitioner cannot derive benefit from this clause to canvass a proposition that the arbitrator was functus officio, the moment he was transferred. There is, thus, force in the contention of the learned Counsel for the respondent that the second part of Clause 25.1 has to be read as an enabling provision. Further the appointment of the arbitrator in the present case was by name.
Page 2456
19. The second aspect raised by learned Counsel for the petitioner is that the arbitral proceedings could not have proceeded or the award made against the petitioner. This plea arises from the fact that the rights under the Contract in question stood transferred to a different legal entity as per a scheme of amalgamation duly approved by the Court of competent jurisdiction. Learned Counsel pointed out by reference to the letter of appointment of the arbitrator itself that the Director General was also conscious of the fact that the new entity M/s. Sterlite Telecom Systems Limited has taken over the assets and liabilities of the petitioner in respect of the Contract in question. In this behalf, learned Counsel drew the attention of this Court to the letter dated 21.8.2001 addressed by the Deputy Director General to the arbitrator on a query raised by the arbitrator about his continuation as an arbitrator on the application filed by the petitioner objecting to his jurisdiction after transfer. The last paragraph of the said letter reads as under:
4. In this connection, you are also informed that the Bank Guarantee for Rs. 1,00,00,000/- has also been kept alive in this case and the BG has been submitted by M/s. Sterlite Optical Technologies Ltd., the new Company which has taken over the assets and liabilities of M/s. Sterlite Industries India Ltd. This may be taken note of please.
20. Learned Counsel for the petitioner pointed out that the scheme of arrangement between the petitioner and M/s. Sterlite Telecom Systems Ltd. was filed before the Bombay High Court. In terms of the scheme the Telecom Division of M/s. Sterlite was transferred and vested in or was deemed to be transferred to and vested in telecom company as per para 3 of the scheme. Sub para (d) of para 3 of the scheme provided as under:
(d) With effect from the Appointed Date, all debts, liabilities, contingent liabilities, duties and obligations of every kind, nature and description of Sterlite relatable to the Telecom Division shall also, under the provisions of Sections 391 and 394 of the Act, without any further act or deed, be transferred to or be deemed to be transferred to TelecomCo so as to become as from the Appointed Date the debts, liabilities, contingent liabilities, duties and obligations of TelecomeCo and it shall not be necessary to obtain the consent of any third party or other person who is a party to any contract or arrangement by virtue of which such debts, liabilities, contingent liabilities, duties and obligations have arisen, in order to give effect to the provisions of this Sub-Clause.
21. The aforesaid scheme thus envisaged that all debts and liabilities were deemed to be transferred to the telecom company. Not only that Clause 8 dealing with Contract and deeds provided that the same will be enforceable against the telecom company. Clause 8 reads as under:
8. CONTRACTS AND DEEDS
Subject to the other provisions of this Scheme, all contracts, deeds, bonds, agreements and other instruments, if any, of whatsoever nature relating to the Telecom Division and to which Sterlite is party and subsisting or having effect on the Effective Date, shall be in full force and effect against or in favor of Telecom Co, as the case may be, and may be enforced by or against Telecom Co as fully and effectually as if, instead of Sterlite, Telecom Co had been a party thereto. Telecom Co shall Page 2457 enter into and/or issue and/or execute deeds, writings or confirmations or enter into any tripartite arrangements, confirmations or novations, to which Sterlite which, if necessary, also be party in order to give formal effect to the provisions of this Scheme, if so required or becomes necessary Telecom Co shall be deemed to be authorised to execute any such deeds, writings or confirmations on behalf of Sterlite and to implement or carry out all formalities required on the part of Sterlite to give effect to the provisions of this Scheme.
22. The aforesaid scheme of arrangement was considered by the High Court of judicature at Bombay, which passed an order on 2.8.2000 sanctioning the arrangement embodied in the scheme. The order inter alia provided as under:
…THIS COURT DOTH HEREBY SANCTION the arrangement embodied in the Scheme of Arrangement between Sterlite Industries (India) Limited, the Transferor Company and Sterlite Telecom Systems Limited, the Transferee Company as set forth in Exhibit to the said Petition and also in the Schedule hereto annexed…. AND THIS COURT DOTH FURTHER ORDER that all legal proceedings pending by or against the Transferor Company relating only to its Telecom Division shall be continued and enforced by or against the Transferee Company….
23. Learned Counsel for the petitioner, thus, submitted that the directions passed by the competent Court being High Court of judicature at Bombay had clearly directed that all legal proceedings pending by or against the petitioner relating to the telecom division shall be continued and enforced by or against the new legal entity.
