Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
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+ ARB.P. 601/2014
STERLITE TECHNOLOGIES LTD ..... Petitioner
Through: Mr. Rohan Dheman, Advocate.
versus
BHARAT SANCHAR NIGAM LTD ..... Respondent
Through: Mr. Rajiv Tyagi with Mr. Divakar
Kumar and Mr. P. Sharma, Advocates.
CORAM: JUSTICE S.MURALIDHAR
O R D E R
% 30.11.2016
1. This petition has a chequered history. The facts have been set out in some
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detail paras 2 to 11 of the judgment dated 11 June 2014 passed by the
learned Single Judge of this Court in Arbitration Appeal No. 4 of 2012
which read as under:
“2. Brief facts are that Appellant had been supplying the Respondent
with PIJF underground cables for some time and has been a
successful bidder in several earlier tenders. The contract between the
parties was for supply of PIJF underground cables, on a long-term
recurrent basis. There was a clause in the contract which entitled the
Respondent, BSNL to come out with circulars indicating the price of
copper, one of the basic raw materials used for manufacture and
supply of PIJF cables. Based on the said circulars, it was envisaged
that the price payable to the Appellant for supply of the cables could
change from time to time.
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3. On 12 January, 2005, the Respondent floated a tender bearing
No.MM/SW/012005/000283 ("Tender Document") for the
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procurement of 120 LCKM PIJF underground cables.
4. The cable supplying companies declined to accept the price offered
in the APO including the Appellant. Therefore, a Price Negotiation
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Committee (PNC) was constituted by the Respondent- BSNL on 30
June, 2005 to negotiate with the bidders referred in APO. This PNC
negotiated with respect to all other raw material prices except copper,
which was to be the exclusive right of the Respondent to issue
monthly price bulletin/circular. During this course, the Union Budget
in February, 2005 reduced import duty from 15% to Zero percent on
copper for Telecom Sector.
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5. Further, the Respondent issued APO dated 30 July, 2005 to all
successful bidders and asked for unconditional and unequivocal
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acceptance to the same, to which the Appellant complied on 9
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August, 2005. As well the Appellant on 30 June, 2006 and 8
February, 2006 gave unconditional and unequivocal acceptance to all
terms and conditions of APO and the Appellant was fully aware that
the Respondent would be issuing provisional pricing of copper and
the final prices of copper were under the consideration of appropriate
committee of the Respondent.
6. For the first few months of the Contract, the Respondent issued
circulars indicating the price of copper as per the market rate
indicated in HCL's circulars. HCL being a manufacturer of copper
had the expertise to indicate the price for the same and in fact, all
throughout, BSNL in past tenders has adopted the price given by
HCL. The Appellant having participated in earlier tenders was aware
of and expected this practice to continue, which it did, but only for the
first few months of the present tender.
7. It is the case of the Appellant that the Respondent-BSNL suddenly
and arbitrarily started coming out with "Provisional Circulars" which
indicated the rate of copper at a flat 10% lesser value than the rate
indicated by HCL. At first, the Appellant was made to understand that
there would be some form of rationalization and reconciliation of
these rates and thus continued supplying. However, in spite of
repeated requests no such reconciliation took place and the
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Respondent stuck to its arbitrary stance.
8. The Appellant was thus left with no option but to initiate arbitration
by submitting the claim for recovery of the loss suffered by it on
account of the arbitrary act of the Respondent by challenging the
mode of computation of the prices and determination thereof by the
Respondent in the form of circular.
9. The Arbitration clause as contained in the agreement reads as
follows :
"Clause 20. Arbitration
20.1 In the event of any question, dispute or difference arising
under this agreement or in connection there-with (except as to
the matters, the decision to which is specifically provided under
this agreement), the same shall be referred to the sole
arbitration of the CIVID, BSNL The agreement to appoint an
arbitrator will be in accordance with the Arbitration and
Conciliation Act, 1996...." (Emphasis Supplied)
10. The Respondent's application under Section 16 of the Act was
based on the ground that the dispute submitted by the Appellant was
not arbitrable as the authority of BSNL to issue circulars indicating
the price of copper was specifically provided in the agreement and
thus fell in the exception clause.
11. The learned arbitrator after hearing the parties passed the
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impugned order dated 10 October, 2011 whereby the learned
arbitrator allowed the application under Section 16 of the Act filed by
the Respondent and terminated the arbitration proceedings. Hence,
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the Appellant has challenged the impugned order dated 10 October
2011 in the present appeal."
