{"id":219030,"date":"2001-10-09T00:00:00","date_gmt":"2001-10-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/maharashtra-state-electricity-vs-sterilite-industries-india-on-9-october-2001"},"modified":"2018-01-16T16:51:54","modified_gmt":"2018-01-16T11:21:54","slug":"maharashtra-state-electricity-vs-sterilite-industries-india-on-9-october-2001","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/maharashtra-state-electricity-vs-sterilite-industries-india-on-9-october-2001","title":{"rendered":"Maharashtra State Electricity &#8230; vs Sterilite Industries (India) &amp; &#8230; on 9 October, 2001"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">Maharashtra State Electricity &#8230; vs Sterilite Industries (India) &amp; &#8230; on 9 October, 2001<\/div>\n<div class=\"doc_author\">Author: R Babu<\/div>\n<div class=\"doc_bench\">Bench: S. Rajendra Babu, Doraiswamy Raju<\/div>\n<pre>           CASE NO.:\nSpecial Leave Petition (civil) 12883-12884  of  2000\n\n\n\nPETITIONER:\nMAHARASHTRA STATE ELECTRICITY BOARD\n\n\tVs.\n\nRESPONDENT:\nSTERILITE INDUSTRIES (INDIA) &amp; ANR.\n\nDATE OF JUDGMENT:\t09\/10\/2001\n\nBENCH:\nS. Rajendra Babu &amp; Doraiswamy Raju\n\n\n\n\nJUDGMENT:\n<\/pre>\n<p>J  U  D\t G  M  E  N  T<br \/>\nRAJENDRA BABU,\tJ.  :\n<\/p>\n<p>\tOn certain disputes having arisen between the Maharashtra State<br \/>\nElectricity Board and Sterilite Industries (India) in connection with the<br \/>\nfailure to supply certain goods the matter was referred to Arbitral<br \/>\nTribunal consisting of three arbitrators.   The petitioners made a claim in<br \/>\na sum of Rs. 70,28,572.05p as damages for breach of contract sustained<br \/>\nby them on account of failure of the respondents to supply the entire<br \/>\nmaterial ordered from them.  In addition to this claim for damages,<br \/>\ninterest on the said amount at 18% per annum for the period between<br \/>\nMay 9, 1989 to October 29, 1990 amounting to Rs. 18,62,571.55p was<br \/>\nalso made.  Thus the total claim for damages and interest is in a sum of<br \/>\nRs. 88,91,143.16p.\n<\/p>\n<p>\tIt is stated that the contract for supply of goods was cancelled by<br \/>\nthe petitioners on April 17, 1989 on the basis that the material which<br \/>\nwas not supplied by the respondents was procured by the petitioners<br \/>\nfrom other suppliers at a price much higher than what was tendered by<br \/>\nthe respondents.  The petitioners referred to various orders placed by<br \/>\nthem with different parties. The damages were thus claimed on the basis<br \/>\nthat the material which was not supplied by the respondents was<br \/>\nactually purchased or procured by the petitioners and the damages were<br \/>\ncomputed on the ground of higher price being required to be paid in<br \/>\norder to make good the short supply by the respondents. The claim of the<br \/>\npetitioners was contested by the respondents on several grounds.\n<\/p>\n<p>\tThe arbitrators raised two issues for consideration, which are as<br \/>\nfollows :-\n<\/p>\n<p>(1) Whether the respondents have committed breach of contract<br \/>\nor<br \/>\nwhether the claimants have committed breach of contract<br \/>\nand on account of such breach it became impossible for the<br \/>\nrespondents to supply the requisite material under the<br \/>\ncontract?\n<\/p>\n<p>(2) Whether under the terms of the contract the damages as<br \/>\nclaimed can be sustained?\n<\/p>\n<p>\tOn consideration of the relevant material and arguments placed<br \/>\nbefore the arbitrators, per majority, they held that the breach of the<br \/>\ncontract is committed by the respondents and not by the petitioners. As<br \/>\nregards damages claimed by the petitioners, they adverted to clause 14 of<br \/>\nthe contract to the effect that the purchaser has a right to purchase<br \/>\nupon such terms and in such a manner as he may deem appropriate<br \/>\nequipment similar to that terminated and then  the contractor will be<br \/>\nliable to the purchaser for any additional cost for such similar equipment<br \/>\nand\/or for liquidated damages for delay as defined in Article 22 of the<br \/>\nGeneral Conditions until such reasonable time as may be required for<br \/>\nthe final supply of equipment and construed the same as providing for\n<\/p>\n<p>(i) that the contractor is liable to reimburse the purchaser the additional<br \/>\ncost of similar equipment which the  purchaser has purchased and  (ii)<br \/>\nthat in addition to that or alternatively,  the contractor is liable for<br \/>\nliquidated damages for delay until such reasonable time as may be<br \/>\nrequired for the supply of equipment and the provision regarding<br \/>\nliquidated damages was not attracted in the present case.  