24. Learned Counsel for the petitioner submitted that the aforesaid orders were passed in furtherance of the provisions made in Section 394 of the Companies Act, 1956. The relevant portion of the said provision as it stood then reads as under:
Section 394. Provisions for facilitating reconstruction and amalgamation of companies. (1) Where an application is made to the Court under Section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court
(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies; and
(b) That under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a transferor company)is to be transferred to another company (in this section referred to as the transferee company);
The Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:
(i) the transfer to the transferee company of the whole or any part of the undertaking property or liabilities of any transferor company;
Page 2458
(ii) the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;
(iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;
(iv) the dissolution, without winding-up of any transferor company;
(v) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; and
(vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out:
Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound-up, with any other company or companies, shall be sanctioned by the Court unless the Court has received a report from the Company Law Board or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest:
Provided further that no order for the dissolution of any transferor company under Clause (iv) shall be made by the Court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the Court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.
25. Learned Counsel submitted that a reading of Section 394(b)(iii) would show that the Court is competent to make provisions for all the matters provided therein including in respect of continuation of legal proceedings and that is exactly what has been done in the present case.
26. Learned Counsel submitted that it is not a case where the respondent is unaware of what had happened. Apart from the letter of the Director General referred to above, the petitioner filed an application specifically annexing all these documents to pray to the arbitrator for deletion of the petitioner from the array of parties. The respondent filed a reply to the same and in para 6 of the reply agreed with the prayer made by the petitioner and made the further request that a substitution must take place in view of the orders passed by the High Court of judicature at Bombay. Despite both the parties taking their stand in this behalf, as set out aforesaid, the arbitrator declined the request vide order dated 4.7.2002. The said order dealt with multiple aspects but insofar as the aforesaid aspect is concerned all that has been stated is that since the scheme of arrangement provided that any question that may arise as to whether a specific asset or liability pertain or does not pertain to the telecom division is to be decided by the Board of Directors of the two companies, it was not necessary to delete the petitioner. It was further observed that the substitution of the parties to the dispute at this stage Page 2459 would cause delay in the award and thus defeat the provisions of the said Act, especially as the defense has already been filed by the petitioner.
27. Learned Counsel for the respondent did not dispute that the respondent had no serious objection to the substitution but contended that setting aside an award at this stage on this technical ground would cause grave prejudice to the respondent. Learned Counsel also referred to Clause (d) of para 3 of the scheme to contend that no consent of a third party was required for the scheme to come into operation.
28. In my considered view, the arbitrator has fallen into a grave error of law in proceeding to decide an arbitration matter against a legal entity, which was no more bound to the contract in question and a new legal entity had taken over the rights and obligations under the Contract. The reasoning given by the arbitrator for rejecting the application of the petitioner is specious. There would be no question of delay in arbitration proceedings since all that was required was a notice to the new legal entity where after the new entity would have been substituted as a party in place of the petitioner. The petitioner made a specific prayer by filing an application and the same was not even seriously disputed by the respondent, if the averments made in the reply are taken into consideration. The respondent, in fact, was right in seeking substitution instead of mere deletion of the petitioner in view of the orders passed by the High Court of judicature at Bombay. It is trite to say that the effect of the approval of the scheme by the High Court of judicature at Bombay would be that the same applies in rem and there would be a legal incapacity to proceed against the petitioner in respect of the subject matter. The Court concerned took into consideration that the approval of the scheme of arrangement goes into all the aspects and thereafter passed an order. Such aspects includes the protection of creditors and debtors of the entities. The scheme clearly provided for transfer of complete telecom division. The submission made by the learned Counsel for the respondent by relying on Clause 3 (d) of the scheme, in fact, supports the stand of the petitioner that from the appointed date nothing more was required to be done and the assets and liabilities stood transferred. The order of the Bombay High Court and the portions reproduced hereinabove as referred to by learned Counsel for the petitioner leave no manner of doubt in this behalf. The reasoning given by the arbitrator in the order dated 4.7.2002 by relying on Clause 1.7.5 also cannot be accepted. The said clause reads as under:
1.7.5 Any question that may arise as to whether a specific asset or liability pertains or does not pertain to the Telecom Division or whether it arises out of the activities or operations of Telecom Division shall be decided by mutual agreement btween the Board of Directors of Sterlite and the Board of Directors of TelecomCo.
29. The aforesaid would be a question to be determined, if there was any dispute whether a particular asset or liability did or did not pertain to telecom division. There was no such dispute nor any such dispute was raised before the arbitrator. The arbitrator shut the door by not even issuing notice to the new legal entity.
30. The expedition of any arbitration proceeding is certainly desirable but the expedition cannot imply that the legal requirements have to be given a go by. Page 2460 The arbitrator incidentally took almost five years from the date of reference to make the award and it can, thus, be hardly an expedited matter.
31. I am thus of the considered view, that the award suffers from a legal infirmity inasmuch as it proceeded against the petitioner while the petitioner was not liable to the respondent in respect of the transaction in question after the approval of the scheme of amalgamation and the award is, thus, liable to be set aside on this ground.
