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Judgment
S. Ravindra Bhat, J.—The Union of India, the defendant in this case has objected to an award dated 5.3.1990, published by the sole arbitrator appointed by agreement of the parties to decide inter se disputes.
The plaintiff M/s The Jammu and Kashmir Cooperative Supply and Marketing Federation Ltd. had on 31.1.1990 responded to a tender enquiry floated by the Union of India for supply of 90,000 tons of Refined Rapeseed Oil in ISI Tins to Defence Services. It quoted different rates for specific quantities and different products in February, March and April, 1990. This court is concerned, for the purposes of these proceedings, with 5000 metric tons at Rs. 2,530/ - per MT.
The Tender was accepted by the Union of India on 5.3.1990 for this quantity in the following terms:
The offer made vide your letter mentioned above has been accepted on the terms and conditions enclosed with this Ministry''s Tender Enquiry No. J-12031/5/89-Pur.IV dated 8.11.1989, which is as under:
Description of Accounting Quantity in Rate Per MT Total Cost stores unit Mts net inclusive in Rs. of Excise Duty and Sales Tax Refined Rapeseed Metric 500 Rs. 23,720/ - Rs. 1,18,62,500/- oil in Ist Tins as per Tons by 31.3.1990 - (Rupees one ASC Specification core eighteen No. 0170:80 packed lakh sixty two in 15 kg square tins F.O.R. Bari thousand five conforming to Ist Brahamana hundred only) specification No. Is: Jammu (BG) 10339/1992
The price is per metric tonne net F.O.R. Station of despatch and is inclusive of cost of raw materials, lost of manufacture, cost of containers, marking, handling and transportation charges etc. including municipal octroi paid in respect of the stores upto their arrival at station of dispatch and also inclusive of sales tax and excise duty.
For the purposes of this controversy, it would be necessary to extract para 2 a and b of the schedule to the tender enquiry and Clause 19A, B and C of tender conditions. They read as follows:
Price (a) The price per metric tonnes as defined in col. 6 of the tender form will include the cost of vanspati/Refined oil, cost of containers, marking, handling, and transportation charges and duties municipal, octroi, etc. paid in respect of stores upto their loading station of despatch/factory siding.
(b) The price quoted should be exclusive of Excise duty and Sales Tax which will have to be claimed separately in the manner provided in the schedule of the Tender and will be paid as admissible on the date of delivery subject to such rebate or exemption subject to the provisions of relevant clauses of the conditions of contract. If, however, tenderor chooses to bear the Excise Duty/ Sales Tax himself, he should clearly state that No. FD/ST will be charged and the same will be borne and paid by him. Necessary ''D'' requested in the tender.
19 Excise Duty Payment
When the acceptance to tender provides payment of excise duty extra, irrespective of whether the duty of excise leviable is a percentage ad valorem or a fixed amount, the supplier while claiming reimbursement will furnish the following certificates:
(a) Certified that the excise duty charged on this bill is not more than what is payable under the provisions of the relevant Act or the Rules made thereunder.
(b) Certified that the amount of Rs.-----claimed as excise duty in
this bill is in accordance with the provision as of the Rules in all respects and that the same has been paid to the excise authorities in respect of goods covered by this bill.
All claims for reimbursement of excise duty should be supported by the following documents:
(i) A copy of the gate pass which besides showing the particulars of goods, quantity, rate and the amount of excise duty levied on
Apparently w.e.f. 1.4.1990 on account of revision in the Union Budget excise duty on rapeseed oil was withdrawn and abolished. Consequently, the Union of India, on 2.4.1990 addressed a letter to the plaintiff taking the position that since excise duty had been abolished the plaintiff had to send its supplies enclosing copies of gate passes in order to claim entitlement to the agreed consideration of Rs. 25,000/- per MT 2375 per MT. The plaintiff, however, contested this and stated that the price quoted was a lumpsum and composite one and could not be divided as was done by the Union of India. It, therefore, withheld supplies to the extent of 150 MT. The Union of India resorted to risk purchase and later invoked arbitration proceedings. The Arbitrator by his award rejected the Union of India''s claim for Rs. 13,24,557.03. In the course of discussion on this head of claim, the arbitrator concluded, on consideration of note 2 (of the notice to invitation of tender) and the other documents that the price was a composite one and that the defendants'' insistence for its downward revision was unjustified. He therefore dismissed claim No. 1 for Rs. 13.5 lakh and correspondingly allowed the counter claim to the extent of Rs. 23,725/ - for the 350 MTs supplied.