Clause 14(ii)<br \/>\nwas thus held to be a special provision with regard to quantum of<br \/>\ndamages and the quantum is to be determined with reference to the<br \/>\nadditional cost involved in purchasing the equipment which the<br \/>\ncontractor had failed to deliver; that in view of this special provision the<br \/>\nmode of computation of damages provided for under Section 73 of the<br \/>\nIndian Contract Act is not attracted; that, the measure of damages upon<br \/>\na breach of contract for sale of goods is the difference between the<br \/>\ncontract price and the market price on the date of breach and it is open<br \/>\nto the parties to lay down a different rule;  that the petitioners had failed<br \/>\nto prove that consequent upon the failure of the respondents to supply<br \/>\nthe material in accordance with the contract,  the petitioners had, after<br \/>\nthe cancellation of the contract, purchased any material in lieu of the<br \/>\nmaterial short supplied by the respondents; that the contracts relied<br \/>\nupon by the petitioners for similar material were already entered into by<br \/>\nthe petitioners and the supply made thereunder had no relationship with<br \/>\nthe short supply made by the respondents; that the petitioners had,<br \/>\ntherefore, failed to prove that they had suffered  any damages as<br \/>\ncontemplated by clause 14 of the contract; that the concept of award of<br \/>\ncompensation is bound up with loss or damage that results from the<br \/>\nbreach of contract and where no loss or damages has ensued, there can<br \/>\nbe no question awarding compensation; that even under Section 73 of<br \/>\nthe Indian Contract Act where a claim for damages on the ground of<br \/>\nbreach of contract is made by a party, the party claiming damages is<br \/>\nunder an obligation to prove the loss; that the claimants in the instance<br \/>\ncase had failed to prove that they had suffered any loss. On this basis,<br \/>\nthe arbitrators held that the petitioners were not entitled to invoke the<br \/>\nprovisions of Section 73 of the Indian Contract Act and they had failed to<br \/>\nprove that any additional purchases were made to make up for the short<br \/>\nsupply resulting from the breach of contract by the respondents and<br \/>\neven otherwise,\t the petitioners had failed to prove that they had suffered<br \/>\nany damages and were, therefore, not entitled to any damages.<br \/>\nAccordingly, the claim made by the petitioners was dismissed.\n<\/p>\n<p>\tThe minority view expressed by another arbitrator is that clause<br \/>\n14(ii) of the contract enables the purchaser the right to purchase upon<br \/>\nsuch terms and manner as he may deem appropriate and that gives only<br \/>\nan additional option without affecting the rights arising under general<br \/>\nLaw and, therefore, he was of the view that the claim should be allowed.\n<\/p>\n<p>\tOn the award being sought to be made the decree of the court,<br \/>\nobjections were raised in the proceedings before a learned Single Judge<br \/>\nof the High Court, who, on examination adverted to the award and, in<br \/>\nparticular, to the scope of clause 14(ii) of the contract entered into<br \/>\nbetween the parties.   The learned Single Judge is of the view that if the<br \/>\narbitrators have given reasons in support of their decision, it would be<br \/>\nopen to the court to set aside the order if it finds that the error of law has<br \/>\nbeen committed by the arbitrators, though reasonableness thereof<br \/>\ncannot be challenged.  He is influenced by the fact that what is found in<br \/>\nthe award on the aspect of loss and quantum of damages against the<br \/>\npetitioners is pure finding of fact based on appreciation of evidence and,<br \/>\ntherefore, could not be examined by the court.