32. The third aspect canvassed by learned Counsel for the petitioner is on a para materia basis in respect of the respondent entity arising from the plea that it is Bharat Sanchar Nigam Limited (BSNL), which was concerned with the matter in question and not DOT.
33. The petitioner in this behalf had also moved an application seeking directions for deleting DOT as a party and substituting in its place BSNL. The application sets out that the arbitration proceedings were initiated in pursuance to the order dated 3.11.1999 by the learned single Judge of this Court in OMP No. 298/1999. The Office Memorandum dated 3.9.2000 had been issued by the Government of India, Ministry of Communications in terms whereof all assets and liabilities of DOT in respect of the telecom operations had been transferred to and vested in BSNL w.e.f. 1.10.2000. This Office Memorandum was not disputed and it is in view thereof the substitution had been sought.
34. A reply had been filed by the respondent wherein the Office Memorandum was accepted and it was stated that such substitution can still be accepted at a later stage. The prayer made was for substitution of BSNL as a claimant as a successor and assign of DOT.
35. Once again, despite the aforesaid stand of the parties, the arbitrator for reasons best known to him proceeded to reject the request of the petitioner vide order dated 4.7.2002. It appears that the arbitrator was under a misconception arising from the orders passed by the High Court and his consequent appointment as an arbitrator inasmuch as the arbitrator perceived that this fact ought to have been brought to the notice prior to passing of the orders by the High Court on 28.11.2000 when extension of time was granted. The arbitrator failed to appreciate that nothing restricted the authority of the arbitrator, especially in view of the stand of the two parties to carry out the substitution.
36. The arbitrator has also taken into consideration the submission of the learned Counsel for the respondent that DOT can continue to conduct the proceedings as an assignee of BSNL. It is this aspect, which emphasised now by learned Counsel for the respondent. It would be relevant to reproduce the Office Memorandum, which is as under:
No. 2-31/2000-Restg.
Government of India
Ministry of Communications
Department of Telecommunication Services
New Delhi, the 30th September 2000
OFFICE MEMORANDUM
Page 2461
Subject:Transfer and assigning of existing and subsisting contracts, agreements and Memoranda of Understanding of the Department of Telecommunications, Department of Telecom, Services and Department of Telecom Operations to Bharat Sanchar Nigam Limited
In pursuance of New Telecom Policy, 1999 the Government of India has decided to corporatise the service provision functions of Department of Telecommunications (DoT). Accordingly, the undersigned is directed to state the Government of India has decided to transfer the business of providing telecom services in the country currently run and entrusted with the Department of Telecom Services (DTS) and the Department of Telecom Operations (DTO) as was provided earlier by the Department of Telecommunications to the newly formed Company viz., Bharat Sanchar Nigam Limited (the Company) with effect from 1st October 2000. The Company has been incorporated as a company with limited liability by shares under the Companies Act, 1956 with its registered and corporate office in New Delhi.
2. The Department of Telecom Services and Department of Telecom Operations concerned with providing telecom services in the country and maintaining the telecom network telecom factories were separated and carved out of the Department of Telecummunications as a precursor to corporatisation. It is proposed to transfer the business of providing telecom, services and running of telecom factories to the newly set up Company, viz., Bharat Sanchar Nigam Limited w.e.f. 1st October 2000. The Government has decided to retain the functions of policy formulation, licencing, wireless spectrum management, administrative control of PSUs, standardisation & validation of equipment and R & D etc. These would be responsibility of Department of Telecommunications (DoT) and Telecom Commission.
3. Government of India has decided to transfer all assets and liabilities (except certain assets which will be retained by Department of Telecommunications required for the units and offices under control of DoT, to be worked out later on) to the Company with effect from 1st October 2000. All the existing contracts, agreements and MoUs entered into by Department of Telecommunications Department of Telecom Services and the Department of Telecom Operations with various suppliers, contractors, vendors, companies and individuals in respect of supply of apparatus and plants, materials, purchase of land and buildings and supply of services, subsisting on date of transfer of business and/or required for operations of the Company and with subscribers of all types of services to be provided by the Company, will also stand transferred and assigned to the Company with effect from 1st October 2000. The Company will be solely responsible for honouring these contracts, agreements and MoUs for their due performance Page 2462 and in case of disputes to sue and be sued as the successor /assignee under the contract, agreement and MoU.
4. The Company Bharat Sanchar Nigam Limited will file suitable required appearances/memos in all pending cases before the Courts, Tribunals, Arbitrators, Adjudicators in all matters except issue of licensing and policymaking which are with the Department of Telecommunications. The Company may get substituted or become an additional party as the case may be, or just conduct the cases as assigns or successor in interest of the Government/Department of Telecommunications as permissible. This may in so far practicable be completed by 31st December 2000.