2. The above appeal came to be allowed by the Court. One of the central
issues considered by the Court was whether the dispute was arbitrable? Para
24 of the judgment which dealt with that issue reads as under:
“24. I shall now proceed to discuss as to whether the dispute
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submitted before the arbitrator is arbitrable or not. For doing the
needful, the relevant clauses 9, 20, 30 and Section XI of the
agreement/bid document dated 12'^^ January, 2005 are reproduced as
under:
"9. BID PRICES
9.1 The bidder shall give the total composite price inclusive of
all Levies & Taxes i.e. Sales Tax & Excise Duty, packing,
forwarding, fright and insurance etc. butexcluding Octroi/Entry
Tax which will be paid extra as per actual, wherever applicable.
The basic unit price and all other components of the price need
to be individually indicated against the goods it proceeds to
supply under the contract as per the price schedule given in
Section VII. Prices of incidental services should also be quoted.
The offer shall be firm in Indian Rupees. No Foreign exchange
will be made available by the purchaser.
9.2 Prices indicated in the Price Schedule shall be entered in the
following manner:
(i) The Basic Unit price (Ex-Factory Price) of the goods, Excise
duty, Custom duty. Sales Tax, Freight, Forwarding, Packing,
Insurance and any other Levies/Charges already paid or payable
by the supplier shall be quoted separately item wise.
(ii) The supplier shall quote as per price schedule given in
section VII for all the items given in schedule of requirement.
9.3 The price quoted by the bidder shall remain fixed during the
entire period of contract and shall not be subject to variation on
any account. A bid submitted with an adjustable price quotation
will be treated as non -responsive and rejected.
9.4 The prices quoted by the bidder shall be in sufficient detail
to enable the Purchaser to arrive at the price of
equipment/system offered.
9.5 "DISCOUNT, if any, offered by the bidders shall not be
considered unless specifically indicated in the price schedule.
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Bidders desiring to offer discount shall therefore modify their
offers suitably while quoting and shall quote clearly net price
taking all such factors like Discount, free supply, etc., into
account".
9.6 The price approved by BSNL for procurement will be
inclusive of Levies and Taxes, packing, forwarding freight and
insurance as mentioned in Para 9.1 above. Breakup in various
heads like excise duty, sales tax, insurance, freight and other
taxes paid/payable as per clause 9.2 (i) is for the information of
the purchaser and any change in these shall have no effect on
price during the scheduled delivery period.
9.7 The freight by sea for transportation of equipment/Stores
from the nearest port in the main land to Andaman & Nicobar
Islands will be reimbursed to the supplier at the concessional
rates levied by ministry of Water and Surface Transport on
production of proof.
9.8 The prices will be quoted at copper wire prices of Rs.
1,83,366/- (Rupees One Lac Eighty Three thousand three
hundred sixty six only) per IVIT excluding Excise Duty as on
January 2005. Price variation will be applicable on copper as
per standard Price variation table given in Section XI of the Bid
Document."
"20. Arbitration
20.1 In the event of any question, dispute or difference arising
under the agreement or in connection there-with (except as to
the matters, the decision to which is specifically provided under
this agreement), the same shall be referred to the sole Arbitrator
arbitration of the CMD, BSNL or in case his designation is
changed or his office is abolished, then in such cases to the sole
Arbitrator arbitration of the officer for the time being entrusted
(whether in addition to his own duties or otherwise) with the
functions of the CMD, BSNL or by whatever designation such
an officer may be called (hereinafter referred to as the said
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officer), and if the CMD or the said officer is unable or
unwilling to act as such, then to the sole Arbitrator arbitration
of some other person appointed by the CMD, BSNL or the said
officer. The agreement to appoint an arbitrator will be in
accordance with the Arbitration and Conciliation Act, 1996.
There will be no objection to any such appointment on the
ground that the matter to which the agreement relates or that in
the course of his duties as a Government Servant he has
expressed his views on all or any of the matters in dispute. The
award of the arbitrator shall be final and binding on both the
parties to the agreement. In the event of such an arbitrator to
whom the matter is originally referred, being transferred or
vacating his office or being unable to act for any reason
whatsoever, the CMD, BSNL or the said officer shall appoint
another person to act as an arbitrator in accordance with terms
of the agreement and the person so appointed shall be entitled
to proceed from the stage at which it was left out by his
predecessors.
