Point of Law: Patent illegality falls under the head of ‘Public Policy’

JUDGMENT :

C. Praveen Kumar, J.

The present appeal is filed by Rashtriya Ispat Nigam Limited [for short “RINL”] under Section 37 of the Arbitration and Conciliation Act, 1996 read with Order 43 Rule 1 of Code of Civil Procedure, 1908 [for short, “C.P.C”], assailing the Order, dated 14.10.2019 passed in C.A.O.P.No. 1 of 2018, on the file of Special Judge for Trial and disposal of Commercial Disputes, Visakhapatnam, wherein the application, filed by the appellant herein under Section 34 of the Arbitration and Conciliation Act, 1996, was dismissed confirming the order of the Arbitral Tribunal.

2. The circumstances, which led to filing of the Claim Petition, are as under:-

(i) The appellant [RINL] herein which is a Government of India undertaking, issued a Global Tender Notice bearing No. PUR.6.17.013/06006 dated 14.03.2006 for supply of 30,000 MT (+)/[-] 5% shipping tolerance of Low Ash Metallurgical (LAM) Coke. The respondent/claimant, who was a successful bidder was given a Letter of Intent, on 21.06.2006 vide PUR 6.17.013/0051. In continuation of the Letter of Intent, the respondent/claimant placed an acceptance of tender for supply of said goods, inconformity with the specifications mentioned in Annexure-I to the contract @ Rs.7730/- per tonne.

(ii) Though, the claimant had to supply the goods between August and September, 2006 as per the purchase order, but delay has occurred due to heavy rains and floods in Gujarat State, where the cookeries were located and that the claimant could offer to supply the goods by nominating the Vessel on 23.09.2006, indicating the particulars of the Ship, which are as under :-

iii) However, vide letter dated 26.09.2006, the appellant herein rejected the nomination for the reason as under:

“In terms of the contract and also due to non-submission of Performance Guarantee bond, we cannot accept the vessel nominated on 26.09.2006. We request you to arrange for Performance Guarantee bond immediately but not later than 27.09.2006 for further necessary action at our end”.

iv) The material on record also shows that vide letter 26.09.2006, the Claimant submitted Performance Guarantee bond and nominated another vessel. The particulars of which are as under :

v) However, the same was rejected by the appellant herein mainly on the ground that the Vessel is more than 22 years of age, which is contrary to Clause 1.1 of Annexure-II B to A/T, as it prescribes a Vessel not more than 15 years old. Further, the Vessel has Cranes of 25 MT capacity only as against the requirements of 30 MT capacity. No grabs were available on board, while Clause 1.1 of the agreement prescribe that the Vessel should have atleast four grabs each of 12 Cubic Metres capacity. The claimant addressed letters dated 23.12.2006, 29.12.2006, 30.12.2006 and 01.01.2007 requesting the appellant to accept the nominated vessel named M.V. Halis Kalkavan with an undertaking that he would comply all the terms and conditions which are agreed between the appellant and its stevedoring agent at the Visakhapatnam Port. The claimant also agreed to bear all costs in connection with acquisition of additional grabs. The claimant nominated another Vessel by name GESCO and forwarded the details of the same vide letter dated 11.01.2007 for approval, but it was also rejected on the ground that it did not comply with the requirements of Annexure-II-B.

(vi) Vide letter dated 03.02.2007, the claimant indicated to the appellant that in view of the rejection of three Vessels nominated by him, without any valid reasons, the claimant g