\t  He is\t further  of the<br \/>\nview that where loss in terms of money can be determined, the party<br \/>\nclaiming compensation must prove the loss suffered by it in order to<br \/>\nattract Section 73 of the Indian Contract Act; that the concept of award<br \/>\nof compensation is bound up with the loss or damage that results from<br \/>\nthe breach of contract and where no loss or damage has ensued, there<br \/>\ncan be no question of awarding compensation; that the majority of the<br \/>\narbitrators have said that the petitioners had failed to prove that they<br \/>\nhad suffered any loss and, therefore, are not entitled to claim any<br \/>\ndamages and thus the claim had to be rejected.\tThe learned Single<br \/>\nJudge took the view that an award can only be set aside if there is an<br \/>\nerror of fact or an error of law and unless such error is apparent on the<br \/>\nface of the record, the objections cannot be sustained and, hence he<br \/>\noverruled the objections holding that the award is unassailable in<br \/>\nproceedings under Section 30 of the Arbitration Act.\n<\/p>\n<p>\tAppeals were filed against this order of the learned Single Judge on<br \/>\nthe Letters Patent side and a Division Bench of the High Court reiterated<br \/>\nthe view taken by the learned Single Judge after reappraisal of the facts,<br \/>\nthe award made by the arbitrators and the contentions raised in the<br \/>\nappeals.  It is against this order of the Division Bench, these special leave<br \/>\npetitions are filed.\n<\/p>\n<p>\tShri T.R. Andhyarujina, learned Senior Advocate appearing for the<br \/>\npetitioners, contended that the view taken by the arbitrators and the<br \/>\nHigh Court on the construction of clause 14(ii) is plainly wrong; that<br \/>\nunder clause 14(ii) of the contract a right was reserved in favour of the<br \/>\npetitioners to purchase upon such terms and in such manner as the<br \/>\npetitioners deemed appropriate, equipments similar to that contracted<br \/>\nand the respondents are liable to the petitioners for any additional costs<br \/>\nfor such similar equipments and\/or for liquidated damages for delay as<br \/>\ndefined in Article 22 of the General Conditions until such reasonable<br \/>\ntime as may be required for final supply of the equipments; that this<br \/>\nreservation in favour of the petitioners is an additional right to claim<br \/>\ndamages from the respondents for an additional costs that might be<br \/>\nincurred for such purchases and has not been taken away from the<br \/>\npetitioners their general right to claim damages under Section 73 of the<br \/>\nIndian Contract Act; that for invoking the provisions of Section 73 of the<br \/>\nIndian Contract Act it was not necessary for the petitioners to have<br \/>\npurchased the equipments and materials not supplied by the<br \/>\nrespondents from the open market; that even in such an event,  the<br \/>\npetitioners are entitled to claim damages from the respondents on the<br \/>\nbasis of the difference between the contract  price and the market price<br \/>\nof the materials on the date of the breach of the agreement by the<br \/>\nrespondents.\n<\/p>\n<p>\tThe position in law has been noticed by this Court in <a href=\"\/doc\/1961694\/\">Union of<br \/>\nIndia  vs.  A.L. Rallia Ram,  AIR<\/a> 1963 SC 1685,\t and <a href=\"\/doc\/1553220\/\">Firm Madanlal<br \/>\nRoshanlal Mahajan   vs. Hukumchand Mills Ltd., Indore,<\/a>\t1967 (1)<br \/>\nSCR 105, to the effect that the arbitrators award both on facts and law is<br \/>\nfinal; that there is no appeal from his verdict; that the court cannot<br \/>\nreview his award and correct any mistake in his adjudication, unless the<br \/>\nobjection to the legality of the award is apparent on the face of it.  In<br \/>\nunderstanding what would be an error of law on the face of the award,<br \/>\nthe following observations in Champsey Bhara &amp; Company\t vs.  Jivraj<br \/>\nBalloo Spinning and Weaving Company Ltd.,  L.R. 50 I.A. 324, a<br \/>\ndecision of the Privy Council,\tare relevant:-\n<\/p>\n<p>An error in law on the face of the award means, in their<br \/>\nLordships view, that you can find in the award or a document<br \/>\nactually incorporated thereto,\tas for instance a note appended by<br \/>\nthe arbitrator stating the reasons for his judgment,  some legal<br \/>\nproposition which is the basis of the award and which you can<br \/>\nthen say is erroneous.