5. In respect of matters relating to personnel (Government servants) pending before various Administrative Tribunals, High Courts and Supreme Court the Company will defend as assigns or successor in interest as per existing rules till the time employees are on deemed deputation with the Company.
6. Any judgment/order/award delivered by an Authority/Tribunal/Court/Arbitrator in respect of all the matters described there shall be implemented in letter and spirit by the Company, in accordance with rules, regulations directions and statutes.
7. These instructions will come into force with effect from 1st October 2000.
(VINOD VAISH)
Secretary to the Government of India
To,
1. The Secretary, DoT and Chairman Telecom Commission.
2. The Secretary, DTS.
3. The Secretary, DTO and Member (Prod.) Telecom Commission.
4. Member (Finance) Telecom Commission.
5. Member (Services) Telecom Commission.
6. Member (Technology) Telecom Commission.
7. Additional Secretary (T) and Secretary Telecom Commission.
8. Joint Secretary (T), DoT.
37. A reading of the aforesaid Memorandum shows that all assets and liabilities of DOT stood transferred to BSNL w.e.f. 1.10.2000 and BSNL was required to file suitable appearances/memos in pending cases. The Office Memorandum, however, provided that the option was with the BSNL to get substituted or become an additional party or just conduct the case as an assignee or successor in interest of DOT. This had to be done insofar as practicable. Learned Counsel for the respondent submitted that a number of cases had been conducted by BSNL without any substitution while continuing to act as an assignee of the DOT in terms of the Office Memorandum.
38. In my considered view, though it would have been advisable to get BSNL substituted as a party instead of DOT, the same would not have any effect on Page 2463 the arbitration proceedings in view of the specific provision made in para 4 of the Office Memorandum dated 30.9.2002 in terms whereof the BSNL could have continued as an assignee of DOT. In view of the specific provision being made in the Office Memorandum, the plea of the petitioner impugning the award is rejected.
39. The next submission advanced by learned Counsel for the petitioner was on account of the lack of adequate opportunity to present the case and thus the principles of natural justice being violated. This plea is based on the provisions of Section 34(2)(a)(iii) and Section 18 of the said Act. The said provisions read as under:
34. Application for setting aside arbitral award.
(1)…
(2) An arbitral award may be set aside by the Court only if
(a) the party making the application furnishes proof that –
(i)…
(ii)…
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
18. Equal treatment of parties. – The parties shall be treated with equality and each party shall be given a full opportunity to present his case.
40. Learned Counsel for the petitioner submitted that the basic sub-stratum of the decision to reopen the case arose on account of a stand that the petitioner and such other suppliers had the option to make supply either through rail or road. Thus, even if there was a strike by the lorry transporters, the petitioner had the option to make the supplies through rail. The arbitrator came to the conclusion that it was open to the petitioner to use rail containers in case there was a lorry transporters strike.
41. In view of the stand taken by the respondent, the petitioner had sought an opportunity to produce the relevant evidence not only in respect of the transporters strike but also to show that the rail container services were not available for the particular site. The application for the same was, however, rejected by the order dated 28.1.2004.
42. A reading of the proceedings before the arbitrator of 28.1.2004 show that the petitioner’s case was that it wanted to produce two outside witnesses being the authorised Office Bearer of the All India Lorry Transporters Association and the Station Master, Balsad or any other Railway Officer of the said Railway Station. The production of the witness from the Railways was sought on the ground that it had to be enquired whether there was any railway head at Silwasa, whether there is container service at Silwasa, whether booking of material can be made from Silwasa or some other railway station apart from the letter produced along with the affidavit of the petitioner written by the Chief Goods Superintendent, Balsad being disputed by the respondent on the ground that it did not speak about the container services. The arbitrator came to the conclusion that no useful purpose shall be served by summoning the said witnesses and ruled out the production of the two witnesses. However, to meet the ends of justice, the parties were permitted Page 2464 to produce documents including documentary evidence, if applying to Railways for container services/booking by Railways.
43. Learned Counsel for the respondent, on the other hand, contended that the arbitrator is the final authority on both the quantity and quality of evidence and if the arbitrator finds that permission to file documents would suffice, no grievance can be made in that behalf.
44. In my considered view, there is no doubt about the legal proposition that normally it is the arbitrator, who is the final authority on the aforesaid issue. This Court also does not sit as a Court of appeal over any direction or order of the arbitrator. However, in case of there being a conduct of the arbitrator whereby one of the parties is unable to present the case as set out within the parameters of Section 34(2)(a)(iii) this Court is not helpless especially in view of the observations made in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. case (supra).
45. It has to be kept in mind that the crucial issue on which the respondent sought to open the case was that the extension of time ought not to have been granted to the petitioner and such suppliers on account of availability of alternative modes of conveyance ought to have been made. Thus, the availability of transportation through Railway services was not only germane to the issue but was the very sub-stratum of the reopening of the case by the respondent. The arbitrator has also come to the conclusion that the option to transport cables through rail container was open to the petitioner. The stand of the petitioner was that there were no such railway containers available from the nearby Railway Station. This evidence was thus extremely material. The only question is whether the liberty granted to the petitioner to produce any documents in this behalf would meet the ends of justice. In my considered view, the answer to the same would be in the negative for the reason that the Railways is a Government Department and is not part of the petitioner. The petitioner can only request for certain documents but the evidence would really be adduced on production of the relevant officer from the Railways to depose in this behalf. It is surprising that on such crucial issue the arbitrator shut out the petitioner from the right to produce the relevant witness, who was not under the control of the petitioner and could not have been produced by the petitioner at its own responsibility. The documents in this behalf were also not in control of the petitioner. The amount of time spent by the arbitrator in deciding this issue was, in fact, possibly more than the time which would have been taken to summon the witness on this limited aspect.
46. In my considered view, the award does suffer from the infirmity canvassed by learned Counsel for the petitioner.
47. The fifth submission advanced by learned Counsel for the petitioner was based on the plea that the award is beyond its reference or what was submitted to be adjudicated by the arbitrator. Thus, it fell in a category of a Page 2465 case where the dispute was not contemplated by the arbitration and thus could be set aside in view of the provisions of Section 34(2)(a)(iv) of the said Act, which are as under:
34. Application for setting aside arbitral award.
(1)…
(2) An arbitral award may be set aside by the Court only if
(a) the party making the application furnishes proof that –
(i)…
(ii)…
(iii)…
(iv) the arbitral award deals with a dispute not contemplacted by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbtration can be separate from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
48. Learned Counsel in this behalf referred to the order dated 25.1.2000, itself appointing the arbitrator, the letter has already been reproduced hereinabove and the subject matter states Re: Levy of liquidated damages against the supply of cables during the extended period. The order also goes on to state that the High Court on 3.11.1999 had directed for reference of disputes to the arbitrator for determination regarding levy of liquidated damages charges for cable supplied during the extended period of delivery. Thereafter, the second paragraph of the order dated 25.1.2000 records that the undersigned (who is the Director General) appoints the arbitrator concerned for determination and adjudication of the said dispute so far arbitrable.
49. The notice issued by the arbitrator dated 19.4.2000 pursuant to his appointment also refers only to the said dispute of liquidated damages. It was, thus, submitted that apart from this dispute, it was not open to the arbitrator to go into the dispute of price variation. In fact, neither any demand was made on account of such prices nor was there any dispute and thus there could be no question of submission of such disputes to arbitration. Learned Counsel pointed out that this plea was specifically raised but was not even dealt with in the award.
50. There can be really no dispute in view of the pleadings of the parties that such objection was raised by the petitioner. A reference to the written synopsis also shows that a specific plea in this behalf has been raised in para 16.3 and 16.4 of the submissions followed by reference to a catena of judgment referred in para 16.5 of the submissions.
51. Learned Counsel for the respondent sought to rely upon the judgment of the learned single Judge of the Bombay High Court in Union of India v. MAA Agency and Anr. 2003 (2) Arbitration Law Reporter 402 to contend that such Page 2466 a defense should be taken not later than the statement of defense. In the said case the facts of the said case as recorded by the Hon’ble Judge show that no objection was raised before the arbitrator as regards to his jurisdiction to entertain the additional claim or with regard to the arbitrability of the claim. It is in view thereof the Court considered the impact of the provisions of Sections 4 & 16 of the Act, dealing with the waiver of the right to object. Learned Counsel also referred to the judgment of the Supreme Court in Narayan Prasad Lohia v. Nikunj Kumar Lohia and Ors. , which laid down that if a party chooses not to object the jurisdictional issue within the time prescribed under Section 16(2) of the said Act, the same will be a deemed waiver under Section 4 of the said Act. Sections 4 & 16 read as under:
4. Waiver of right to object. – A party who knows that –
(a) any provision of this Part from which the parties may derogate, or
(b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.
16. Competence of arbitral tribunal to rule on its jurisdiction. – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose, –
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defense; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in Sub-section (2) or Sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in Sub-section (2) or Sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
Page 2467
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34.
52. The Bombay High Court, thus, held that in view of the provisions of Sub-section 2 of Section 16, a plea that the arbitral tribunal does not have jurisdiction has to be raised not later than the submission of the statement of defense. Similarly under Sub-section 3 of Section 16, it has been provided that a plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
53. There can be, once again, no dispute about the legal proposition laid down in the said judgment by reference to the pronouncements of the Apex Court but the same would have no application in the present case since the respondent raised this plea at the threshold.