20.2 The arbitrator may from time to time with the consent of
both the parties enlarge the time frame for making and
publishing the award. Subject to the aforesaid. Arbitration and
Conciliation Act, 1996 and the rules made there under, any
modification any modification thereof for the time being in
force shall be deemed to apply to the arbitration proceeding
under this clause.
20.3 The venue of the arbitration proceeding shall be the office
of the CMD, BSNL, New Delhi or such other places as the
arbitrator may decide."
"30. COURT JURISDICTION: The contract shall be governed
by Indian laws and courts at Delhi/New Delhi will have
jurisdiction to entertain any dispute or claim arising out of this
tender till issue of authorization letters to Circles for placement
of Purchase Orders (P.O.s)."
"SECTION-XI
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PRICE VARIATION TABLE
PRICE VARIATION TABLE FOR PIJF, (U/G) CABLES
For increase/decrease of Price of Raw materials by Rs.
100.00 per MT, the corresponding increase/decrease of
Price of the related stores is tabulated as under:
Note: (1) The price variation will be calculated on the Basic
Price element of the approved date and the same shall be used
to arrive at the composite price to be offered to all the vendors.
The composite price of each size ccordingly or mounty basis,
based upon the Copper Price Circulate issued by BSNL. This
price variation shall be applicable within original delivery
schedule.
(2) In case of supplies made under extended delivery period,
the price variation will be regulated as follows:-
In case of any decease due in reduction in Copper Wire Rod
Price, benefits will be passed on to the Purchaser. However, no
increase in price will be allowed by the supplier due to the hike
in Copper Wire Rod price during the extended delivery period.
In such cases, the price of Copper Wire Rod prevailing in the
last month of the original supply schedule shall prevail."
Àrb.P. 601/2014 Page 7 of 15
From the conjoint reading of the aforesaid clauses, the following
position can be discerned:
a) That the Clause 9.3 of the agreement provides that the price
quoted by bidder shall remain fixed during the currency of the
contract and shall not be subject to variation on any account.
b) Clause 9.8 of the agreement provides that the prices will be quoted
at the copper wire prices of Rs. 183366 per MT as on January 2005
and variation in the prices of the copper shall be applicable as per the
variation table given in schedule XI of the bid document.
c) Schedule XI of the agreement provides the mode of the
computation of the variation in the price of raw materials viz copper
wire rod and also provides in the explanatory notes the guidelines to
be taken into consideration while ascertaining the said variation. The
explanatory note 1 gives a hint that the price variation shall be
calculated on the basic price element of the approved rate and the
shall be used to arrive at the composite price to be offered to vendors.
The said composite price shall be worked on the basis of the circular
issued by the respondent.
d) Clause 20 of the agreement provides that any question or dispute or
difference arising under this agreement or in connection there-with
(except as to the matters, the decision to which is specifically
provided under this agreement ), the same shall be referred to the
sole arbitration of CMD, BSNL.
e) Upon the careful reading of the clause 9, read with clause 20 of the
agreement and schedule XI appended to the agreement, it can be seen
that though clause 9.8 provides that the price variation of the copper
shall be ascertained in the manner provided in schedule XI, it no
where provides specifically that the same shall be termed as decision
of BSNL to determine the said copper prices.
f) Upon meaningful reading of the said schedule XI appended to the
agreement, it is seen that the said schedule provides the mode of
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computation of the price variation and also in explanatory note
provides that basic price of the approved rate shall be taken into
consideration while computing the price variation of the copper. The
said schedule XI also does not give any mandate that the said
computation done by BSNL shall be termed as decision in the
agreement. If that is so provided specifically in the agreement or the
schedule XI which may be termed as a part of the agreement, only
then it can be said that aspect is ousted or can be termed as excepted
matter within the meaning of the agreement. In cases of ambiguity
where the arbitration clauses is broad enough to cover each and every
dispute arising out of or in connection there with the agreement as
against the excepted matters which is confined to specific mention of
the decision under the agreement. No deemed inference as to
specificity or decision making of BSNL may be drawn once it is not
clearly evinced from the agreement or the schedule appended thereto
in the agreement.
g) As against the absence of any specific mention in the agreement or
the schedule thereto relating to the decision of BSNL under the
agreement, Schedule XI provides the mode of computation of the
prices and the guidelines for doing such computation which include
taking into consideration of base price of the approved rate in order to
arrive at composite price. The said schedule also merely provides that
BSNL may issue circular in this respect for working out such
composite price. The schedule XI also no where attaches any finality
to the prices ascertained by the respondent nor calls it as a decision
under the agreement. In such circumstances, a dispute as to mode of
computation of the prices when it is not specifically categorized as a
decision under the agreement can be raised and can conveniently fall
within the ambit of clause 20 of the agreement. This is also the reason
the respondent has failed to point out any provision in the agreement
during the argument and not even in the written submissions as to
which provision specifically provides that the price circular issued by
the respondent is a decision within the meaning of the agreement and
hence excluded matter. In the absence of the said provision, dispute is
clearly arbitrable in nature.