\n<\/p>\n<p><a href=\"\/doc\/899181\/\">In  Arosan Enterprises Ltd.   vs.  Union of India &amp; Anr.,<\/a> 1999 (9)<br \/>\nSCC 449, this Court again examined this matter and stated that where<br \/>\nthe error of finding of fact having a bearing on the award is patent and is<br \/>\neasily demonstrable without the necessity of carefully weighing the<br \/>\nvarious possible view points,  the  interference in the award based on<br \/>\nerroneous finding of fact is permissible and similarly, if an award is<br \/>\nbased by applying a principle of law which is patently erroneous, and but<br \/>\nfor such erroneous application of legal principle, the award could not<br \/>\nhave been made, such award is liable to be set aside by holding that<br \/>\nthere has been a legal misconduct on the part of the arbitrator.\n<\/p>\n<p>\tIn the Russell on Arbitration [17th Edition], the position in law is<br \/>\nthus stated :-\n<\/p>\n<p>Where an arbitrator makes a mistake either in law or in fact in<br \/>\ndetermining the matters referred, but such mistake does not<br \/>\nappear on the face of the award, the award is good notwithstanding<br \/>\nthe mistake, and will not be remitted or set aside.\n<\/p>\n<p>The general rule is that, as the parties choose their own arbitrator<br \/>\nto be the Judge in the disputes between them, they cannot, when<br \/>\nthe award is good on its face,\tobject to his decision,\t either upon<br \/>\nthe law or the facts.\n<\/p>\n<p>In the light of this enunciation of law, we are of the view that<br \/>\nunless the error of law sought to be pointed out by the learned counsel<br \/>\nfor the petitioners in the instant case is patent on the face of the award<br \/>\nneither the High Court nor this Court can interfere with the award.  The<br \/>\nexercise to be done by examining clause 14(ii) of the contract entered into<br \/>\nbetween the parties, construing the same properly and thereafter<br \/>\napplying the law to it to come to a conclusion one way or the other, is too<br \/>\ninvolved a process and it cannot be stated that such an error is apparent<br \/>\nor patent on the face of the award.  Whether under the context of the<br \/>\nterms and conditions of a contract, a stipulation in the form and nature<br \/>\nof clause 14(ii) operates as a special provision to the exclusion of Section<br \/>\n73 of the Indian Contract Act is a matter of appreciation of facts in a<br \/>\ncase, and when the decision thereon is not patently absurd or wholly<br \/>\nunreasonable, there is no scope for interference by courts dealing with a<br \/>\nchallenge to the award.\t Therefore, we think, the view taken by the High<br \/>\nCourt in this matter is correct and calls for no interference.\n<\/p>\n<p>\tIf as construed by the arbitrators that clause 14(ii) excludes<br \/>\napplicability of Section 73 of the Indian Contract Act and the proposition<br \/>\nof law stated by the arbitrators is correct, then Section 73 is not<br \/>\nattracted to the case.\n<\/p>\n<p>\tIn this view of the matter, we find absolutely no substance in these<br \/>\npetitions and they are dismissed with costs of the respondents quantified<br \/>\nat Rs.5,000\/- in each set.\n<\/p>\n<p>\t\t\t\t\t\t\t J.\n<\/p>\n<p>\t\t\t\t\t\t\t [ S. RAJENDRA BABU ]<\/p>\n<p>\t\t\t\t\t\t\tJ.\n<\/p>\n<p>\t\t\t\t\t\t\t[ DORAISWAMY RAJU ]<br \/>\nOCTOBER\t 9, 2001.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India Maharashtra State Electricity &#8230; vs Sterilite Industries (India) &amp; &#8230; on 9 October, 2001 Author: R Babu Bench: S. Rajendra Babu, Doraiswamy Raju CASE NO.: Special Leave Petition (civil) 12883-12884 of 2000 PETITIONER: MAHARASHTRA STATE ELECTRICITY BOARD Vs. RESPONDENT: STERILITE INDUSTRIES (INDIA) &amp; ANR. DATE OF JUDGMENT: 09\/10\/2001 BENCH: S. Rajendra [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-219030","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Maharashtra State Electricity ... vs Sterilite Industries (India) &amp; ... on 9 October, 2001 - Free Judgements of Supreme Court &amp; High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/maharashtra-state-electricity-vs-sterilite-industries-india-on-9-october-2001\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Maharashtra State Electricity ... vs Sterilite Industries (India) &amp; 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