M/S M P STATE CO-OP OILSEED GROWERS FEDERATION LTD v. UNION OF INDIA & ANR

1. The petitioner has filed the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereafter the ‘A&C Act’) impugning the Arbitral Award dated 25.07.2012 (hereafter the ‘impugned award’) delivered by an Arbitral Tribunal comprising of a Sole Arbitrator (hereafter the ‘Arbitral Tribunal’). The Arbitral Tribunal was constituted by appointment of the Sole Arbitrator by the Ministry of Finance by its letter dated 04.04.2011.

2. The respondents had issued a notice dated 23.02.1998 inviting tenders for supply of 17000 MT of refined mustard oil. The petitioner had responded to the said tender and furnished its bid to supply 3000 MT of refined mustard oil. The tenders were opened on 05.03.1998. 2022:DHC:1898 The petitioner had made an offer for supply of 3000 MT of refined mustard oil at a price of ₹38,750/- per MT.

3. Thereafter, on 11.03.1998, the respondents issued a telegram to the petitioner and other bidders calling upon them to depute their respective representatives for further negotiations to be held on 20.03.1998. However, prior to that date, the respondents issued a letter dated 18.03.1998, accepting the bid for supply of 3000 MT of refined oil. Thereafter, the representatives of the petitioner and the respondents held a meeting for negotiations on 20.03.1998 as scheduled.

4. In terms of the tender conditions, the petitioner was required to furnish a Bank Guarantee and security deposit, however, the petitioner did not do so at the material time and sought extension of time to furnish the same. The respondent acceded to the request and extended the time for furnishing the Bank Guarantee and Security Deposit till 10.04.1998.

5. Notwithstanding the further time being granted to the petitioner, the petitioner did not deposit the security amount or the Bank Guarantee within the extended period as granted by the respondent.

6. On 29.04.2008, the respondent once again called upon the petitioner to make the security deposit, however, the petitioner declined to do so claiming that there was no concluded contract between the parties.

7. By a letter dated 10.06.1998, the respondent terminated the Agreement and floated another tender for purchasing agreed quantity of mustard oil at the risk and cost of the petitioner. The said tender was opened on 14.07.1998. The lowest bidder had quoted a price of ₹52,000/- per MT.

8. In view of the above, the respondent invoked the arbitration clause claiming the amount of loss suffered by it on account of nonperformance of the contract in question. The disputes raised were referred to arbitration. The respondent claimed a sum of ₹4,35,30,095/along with interest at the rate of 24% per annum.

9. The arbitral proceedings culminated into an arbitral award dated 28.01.2000. The learned Arbitrator allowed the respondent’s claim and also awarded further interest at the rate of 12% per annum from the date of the award till realization. The petitioner impugned the arbitral award dated 28.01.2000 under Section 34 of the A&C Act by filing a petition in this Court [being OMP No.150/2000]. The said petition was allowed by an order dated 13.11.2009. The arbitral award dated 28.01.2000 was set aside and the disputes were referred for fresh determination in accordance with law.

10. The Arbitral Tribunal has examined the rival contentions and allowed the respondents claim. In terms of the impugned award, the Arbitral Tribunal has awarded a sum of ₹4,35,30,095/- along with interest at the rate of 21% per annum from the date of the demand notice till realization. Reasons and conclusion

11. Mr. Tiwari, learned counsel appearing for the petitioner has assailed the impugned award on, essentially, four grounds. First, he submitted that the reference to the Arbitral Tribunal is barred by limitation. Second, he submitted that the arbitral award is unreasoned and is liable to be set aside. Third, he submitted that, ny a letter dated 22.02.1999, respondent no.1 has claimed a sum of ₹3,97,50,000/-, however, that was incorrectly inflated to ₹4,35,30,095/. Lastly, he submitted that the award of interest at the rate of 21% per annum is excessive and manifestly erroneous.

12. During the course of further arguments, Mr. Tiwari has agreed not to press the first two grounds: that the reference to Arbitral Tribunal was barred by limitation, and that the impugned award is unreasoned. He fairly conceded that the said grounds were unmerited as the respondents had invoked the Dispute Resolution Mechanism within the period of three years of concluding the Risk Purchase Contract. Further, the Arbitral Tribunal had clearly held that the respondents would be entitled to the loss suffered. The contention that there was no concluded contract was rejected by the Arbitral Tribunal and the same warrants no interference in this proceeding.

13. Mr. Tiwari confined his challenge to the impugned award to the extent of a patent error regarding calculation of the amount awarded and the award of interest.

14. Mr. Pandey, learned counsel appearing for the respondent conceded that there was an error in calculation of the amounts claimed. He submitted that Central Sales Tax had not been factored in and therefore, the claim amount was required to be restricted to ₹3,97,50,000/- as stated in the respondents’ demand letter dated 22.02.1999. He also submitted that he has instructions to consent to a reduction of the rate of interest to such rate of interest as this Court deems fit.

15. In view of the above, this Court has suggested that the rate of interest be reduced to 12% simple interest per annum from the date of demand i.e. 22.02.1999 till the date of payment. Mr. Tiwari accepts the same after obtaining instructions from the concerned officer who is present in Court.