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BOMBAY HIGH COURT
B.P. Saraf, Vijay Daga, JJ.
MAHARASHTRA STATE ELECTRICITY BOARD - APPELLANT
v.
STERLITE INDUSTRIES (INDIA) LTD. AND OTHERS - RESPONDENTS
Appeal Nos. 836 and 837 of 1997 in Arb. Petition Nos. 147 and 145 of 1993 in Arb. Award Nos. 41 and 42 of 1993,
Decided on: February 17, 2000
Arbitration Act - Maharashtra State Electricity Board - Electricity (Supply) Act, 1948 - Contracts - Section 30 of the Arbitration Act, 1940
Fact of the Case:
The Maharashtra State Electricity Board (MSEB) appealed against the refusal to grant decrees in terms of the minority awards and the order to grant decrees in terms of the majority awards under the Arbitration Act, 1940. The appellants required supplies of material and equipment for their rural electrification schemes and had entered into contracts with the respondents for the supply of conductors. The respondents failed to supply the agreed quantities, leading to termination of the contracts and a claim for damages by the appellants.
Finding of the Court:
The court held that the appellants were not entitled to claim damages under Section 73 of the Indian Contract Act due to the special provision in the contracts reserving the right to purchase materials and equipments from the market and to claim damages from the respondents. The court also found that the appellants failed to prove the loss suffered by them and did not purchase the goods not supplied by the respondents after termination of the contracts, as required by the contract terms. The court dismissed the appeals.
Issues: (1) Whether appellants were entitled to invoke provisions of Section 73 of the Indian Contract Act ? (2) If yes, whether appellants prove that they suffered any loss ? (3) Whether it was incumbent upon the appellants under Clause 14 of the contract to actually purchase the goods, not supplied, by the contractors, from the open market after termination of the contract in order to claim damages ?
Ratio Decidendi: The court held that the appellants were not entitled to claim damages under Section 73 of the Indian Contract Act due to the special provision in the contracts reserving the right to purchase materials and equipments from the market and to claim damages from the respondents. The court also found that the appellants failed to prove the loss suffered by them and did not purchase the goods not supplied by the respondents after termination of the contracts, as required by the contract terms.
Final Decision: The appeals were dismissed as the court found no case for interference and held that the claims were rightly rejected. The court also emphasized the need to support an award if reasonably possible, rather than to destroy it by calling it illegal.
V. C. DAGA, J. - These appeals are directed against the common judgment and order passed by the learned single Judge whereby he refused to grant decrees in terms of the minority awards and repelled all the objections to the majority awards raised under section 30 of the Arbitration Act, 1940 (hereinafter referred to as "Act" for short) and ordered decrees in terms of the majority awards.
2. The appellants-Maharashtra State Electricity Board (hereinafter referred to as "MSEB" for short), are Statutory Corporation constituted under the provisions of the Electricity (Supply) Act, 1948, (hereinafter referred to as "the Supply Act" for short) which inter alia is engaged in distribution and supply of electricity within the State of Maharashtra.
3. In the discharge of its duties under the Supply Act, the appellants frames schemes for generation, distribution and supply of electricity in accordance with the policy of the State and its schemes includes rural electrification for the purpose of spreading the benefit of electricity to the rural in the State of Maharashtra. The schemes are implemented in the phased manner from year to year. The implementation of such schemes for rural electrification and development of rural areas is a continuous process forming part of the five-year plans of the State. The appellants require supplies of material and equipments of different kinds for their schemes which include conductors of different kinds needed for transmission distribution and supply of electricity. Such conductors were needed in large quantities and the appellants have to place orders according to their estimated requirements every year and from time to time during a year.
4. The appellants had floated tenders for purchase of conductors for its rural electrification schemes some time in 1982. The respondents (1) M/s. Sterlite Industries (India) Ltd. and (2) M/s. Pravin Trading Corporation (hereinafter referred to as 'both respondents' for short) were the tenderers in response to appellant's notice inviting tenders. The appellants had accepted tenders submitted by both the respondents for manufacture and supply of conductors on terms and conditions stated in the appellant's letter of acceptance of tenders issued to both the respondents on 19th/22nd November, 1983, respectively. The letters of acceptance of tenders set out inter alia the scope of the work, the specification of the form the goods to be manufactured and supplied under the contracts, the terms relating to the price and payment, the conditions relating to price variation, delivery, inspection, consequences of delay or default, termination of contract, arbitration and such other matters. The said letters of acceptance also incorporated therein, inter alia general conditions of contract set out in the tender documents which were issued by the appellants.
5. According to the terms of the aforesaid contracts respondents were under an obligation to supply the entire quantity of the various kinds of conductors and stay wires by the end of June, 1985. At this junctures it is necessary to refer to Clause 14(ii) of the contract between the parties dealing with default liability of contractors which reads as under:
"14. The purchaser may upon written notice of default to the contractor terminate the Contract in circumstances detailed hereunder:
(a) & (b) ...............
(ii) In the event the purchaser terminates the contract in whole or in parts as provided in paragraph 14(i), the purchaser reserves the right to purchase upon such terms and in such manner as he may deem appropriate. Equipment similar to that terminated and the Contractor will be liable to the purchaser for any additional costs for such similar equipment and/or liquidated damages for delay as defined in Article 22 of the General Conditions until such reasonable time as may be required for the final supply of Equipment. In both the cases, the respondents have defaulted in making supply of conductors and stay w
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