In view of the position discussed above, upon fair and meaningful
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reading of the clauses of the agreement, it can be safely said that the
dispute as to the mode of computation of the prices or effect of
variation of prices in Copper can be made in the event the dissatisfied
contractor assails the computation carried out by BSNL in form
issuance of the circular on the grounds permissible to him be it is not
fair or is not as per past practice or without following the mode of
computation as per the representation given at the earlier occasion by
giving its justifications as to what can be the actual computations as
per the contractors and the arbitrator can decide the same depending
upon the merits of the claim. In such cases, as there is no indication as
to finality attached to the circular which can be evinced from the
agreement or schedule XI appended to the agreement, the dispute is
clearly arbitrable and can be subjected to the arbitration.”
3. The Court also negatived the submission of the BSNL that if the price
were found to be arbitrary in nature by the Petitioner, they should have
preferred a writ petition for challenging the computation of price. The Court
further negatived BSNL's submission that this was an excepted matter and
therefore not arbitrable. Thereafter in paras 27 to 29, the Court held and
directed as under:
“27. The matter can also be seen from another angle which is that the
Petitioner is not challenging the authority or competency of the
Respondent to issue circulars containing the prices of copper so that
the contracts should follow the same, the respondent is attempting to
dispute the mode of computation of the prices of the copper and effect
of variation of the prices. The contract is concerning supply of PIJF
cables and talks about the prices of the copper in clauses 9 of the
agreement which is an essential ingredient having its role to play in
pricing of copper. In such circumstances, the dispute concerning the
computation of pricing of copper is not the one which is outside the
agreement but is inextricably connected with that of subject matter of
the contract. The said dispute disputed either way can effect the
pricing consideration in contract and thus the same cannot be the one
which can be said to be non arbitrable one especially when the
agreement does not specifically provide it as an excepted matter under
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the agreement. For this reason also, the dispute submitted before the
arbitral tribunal is arbitrable in nature.
28. In view of the aforementioned discussed, the impugned order
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dated 10 October, 2011 is set aside and it is observed that the claim
submitted before the arbitrator is arbitrable as per the operation of
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clause 20 of the agreement/bid document dated 12 January, 2005.
List the matter before the arbitrator for further proceedings.
29. With these observations, present appeal is accordingly disposed of
so as the pending application. Parties shall appear before the learned
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Arbitrator on 12 August, 2014. Copy of the order be communicated
to the learned Arbitrator.”
4. It requires to be noticed that a Special Leave Petition by BSNL
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challenging the above order was dismissed by the Supreme Court on 29
February 2016. The above order dated and thus attained finality.
5. Today it is sought by Mr. Rajiv Tyagi, learned counsel for BSNL, that the
above appeal challenged only one finding of the Arbitrator viz., the
competence of the Arbitrator under Section 16 of the Act and not the finding
on the arbitrability of the dispute.
6. A reading of the above judgment of the learned Single Judge of the Court
which is affirmed by the Supreme Court leaves no manner of doubt that the
Court dealt with both the issues of the competence of the Arbitrator as well
as the arbitrability of the dispute. The Respondent, BSNL having
unsuccessfully challenged the said judgement of the learned Single Judge
cannot now contend that some part of the order of the Arbitrator survives
and therefore, this petition seeking the appointment of an Arbitrator to
substitute the above arbitrator cannot be entertained.
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7. The second submission is that in terms of Clause 20 of the Contract, the
Petitioner had to write to the Chairman-cum-Managing Director (CMD) of
the BSNL seeking the appointment of an Arbitrator to substitute the
Arbitrator who passed the order declining to act as such. The Court notes
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that the BSNL was aware of the facts that after dismissal of the SLP on 29
February 2016, an Arbitrator was required to be appointed to substitute the
Arbitrator who ceased to act as such. This did not require the Petitioner to
have to write to the CMD of BSNL.