54. The facts of the present case show that the only dispute raised and the claim made was about liquidated damages and the said claim was refuted by the petitioner. The same formed subject matter of the OMP where a direction was issued that the matter should be referred to arbitration. The order of reference as well as letter of the arbitrator seeking to adjudicate upon the dispute makes it clear that the subject matter before the arbitrator was only about liquidated damages. In such a case, the petitioner was within its rights to object to the adjudication on account of price variation and there was merit in the plea of the petitioner. The arbitrator has not even dealt with this plea or with the authoritative pronouncements referred to in the written synopsis in this behalf.
55. In view of the aforesaid, I am of the considered view, that the award is liable to be set aside on this account.
56. Learned Counsel for the petitioner in addition to the plea about the lack of authority of the arbitrator to adjudicate on the claim arising out of the pricing submitted that in any case the award even on merits is contrary to the terms of the Contract and is thus open to judicial scrutiny under Sub-section 3 of Section 28 of the said Act, which reads as under:
28. Rules applicable to substance of dispute. –
(1)…
(2)…
(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.
57. Insofar as the issue of pricing is concerned Clause 5.5 deals with applicable prices and reads as under:
5.5 Applicable Prices:
(a) The prices of the PIJF U/G Cables for the purpose of obtaining present quantity on deferred payment terms shall be provisional till applicable prices are available and have been calculated @ 95% of the total price(s) (inclusive of all taxes and duties) finalised in tender No. 14-21/94-MMT (MMS) dated 24.01.1995 of DoT in respect of PIJF U/G Cables. The applicable prices (final and Page 2468 payable for the present quantity on deferred payment terms) shall be the prices under T.E. No. 14-21/94-MMT (MMS) opened on 24.01.1995 adjusted to the customs duty reduction in the budget for 1996-97.
(b) The payment of QA/EQA (based on provisional prices and calculated in accordance with para 12 below) shall be provisional till finalisation of applicable prices.
(c) After the finalisation of applicable prices as explained above, the new QA/EQA shall be calculated in accordance with para 12 below. The unpaid and outstanding Installments of QA/EQA shall accordingly be revised. The unencashed post-dated cheques with the supplier shall be returned by the supplier within 15 days of intimation from the Paying Authority for issue of revised cheques for new amount of EQA. Alternatively, in case EQA amount is higher, additional post-dated cheques (with same as the balance unencashed cheques) for the difference will be released to the suppliers.
(d) After finalisation of new amount of QA/EQA the paying authority shall inform the supplier of the total amount paid short/excess in respect of the Installments of EA/EQA whose payment has already been made and drawn by supplier.
(e) The amount due to supplier, if any, as a result of adjustment as per para (d) above, shall be paid by the paying authority.
(f) No increase in rates/levies shall be allowed during the currency of the firm Purchase Order. Any increase in taxes and other statutory duties/levies during the extended delivery period after the expiry of the scheduled delivery date shall be to the suppliers’ account. However, benefit of any decrease in these taxes/duties or downward trend in prices of principal raw materials during the scheduled or extended delivery period shall be passed on to the Purchaser by the supplier.
58. Learned Counsel submitted that the aforesaid clause formed a part of the bilateral contract dated 17.12.1996.
59. The arbitrator has come to the conclusion that Clause 5.5 of the Contract has to be read with the DOT clarification dated 16.7.1997, which provides for applying lower of the existing prices as per the Agreement or rates finalised in the new tender opened on 25.3.1997, for delayed supplies. This conclusion was alleged to be erroneous by learned Counsel for the petitioner on account of the fact that there could not be any unilateral clarification by DOT dated 16.7.1997 referring to the opening of a new tender on 25.3.1997. It was, thus, submitted that post 1997 contract parameters could not have been applied to the earlier contract where extension had been granted since the original contract could not be changed unilaterally.
60. Learned Counsel for the petitioner contended that the levy of liquidated damages in any case is erroneous in law. The petitioner had set forth the ground for extension of delivery period in terms of the letter dated 15.4.1997, as has been discussed hereinabove and sought an extension of 25 days time on account of various ramifications arising from the Page 2469 transporters strike. These ramifications arose out of failure of the supply of raw material leading the supplies being stuck on the way and further supplies being made. Not only this, the factory of the petitioner had to be closed down on account the transporters strike. Learned Counsel submitted that it is not the case of the respondent that the extension of time sought on account of force majeure was not granted by the competent authority. A reading of the response of the respondent to the request of the petitioner would show that the matter was put up to the competent authority for consideration and the plea of the petitioner for extension of time without application of liquidated damages was accepted. The matter, thus, stood concluded and could not have been raised again.
