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1995 Supreme(Bom) 203
IN THE HIGH COURT OF BOMBAY
(MARCH 31, 1995)
V. S. DEMPO AND COMPANY LIMITED
Versus
TELECOM DISTRICT MANAGER
Headnote:(Indian) Telegraph Act, 1885
Section 7-B-Constitution of India, Article 226-Departmenfs refusal to refer to arbitrator-Case of over- billing-Ground-Without courts order, cannot be referred to-Held-Inspite of knowing provision under Section 7-B, non-reference by circular is illegal-In view of such instructions, it is easy to find that the circular in quest on is inconsistent will the same since it does not provide for a situation in which split bills are bound to be issued. Needless to say that Executive Instructions are always meant to supplement Rules and to that extent Instructions 6 and 7 is an instruction framed under the Indian Telegraph Act carrying with it statutory nature, Thus, it is only in case they are contrary to the rules that such instructions can be denied statutory character.
Section 7-B-Departments action of disconnecting phone-Ground -Non-payment of bills-Reference to arbitration already denied-Held-Payable bills be only those which are decided by award to be paid-Department not authorised to disconnect phone on non-payment of bill even if, disputed.-In the instant case, it is seen that the Instruction 6.7 is a valid one because it aims at supplementing the rules in contra position with the instructions contained in the Directory and which are manifestly against the Act! Rules as well as the very contained in the Directory take sufficient care of the grievances of the subscribers and therefore, are to be followed cannot be accepted because the same appears to contemplate the right of tile Department to disconnect the telephone every time the bill, even if, it is disputed, is not paid by the subscriber.
Section 7-B-Scope of arbitration-On over- billing-Complaint of over-billing-Being refused to be referred to arbitrators-Ground-With out courts order cannot be referred to--Held-Reference to arbitration is mandatory-Departmental circulars cannot negate statutory provisions, It is, therefore, not open to the department nugatory the mandate of the statute according to which the department has no other option rather to refer the matter of any dispute raised by the subscriber to arbitration and therefore, the court is inclined to hood that there is no authority in law for the department to insist that for the purpose of reference of a dispute to the arbitrator the subscriber will have Lo necessarily approach the Court.
A. P. SHAH, J.
( 1 ) THE petitioner Lubrizol (India) Limited is a public sector undertaking engaged in the manufacture, sale and development of chemical additives and speciality chemicals used for improving the performance of petroleum based lubricants and fuels and sixty per cent of its subscribed capital is held by the Government of India and balance forty per cent is held by Lubrizol Corporation, USA, the respondent herein. The respondent is a leading manufacturer of chemical additives in the world and has a technical collaboration with the petitioner for transfer of technology relating to the manufacture, sale and development of chemicals additives and speciality chemicals meant for improving of petroleum based lubricants and fuels.
( 2 ) ON 18th January, 1988, a Technology Transfer Agreement (TTA) was entered into between the petitioner and the respondent effective from 1st January, 1988 for a period of seven years. Under the TTA, the respondent agreed (a) to provide technical services and (b) to grant licence to use and practise its manufacturing technology, formulation technology and patent rights to the respondent for a two-fold consideration specified in Clauses 4. 1 and 4. 2 respectively, namely, for the technical services the petitioner agreed to pay to the respondent an amount equal to pay two and half per cent of the sales price of all products sold by the petitioner during the term of the agreement and for the rights in manufacturing technology, formulation technology and the patent rights, the petitioner agreed to pay an additional amount (styled royalty in correspondence) equal to three per cent of the net sales value of all the products covered by the aforesaid rights sold by the petitioner during the term of the agreement.
( 3 ) FOR the aforesaid purpose, the TTA defines the three relevant expressions- Net Sales Value, Sales Price and Landed Cost in Clauses 1. 6, 1. 11 and 1. 3 respectively thus :--- " "net Sales Value" of a product is defined by Clause 1. 6 as meaning the sales price of the product minus the landed cost of any finished components purchased from the respondent that are transported into that product. Landed cost shall be deducted from the Sales Price on "a first in, first out" basis. "sales Price" of a product is defined by Clause 1. 11 to mean the net F. O. R. factory price of the petitioner invoiced to customers of that product. Net F. O. R. factory price shall not include cash and trade discounts to customers, charges for sales or transaction taxes, storages, warehousing, wrapping or packing or any Central, State or Municipal Taxes, Union excise duties etc. all as separately shown on invoices. "landed Cost" of a finished component is defined by Clause 1. 3 as meaning the C and F price invoiced by the respondent to the petitioner plus customs duties imposed upon the sale of such component. "
( 4 ) SINCE the TTA involved foreign collaboration as also foreign exchange outflow, approval of Government of India was required to be obtained for it and the same was accorded to it by the Government of India by their two letters dated 18th January, 1988 and 16th February, 1988 subject to the modifications of the terms as specified therein. In their letter dated 16th February, 1988 the Government particularly in regard to the royalty payable at three per cent expressly reiterated that "royalty will be payable on the basis of net ex-factory sales price of the product exclusive of excise duty and sales tax minus the landed cost of bought out components imported from the collaborator including ocean freight, customs duty etc. ".
( 5 ) DURING the currency of the TTA dispute arose between the parties on account consideration/royalty as per clause 4. 2. Initially the petitioner paid the royalty at 3% of the net sales value of the product after deducting the landed cost of imported component exclusive of additional customs duty levied and paid for the period from 1st January, 1988 to 30th September, 19