In these proceedings u/s 30/33 of the Arbitration Act, 1940, the findings of the arbitrator are sought to be attacked. It is urged by Mr. Saxena, learned Counsel for the objector - Union of India, that a conjoint reading of Clause 19 and note 2, along with Section 64A of the Sale of Goods Acts indicates revision of excise duty was a price variation that had persuaded to the parties, to enter into contract.
Learned Counsel placed considerable reliance on the tender submitted by the plaintiff on 31.1.1995 in respect of specific quantities and the price quoted in which the entry towards excise duty had been indicated as Rs. 750/ - per MT. Learned Counsel urged that the arbitrator completely ignored this document and overlooked the material impact of Clause 2 and Clause 19 of the tender documents in considering its signifying intention in case of downward revision or completion of excise duty the price had to be necessarily reflected during the supplies.
Mr. Khorana learned Counsel for the plaintiff, on the other hand, urged that the acceptance of tender communicated on 5.3.1990 indicates that it was for a lumpsum price as quoted by the plaintiff. In other words even if there were to be an increase in the sales tax etc, the plaintiff could not have claimed it. He submitted that Section 64A is inapplicable in the facts of this case. Counsel also urged that on a fair application of the well settled principles as to the jurisdiction of courts in interfering with awards, the findings of the arbitrator in this case cannot be interfered with.
It is apparent from the above discussion that the controversy before the court is a narrow one; it concerns the interpretation of two conditions in the tender documents and the manner of acceptance of the plaintiff''s offer. Clause 2 of the schedule of the tender enquiry as well as the Note 2 to the invitation to tender signify a more or less similar intention, namely excise duty and sales tax if payable by the purchaser would have to be claimed separately. Clause 19-A and B of the tender conditions prescribe a methodology for claiming actual payment of such excise duty. Now in this case it is common ground that excise duty was abolished w.e.f. 1.4.1990. The tender of the plaintiffs tender which was accepted on 5.3.1990 specifically stated that it was in all inclusive price.
The contract was a commercial one and the parties initiated the terms and conditions and took care in putting them down in writing. It is nobody''s case that the plaintiff claimed excise duty in the manner agreed to by the parties, in terms of Clause 19. On the other hand the document of 5.3.1990 makes it abundantly clear that it is an all inclusive fixed and invariable price. In these circumstances the arbitrator concluded that the price quoted was composite and invariable one and accepted as such.
As far as the argument Section 64A (of the Sale of Goods Act) is concerned, it begins with the expression "unless a different intention appears from the terms of the contract" and goes on to indicate that increased tax effect would have to be borne by it and in case of decrease or reduction, the seller would have to bear it. In recent decision of the Supreme Court reported as Numaligarh Refinery Ltd. Vs. Daelim Industrial Company Ltd., the court had occasion to consider the effect of this provision. The court was concerned with a clear stipulation, Clause 6 which casts the entire liability of bearing the burden of new taxes and imposts upon one party. In that case stipulation mandated to an agreement to the contrary, adverted in Section 64A. In this case the phraseology adopted in the tender condition, tender note and invitation to tender as understood by the parties (and ultimately accepted by acceptance of the Union on 5.3.1990) signify that the cost was a composite one. The Arbitrator also came to the same conclusion. It is well established that an arbitrator being an agreed adjudicated is entitled to consider the terms of the contract and interpret document, which fall within his exclusive domain. Even if there is an error of law as long as such an error does not amount to misconduct, in the sense that it is not patent, the Court would not disturb with the findings.
Having considered the submissions and the materials on the record this Court is of the opinion that the objector Union has been unable to disclose any error of law in the findings or in the approach of the arbitrator amounting to legal mis-conduct as Section 30 and 33 of the Act. The objections embodied in I.A. No. 7962/2000 are accordingly dismissed. The award shall be made rule of the court but in the above terms.