61. Learned Counsel also pointed out that the internal circular dated 10.11.1998, which gave rise to the demand was, in fact, a general circular without any examination of a particular case. The question, thus, raised was whether in pursuance to such a general circular could the matter have been reopened when there was no doubt raised about the authority taking the decision in that behalf
62. In my considered view, the answer to the aforesaid question would be in the negative and there is force in the contention of the learned Counsel for the petitioner. It is not in dispute that the demand had been raised for the first time after two and a half years of the supply being concluded and the payments being made. The issue was raised vide letter dated 22.9.1999. The matter of estoppel is of substantive law. Even in the statement of claim, it is not the case of the respondent that the authority, which accepted the plea of the petitioner of force majeure was, in fact, not vested with the authority to take the decision in that behalf. There is no challenge to the authority of any one.
63. The findings arrived at by the arbitrator are stated not even based on any plea advanced in the statement of claim. The findings recorded are as under:
Irrespective of whether Divisional Engineer (SP) Kolkata Telephones was having authority to issue such letter or not, the fact remains that the extension of delivery period as per letter dated 10.5.97 of Divisional Engineer (SP) is applicable only for stores which could not be dispatched due to transporter’s strike i.e. the stores which were lying fully manufactured duly inspected & passed by QA wing of the DOT. The Claimant has also proved beyond reasonable doubt that as on 31.3.97 the date of commencement All India Transporter’s strike the Respondents have not even manufactured the cables as they were yet to get raw materials required for manufacture of cables.
Under the circumstances I hold that Respondents are responsible for delay in manufacture of cables and the delay in supply of the cables by scheduled delivery date is attributable solely to them as they did not procure sufficient raw-materials as required for manufacture of all cables as on 31.3.97 and hence the plea that delivery date has been extended by Divisional Engineer (SP) Kolkata Telephones in his letter dated 15/4/97 does not hold water. Had there been no All India Road Transporter’s Strike, the respondent could not have delivered the cables Page 2470 on or before 16/4/97 the date of scheduled delivery specified in the contract. Hence I hold that Respondents are liable to compensate the Claimant by way of LD for delay which is solely attributed to the Respondents as per Clause 19 of the contract.
64. The arbitrator, in my considered view, has failed to appreciate that once the authority of the officer deciding the matter on behalf of the respondent is not disputed then there must be a finality attributable to such decision and the matter cannot be reopened. The case made out by the arbitrator has not even been set forth in the statement of claim and there is absence of any such pleading. The goods had been supplied and payments were made.
65. Learned Counsel for the respondent, on the other hand, submitted that the plea of the petitioner is really based on waiver and estoppel and since the petitioner failed to establish its case by leading appropriate evidence, the benefit should not be made available to the petitioner of the said plea. In this behalf, learned Counsel referred to the judgment of the Apex Court in Sharma Transport v. Government of A.P. and Ors. . Portions referred to by learned Counsel are as under:
13.Next plea is the oft-repeated one of promissory estoppel. It has to be noted that even though a concession is extended for a fixed period, the same can be withdrawn in public interest. In STO v. Durga Oil Mills it has been held by this Court that a notification granting exemption of tax can be withdrawn at any point of time. There cannot be estoppel against any statute. Where it is in public interest, the Court will not interfere because public interest must override any consideration of private loss or gain (see Kasinka Trading v. Union of India . In Shrijee Sales Corporation v. Union of India it was observed that where there was supervening public interest, the Government is free to change its stand and withdraw the exemption already granted. One such reason for changing its policy decision can be resource crunch and the loss of public revenue. There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel, clear sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expression, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. The principle of promissory estoppel is that where one party has by his word or conduct made to the other a clear and unequivocal promise or representation which is Page 2471 intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inquitable to allow him to do so, having regard to the dealings which have taken place between the parties. The doctrine of promissory estoppel is now well-established one in the field of administrative law. The foundation for the claim based on the principle of promissory estoppel in public law was laid by Lord Denning in 1948 in Robertson v. Minister of Pensions (1949) 1 KB 227 : (1948) 2 All ER 767. Prof. de Smith in his Judicial Review of Administrative Action (4th Edn. at p. 103) observed that the citizen is entitled to rely on their having the authority that they have asserted.
24. It is equally settled law that the promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is prohibited by law or which was devoid of the authority or power of the officer of the Government or the public authority to make. Doctrine of promissory estoppel being an equitable doctrine, it must yield place to the equity, if larger public interest so requires, and if it can be shown by the Government or public authority for having regard to the facts as they have transpired that it would be inquitable to hold the Government or public authority to the promise or representation made by it. The Court on satisfaction would not, in those circumstances raise the equity in favor of the persons to whom a promise or representation is made and enforce the promise or representation against the Government or the public authority. These aspects were highlighted by this Court in Vasantkumar Radhakisan Vora v. Borad of Trustees of the Port of Bombay , STO v. Shree Durga Oil Mills (supra) and Ashok kumar Maheshwari (Dr) v. State of U.P. . Above being the position, the plea relating to promissory estoppel has no substance.
