Union of India (UOI) vs New Swadeshi Sugar Mills and Another

Shiv Narayan Dhingra, J.—The subject matter of objections raised by the defendant/respondent in this case is an award passed by the Learned Arbitrator on 6th August, 1980 whereby he awarded a sum of Rs. 5,06,918/- to the plaintiff/petitioner. The award of the Learned Arbitrator is a short award and the relevant portion is reproduced below:

And whereas, I heard and examined and considered the statements of the parties and their evidence.

I do hereby make my award as follows:

I award Rs. 5,06,918/- (Rupees Five Lakhs six thousand nine hundred and eighteen only) in favour of the Union of India and direct the Contractor to pay the said amount to the Union of India.

The parties shall bear their respective costs of the proceedings before me.

The contention of the respondent who raised objections against the award is that the learned Arbitrator had passed a totally non-speaking award and had not given any reason or basis of awarding a sum of Rs. 5,06,918/-. The Respondent argued that the contract between the parties was for the supply of potatoes. The respondent could not supply the full quantity of potatoes. In such a contract, no damages could be awarded by the learned Arbitrator unless it is proved that the petitioner had done Risk purchase and it actually spent more amounts at risk purchase.

It is also argued that the Arbitrator had not taken into account the fact that even during risk purchase the petitioner had procured only 100 metric tonnes of potatoes against the short supply of around 500 metric tonnes and the Arbitrator could have awarded only the difference in the cost of 100 metric tonnes.

The contract would show that the respondent had contracted for supply of 850 metric tonnes of potatoes (700 metric tonnes tinned potatoes and 150 metric tonnes other potatoes). The respondent failed to supply 445 metric tonnes of tinned potatoes with the result that the petitioner had to cancel the order at the risk and cost of the respondent. The price quoted by the respondent for tinned potatoes was Rs. 3.43 per kg. The petitioner had retendered for procuring the balance quantity. After cancelling of the contract by the petitioner and the price quoted in retender was higher than what was the earlier price and even the respondent had also participated in retender and quoted Rs. 1 per kg. more than the earlier price.

It only shows that the respondent deliberately did not fulfill the earlier contract because of which petitioner had to de novo start the process of procuring potatoes at considerable cost.

Whenever a person gives quotations against a tender and his quotations are accepted, the person is supposed to complete the contract. If the person does not complete the contract he has to suffer the consequences. If a person does not complete the contract then the party had to again issue advertisement and call tenders. The entire process of the re-advertising/recalling the tenders is an expensive and time consuming process, as advertisement is to be published in national newspapers then the employer has to procure the things at prices quoted in retender. The earlier contractor is liable to pay the difference between the two prices and the other administrative costs and loss suffered by the employer.

There is no dispute in this case that the respondent had failed to supply the material and retendering was done. The petitioners had invoked the Arbitration clause and the learned Arbitrator considered all the documents and the evidence and then passed the award. An award cannot be set aside merely because the Arbitrator had not taken the item-wise award and has chosen to give a lump sum award. The lump sum award cannot be considered an invalid award. It is also well settled that it is not necessary for the Arbitrator to give a speaking award (refer to M/s. M.K. Shah Engineers and Contractors Vs. State of Madhya Pradesh, ).

The present award was passed by the Learned Arbitrator under Arbitration Act, 1940. The Court cannot interfere in the award unless there is error apparent on the face of the record. There is no doubt that the award is a non-speaking award but the agreement between the parties did not provide that the Arbitrator had necessarily to make a speaking award. In absence of such an Arbitration agreement, the Court cannot set aside the non-speaking award on the grounds that there was an error apparent on the face of the award. The award of the Arbitrator in the present case being under old Act was justified as there was no requirement of giving a speaking award. Even otherwise, the scope of interference by the Court is extremely limited in a non-speaking award. The Court cannot probe into the mental process of the Arbitrator. The Court should support the non-speaking award provided it was not invalidated due to Arbitrator''s misconduct (refer to Markfed Vanaspati and Allied Industries Vs. Union of India (UOI), ).

I find no ground to interfere with the award.

However, it is observed that the correspondence between the party shows that petitioner had already encashed bank guarantee. The amount of bank guarantee encashed by the petitioner is liable to be adjusted against the amount awarded. The award is made rule of the Court. The decree-sheet be prepared in terms of the award. The Petition is hereby allowed in above terms.