Union of India v. Bharat Battery Manufacturing Company Pvt Ltd

1. The present petition challenges the impugned award dated 24th June, 2008 passed by the Learned Sole Arbitrator – Justice K.S. Gupta (Retired). The brief background of the case is that a tender was called by the Union of India for supply of batteries. The Respondent submitted its offer on 7th October, 2002. The batteries were “secondary lead acid portable” of 6V 170 AH and 12V 75AH, for which the Respondent quoted a price of Rs.2070 and Rs.1871 per battery respectively. The supplies were for Defence requirements. The offer given by the Respondent on 7th October, 2002 was considered by the Petitioner and vide letter dated 26th March, 2003, the Respondent was called upon to give its best reduced revised rates. The Respondent thereafter submitted its revised offer vide letter dated 8th April, 2003 and reduced the prices to Rs.1829 and Rs.1749 for the 6V and 12V 2018:DHC:6632 batteries respectively. Supplies were made by the Respondent against various purchase orders.

2. Disputes arose between the parties because the Respondent claimed price variation as per clause 12 of Schedule A, of the contract, which was refused by the Petitioner.

3. The Learned Arbitrator considered the matter and held that price escalation was liable to be granted. The operative portion of the award reads as under: “…In the statement (Annexure-C24), details of Rs. 42,33,891/- being the differential amount due to escalation in rate based on Hindustan Zinc Ltd.'s price circulars (Ex. C-10 to C-18) have been set out. Respondent has not lead any evidence showing any inaccuracy in this statement. Claimant is, thus, entitled to the said amount under the price variation clause. Though the Rate Contract does not provide for payment of any interest still in view of the ratio in Secretary, Irrigation Department, Govt. of Orissa and Ors. Vs. G.C. Roy, (1992) I Supreme Court Cases 508, the claimant is entitled to interest on the above amount which is quantified @ 9% p.a. As may be seen from the said statement the interest has been calculated from the respective date(s) of raising the bills. First bill was raised on 12.8.2004 while the last on 13.5.2006. In the facts and circumstances of case, the claimant is awarded interest from 13.5.2006. Accordingly, award of Rs. 42,33,891/- with interest @ 9% p.a. from 13.5.2006 till date of realization of amount is passed in favour of the claimant, and against the respondent. Respondent will further pay share of arbitration fee paid by the claimant, stamp duty and Rs. 15,000/- as lawyer's fee to the claimant.”

4. The only question raised and argued by the learned counsel for the Petitioner, while challenging the award, is that there was no price variation clause in the contract with the Respondent and hence the amount under the said price variation clause could not have been awarded.

5. It was also submitted that the fact that the claim for price variation was raised after the entire contract period was over, shows that the Respondent was well aware that such a clause did not exist and the claim was an afterthought.

6. On the other hand, learned counsel for the Respondent submits that the rate contract, which was initially issued, had inadvertently omitted the price variation clause. The fact that it exists is clear from the tender, the offer letter, and also letter dated 2nd July, 2004 with which the price variation clause was sent to the Respondent. The Respondent further argues that the belated raising of this claim is an untenable submission inasmuch as immediately after the rate contract was placed upon it, the Respondent had written to the Petitioner informing of this omission and had called upon the Petitioner to incorporate the same into the rate contract.

7. In rejoinder, Ld. counsel for the Petitioner submitted that the letter dated 2nd July, 2004 attaching the price variation clause is without authority of law. He submits that no amendment can be made into the rate contract and, the same, if any had to be in writing. By a unilateral letter, such an amendment could not have been added. He also submitted that the issuance of this letter is with the condition that it is “without prejudice to the terms and conditions of the contract”. Thus, the letter cannot be read as overwriting the rate contract. He relies upon Article 299 of the Constitution to argue that any contract entered into by the Government has to be with the authority of the President of India and not without authority, by any officer’s whims and fancies.

8. Having heard the counsels for the parties, the dispute is in a very narrow compass. The only question is as to whether the price variation clause existed in respect to this tender or not. A perusal of the Notice Inviting Tender (hereinafter ‘NIT’) shows that in clause 8, which dealt with the technical requirements of batteries, the following was clearly specified: