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Delhi High CourtIndian Cases

Arihant Industries vs Union Of India on 12 November 1997

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Delhi High Court
Arihant Industries vs Union Of India on 12 November, 1997

C.M. Nayar, J.

1. The present petition impugns the Award dated 13th January, 1986 made by the arbitrator Shri R. N. Misra. The operative portion of the Award reads as follows :

“Claim Award
(1) U.O.I. claims a sum of Rs. 1,03,692/-
as damages on account of risk purchase, against the Contractor. 1. Allowed
(2) U.O.I. claims interest pendente lite and future, against
the contractor. 2. Nil
(3) U.O.I. claims cost of the proceedings and such others 3. Nil award as may be deemed fit, against the Contractor.

The Contractor is directed to pay a sum of Rs. 1,03,692 (Rupees One lakh Three Thousand, Six Hundred and Ninety-Two only) within one month from the date of Award failing which the Contractor will be liable to pay interest @ 12% p.a. till payment of award made rule of the court, whichever is earlier.

2. The main objection which has been agitated by the petitioner is that the arbitrator had no jurisdiction to adjudicate the claims as there was no concluded contract between the parties in terms of Article 299 of the Constitution of India and, therefore, the reference is void and illegal. The facts relating to this plea are referred to in paragraphs 1, 2 and 3 of objections filed by the petitioner under Sections 30, 32 and 33 of the Arbitration Act, 1940 (I.A. No. 4478/89) which may be referred to as under :

“1. The respondent knowing the reputation of the petitioner invited them to participate in a tender enquiry for Cotton Tape Newar. The petitioner gave his offer on 5-2-1981. Thereafter the petitioner was called by respondent on 23-2-1981 to confirm that the rate of Local and Central Sales Tax which the petitioner were to charge extra, with the direction to reply the same within 10 days of the receipt of it.
(1) Copy of letter dated 23-2-1981 is annexed as Annexure-A to this petition. (2) The petitioner on 25-2-1981, in reply to it, by his letter dated 25-2-1981 wrote to respondent as under :
“At present there is no Local and Central Sales Tax on the supply of stores, if introduced by the Government during the currency of the contract will be payable by the purchaser.”
Copy of letter dated 25-2-1981 is annexed as Annexure-B to this petition.

(3) There was no communication from respondent, thereafter. On account of leaving of the partner of petitioner out of India due to certain major operation of family member at United States the petitioner issued a letter dated 21-3-1981 while withdrawing their offer wherein the petitioner wrote as under :

“It is therefore not possible for us to keep our offer alive for the time being and the same be treated as withdrawn.”
3. It is next reiterated in paragraph 8 that the respondent-Union of India acted illegally and invalidly and without having any offer, issued another letter No. 225/042/102/Arihant/846/CAOD dated 2nd April, 1981 which was purported to be their formal order. This letter, it is contended, could not conclude the contract between the parties as there was no offer of the petitioner pending for acceptance as the same was withdrawn on 21st March, 1981. It is well settled that the plea that there was no concluded contract between the parties is within the domain of the arbitrator who can adjudicate and consider the same. The arbitrator in the present case did not decide that question and the present Award is, accordingly, vitiated on that ground. Therefore, the matter needs to be remitted back for that purpose. In this context reference may be made to the judgments of the Supreme Court as reported in Union of India v. M/s. Hanuman Oil Mills Ltd. and others (1987 (Suppl.) SCC 84.), and of this court in Union of India v. M/s. Delhi Footwear (Suit No. 130A/86 & Suit No. 204A/86 Decided on 31-10-1985.), by K. Ramamoorthy, J. The Award dated 13th January, 1986 is, accordingly, set aside and the same is remitted back to Additional Legal Adviser, Government of India, Ministry of Law, Justice and Company Affairs, for disposal in accordance with law. The arbitrator shall be appointed within four weeks from the date of communication of the Order. The Registry shall take steps to send the record relating to the Award and the proceedings to the Additional Legal Adviser, Government of India, Ministry of Law, Justice and Company Affairs, 1st Floor, Gate No. 3, Jeevan Tara Building, Sansad Marg, New Delhi-110001. The arbitrator shall consider the plea of the petitioner as to whether there was a concluded contract between the parties and give his findings and render the Award in accordance with law.

4. Petition allowed.