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1996 Supreme(Del) 583
High Court Of Delhi
THRI STAR SUPPLY AGENCY - Appellant
Versus
STATE OF HARYANA - Respondent
Decided On : 07/17/1996
Where the contract provides for the levy of a penalty in the event of delay in carrying out the contract, time cannot be taken to be the essence of the contract.
Headnote:
ARBITRATION ACT, 1940 - SECTION 30 - AWARD - CHALLENGE - TIME OF ESSENCE - DELIVERY OF GOODS - F. O. R. BASIS - PENALTY FOR DELAY - REASONABLENESS OF REASONS GIVEN BY ARBITRATOR.
Fact of the Case:
A contract was entered into between the claimant and the respondent for the supply of 820 CHV kits (Steel Trunks) on F. O. R. basis, to be completed before March 31, 1981. The claimant dispatched the goods by train on March 30, 1981, but some of the C. M. Os refused to accept the goods on the ground that they were not sent in time. The claimant auctioned the unsold kits for a sum of Rs. 26,348.14 and claimed damages from the respondent. The respondent refused to pay and the claimant filed a petition under section 20 of the Arbitration Act, 1940. The court appointed an arbitrator who awarded damages to the claimant.
Finding of the Court:
The court held that the time was not the essence of the contract as the contract provided for the levy of a penalty in the event of delay. The court also held that the delivery of the goods to the Railways was deemed to be delivery to the respondent, and that the goods were supplied within the stipulated period. The court rejected the respondent's objection that the kits were to be purchased under a scheme of the Government of India which lapsed on March 31, 1981, as there was no mention of any such scheme in the contract.
Issues: Whether time was the essence of the contract.
Ratio Decidendi: The court held that time was not the essence of the contract as the contract provided for the levy of a penalty in the event of delay. The court also held that the delivery of the goods to the Railways was deemed to be delivery to the respondent, and that the goods were supplied within the stipulated period.
Final Decision: The court rejected the respondent's objections and made the award a rule of the Court and passed a decree in terms thereof.
( 1 ) HAVING regard to the averments made in the application (I. A. 6813-A/94) which is supported by an affidavit of Mr. K. K. Parmar, Assistant Director in the Department of Supplies and Disposal, Govt. of Haryana, Chandigarh, the delay of 7 days in filing the objections to the award are condoned. This application is accordingly disposed of.
( 2 ) LA. No. 6813/94: This is a petition by the objector/respondent under section 30 of the Arbitration Act challenging the award of the Arbitrator dated November 23,1992. The facts giving rise to this petition are as under-
( 3 ) THE Assistant Controller of Stores invited tenders for supply of 820 CHV kits (Steel Trunks) of the specifications mentioned in the tender notice. Responding to the notice, the claimant M/s. Three Star Supply Agency by its letter dated February 25, 1981 offered to supply the aforesaid goods specified in the tender at the rate of Rs. 156. 65 per kit. The offer of the, claimant was accepted by the respondent by latter s telegram dated March 5, 1981. Subsequently on March 17, 1981 a contract was executed between the parties. The contract postulated that the supply was to be made on F. O. R. basis and to be completed before March 31, 1981. Pursuant to the contract, the Director Health Services, Haryana by letter dated March 19,1981 required the claimant to despatch the following under of kits to the Chief Medical Officers of the below mentioned places :-
( 4 ) THE claimant supplied 50 Kits to the Chief Medical Officer, Faridabad on March 31,1981 by personal delivery. In so far as the other places are concerned, the Kits were despatched on March 30, 1981. While C. M. Os. Sursa, Kamal and Gurgaen accepted the Kts, the other C. M. Os. refused to retire the Railway documents on the ground that the Kits were not sent in time. The claimant requested the authorities to accept the Kits but failed in its endeavour. Since the aforesaid C. M. Os. did not retire the goods, the petitioner got back the same from the Railways. After receipt of the Kits, the claimant is said to have auctioned the Kits for a sum of Rs. 26,348. 14. By notice dated March 25, 1982 the claimant asked the Controller of Stores to pay the following sums:-
( 5 ) THE notice ofthe petitioner also required the State of Haryana to appoint an Arbitrator in terms of clause 18 of the Contract in the event of latter s refusal to make the payment demanded by the former. Finding no response from the respondent, the petitioner claimant filed a petition before this Court under section 20 of the Arbitration Act, 194c. On November 30,1988, Court directed the State of Haryana to file the arbitration agreement and to refer the disputes specified in the petition to Arbitration, within 8 weeks. The objector, however, failed to earn out the direction, with the result that on being moved by the claimant, the court appointed Justice G. C. Jain (Retd.) as the Arbitrator on February 9,1990. The Arbitrator entered upon reference and made and pub ished the award on November 23,1992. The Arbitrator held the claimant to be entitled to Rs. 74,021,54 - Rs. 69,318. 00 towards damages, Rs. 1203,54 towards balance price of goods which were delivered and accept ed by some of the C. M. Os and Rs. 3500. 00 towards security deposited with the respondent. The. Arbitrator also allowed interest @ Rs. 15% P. A. from May 1,1981 till the passing of the decree in respect of the aforesaid sum of Rs. 4703. 54 (Rs. 1203. 54 being the balance price and Rs. 3500 being the security deposit ). The Arbitrator also rejected the counter claim of the objector. The respondent not being satisfied with the award of the Arbitrator, filed the instant application under section 30 of the Arbitration Act.
( 6 ) I have heard the leanrned counsel for the parties The main contention of the objector/respondent is that the time was the essence of the contract and since the claimant failed to supply the goods before March 31, 1981, it was not entitled to claim