8. Learned counsel for the Respondent has drawn the attention of the Court
to the judgment in Yashwith Constructions (P) Limited v. Simplex
Concrete Piles India Limited (2006) 6 SCC 204 which discusses the term
„Rules‟ under Section 15(2) of the Act. On the facts of that case, the MD of
the Respondent therein had exercised the powers in terms of the arbitration
agreement and had appointed a substitute Arbitrator by the time the matter
was considered by the Court. However, in the present case the BSNL has not
taken any action to appoint the substitute Arbitrator.
9. A third aspect requires to be adverted to is that for a long time in this
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matter no reply was filed by BSNL. By an order dated 21 March 2016, a
final opportunity was granted to it to file a reply within four weeks from that
date subject to costs of Rs.20,000 being paid to the Petitioner within the
same time. This order was passed in the presence of Mr. Rajiv Tyagi,
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learned counsel appearing for BSNL. On the next hearing on 4 May 2016,
the Court was informed that the costs had not been paid. Again one “final
opportunity” was granted to BSNL to pay costs within two weeks. Further
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the Court dismissed the application filed by BSNL for waiving the costs
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imposed by the order dated 21 March 2016. The Court further noted that
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the Supreme Court had by an order dated 29 February 2016 dismissed the
Respondent‟s SLP.
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10. Again on 2 August 2016, the Court was informed that the costs of
Rs.20,000 had not been paid. Mr. Tyagi then sought time to verify the facts.
It was then made clear that in case the costs are not paid, the reply filed by
the Respondent would not be considered.
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11. Today Mr. Tyagi has placed before the Court a sanction memo dated 17
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May 2016 along with a covering letter stating that a cheque dated 19 May
2016 of Rs.18,000 in favour of the Petitioner had been issued. The
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photocopy of the said letter bears signature of a person with a date of 31
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August 2016. The said letter appears to have been sent only on 24 August
2016. It appears from the signature on the said letter that the cheque was
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valid only till 31 August 2016 and could not have been encashed. In any
event learned counsel for the Petitioner denies knowledge of such cheque.
His instruction is that the Petitioner has till date not received costs as
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directed by the Court in its order dated 21 March 2016.
12. It is unfortunate that despite many opportunities granted to the
Respondent, the costs as directed by the Court has not been paid to the
Petitioner till date. In any event, the cheque shown to have been made was
for a sum of Rs.18,000 and not Rs.20,000 as directed by the Court. There
was no question of deducting TDS from costs as directed by the Court. If
costs of Rs.20,000 had been ordered, then that amount and nothing less
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should be paid by the Respondent to the Petitioner.
13. For deliberate disobedience of the orders of the Court for several
hearings, the Court directs the Respondent BSNL now to pay further costs of
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Rs.40,000 to the Petitioner not later than 12 December 2016 and a proof of
payment of such costs will be placed on record. It is made clear that this is
irrespective of whether the earlier costs were paid or not. If there is any
disobedience of this order it will be open to the Petitioner to move the Court
for appropriate directions.
14. The Court finds no merit in any of the objections raised by the
Respondent to the prayer made in the present petition that an Arbitrator
should be appointed by the Court in place of Mr. R.C. Gupta who has acted
as an Arbitrator in the first instance. The statement of claims has already
been filed by the Petitioner and so the arbitration will have to resume from
that stage before the new Arbitrator.
15. Accordingly, the Court appoints Justice A.P. Shah, a former Chief
Justice of this Court (Mobile No. 9810160007) as an Arbitrator to adjudicate
the disputes between the parties including claims and counter-claims. The
fees will be consistent with the Schedule to the Arbitration and Conciliation
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Act, 1996 as amended from 23 October 2015. The parties are directed to
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appear before the learned Arbitrator on 19 December 2016 at 4 pm or such
changed time and/or date that the learned Arbitrator finds convenient which
will be communicated to the parties at least ten days in advance. The venue
for the first hearing will be fixed by the Petitioner and communicated to the
learned Arbitrator and the Respondent at least one week prior to the date
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fixed. The expenses incurred for the hearings shall be equally shared by the
parties.
16. The petition is disposed of in the above terms. A certified copy of this
order be delivered to the learned Arbitrator forthwith.
17. Order be given dasti.
S.MURALIDHAR, J
NOVEMBER 30, 2016
Rm
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