66. I fail to appreciate the relevance of the aforesaid plea advanced by learned Counsel for the respondent. In the present case, one is not concerned with any estoppel by a statute or an element of public interest, as sought to be canvassed by learned Counsel for the respondent. The matter pertains to a purely commercial transaction and what was agreed to between the parties. The price mechanism is set out in the Contract. The subsequent circular can only apply to what has been agreed upon in respect of the later tender enquiry. The present case is not relating to the same tender enquiry but to a prior Page 2472 tender enquiry. The parties must be bound by the terms of the Contract, which is Clause 5.5. A unilateral clarification issued subsequently by DOT cannot be changed in terms of the contract.
67. The present case is one where extension has been granted in respect of a Contract in pursuance to an earlier tender enquiry by a duly authorised person. Thus, the clarification can have no application to the present case. The respondent is seeking to apply the clarification to the earlier contract claiming that this is an extended delivery period and thus a different methodology of price mechanism should apply. Thus, even on merits, the claim of the respondent is fallacious.
68. I am thus of the considered view that on the basis of some general circular with no reference to the facts of a case, the matter which stood concluded between the parties two and a half years back on the issue of extension of time could not have been reopened. It must be appreciated that the petitioner asked for extension of time and thereafter made supplies during the extended period of time and received payments for the same. The petitioner, thus, acted on the decision of the respondent to extend the period of time by making supplies and the matter, thus, stood concluded long time back. Merely because after lapse of considerable period of time there is a general observation that such extension ought not to have been granted without doubting the authority of the person, who took the decision on behalf of the respondent, cannot be a ground to reopen the chapter. The respondent is estopped from doing so. The petitioner is, thus, entitled to succeed on this ground.
69. The last submission of the learned Counsel for the petitioner is based on the plea that the liquidated damages could not have been imposed as they were really not in the nature of genuine pre-estimate of damages and no adjudication took place about the quantum of damages. The plea has been considered by the arbitrator and it has been held that the damages were genuine pre-estimate of what the parties perceived to be correct damages and thus, no adjudication on the quantum was required to be made.
70. Learned Counsel for the petitioner referred to Clause 19, which dealt with the issue of liquidated damages. The clause reads as under:
19. LIQUIDATED DAMAGES:
19.1 The date of delivery of the goods stipulated in this Agreement should be deemed to be the essence of the contract and delivery must be completed not later than the dates specified therein. Extension will not be given except in exceptional circumstances. Should, however, deliveries be made after expiry of the contracted delivery period, without prior concurrence of DOT, and be accepted by the consignee, such deliveries will not deprive DOT of its right to recover liquidated damages under Clause 19.2 below. However, when supply is made within 21 (twenty one) days of the contracted original delivery period, the consignee may accept the stores and in such cases the provision of Clause 19.2 will not be applied.
19.2 Should the supplier fail to deliver the goods or any consignment thereof within the period prescribed for delivery, the Department of Telecommunications shall be entitled to recover 0.5% of the Page 2473 value of the delayed supply for each week of delay or part thereof, subject to maximum of 5% of the value of the delayed supply, provided that delayed portion of the supply does not in any way, hamper the commissioning of the route. Where the delayed portion of the supply materially hampers installation and commissioning of the route, liquidated damage charges shall be levied is above on the total value of the route. Liquidated damages so levied shall be deducted from the invoice value for computation of QA/EQA as per para 12 above.
71. Learned Counsel contended that Clause 19.1 envisages that if the supply is made within 21 days of the original delivery period, the consignee may accept the stores and in such case provisions of Clause 19.2 will not be applied. However, it is not in dispute that supplies were made beyond 21 days though within 25 days. Thus, in my considered view, the same would not be of much assistance to learned Counsel for the petitioner.
72. The submission of the learned Counsel for the respondent is that the present case is not of imposition of any penalty.
73. In my considered view, that Clause 19.0 provides for the quantum of liquidated damages for each week of delay subject to a maximum cealing. The parties have agreed to this as a genuine pre-estimate of damages, which is not really by way of a penalty. In the present case, however, the question of imposition of any liquidated damages cannot arise for the reason that the respondent itself had granted extension of time without imposition of liquidated damages on a request being made by the petitioner and the goods had been supplied by the petitioner thereafter and the payments made to the petitioner. Thus, this plea would really be an academic exercise even otherwise.
74. In view of what has been stated above, the award of the sole arbitrator, Shri H.C. Goyal, dated 29.11.2004 cannot be sustained and is accordingly set aside. The petitioner shall also be entitled to costs quantified at Rs. 7,500/-.