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1989 Supreme(Del) 172
High Court Of Delhi
INDU ENGINIRING AND TAXTILE LIMITED - Appellant
Versus
DELHI DEVELOPMENT AUTHORITY - Respondent
Suit 944A of 1985
Decided On : 04/07/1989
Harish Malhotra, R.K.VIRMANI
An arbitrator's failure to consider a material document that could have influenced the decision amounts to legal misconduct, and the award can be set aside on that ground.
Headnote:
ARBITRATION - AWARD - SETTING ASIDE - GROUNDS - LEGAL MISCONDUCT - IGNORING MATERIAL DOCUMENT - ARBITRATOR FAILED TO CONSIDER A VITAL DOCUMENT THAT COULD HAVE INFLUENCED THE DECISION - AWARD SET ASIDE.
Fact of the Case:
A dispute arose between the petitioner, a contractor, and the respondent, DDA, over the supply of cast iron pipes. The petitioner claimed additional payment for the increase in prices of pig iron and hard coke. The matter was referred to arbitration, and the arbitrator awarded the petitioner the claimed amount.
Finding of the Court:
The court found that the arbitrator had committed legal misconduct by ignoring a crucial document, a letter dated 9-6-82, which showed that the petitioner had agreed to delete a letter dated 13-5-81 from the agreement. The court held that this letter was material to the case and should have been considered by the arbitrator.
Issues: Whether the award should be set aside due to the arbitrator's legal misconduct in ignoring a material document.
Ratio Decidendi: The court relied on the Supreme Court's decision in K. P. Poulose vs. State of Kerala, which held that an arbitrator's misconduct includes legal misconduct, such as arriving at an inconsistent conclusion or ignoring material documents. The court found that the arbitrator in the present case had engaged in legal misconduct by ignoring the letter dated 9-6-82.
Final Decision: The court set aside the arbitrator's award on claim No. 2 and remitted the matter to the arbitrator for fresh consideration after taking into account the letter dated 9-6-82.
( 1 ) PETITIONER was awarded a contract forthe supply of cast irons pigot and socket soil waste and ventpipes by D. D. A. (hereinafter called the respondent ). The case ofthe petitioner is that the terms and conditions on which supplieswere contracted were revised by writing incorporated in the agreement executed on 14/05/1981 between the parties. Certaindisputes anose between the parties out of the execution of thecontract.
( 2 ) THE engineer member of D. D. A. by his order dated14-12-1984 appointed Shri Banarsi Dass, Superintending Engineer, D. D. A. to decide the matter and make an award regardingthe disputes between the parties. The Arbitrator entered uponthe reference and after hearing the parties made his award on 16/05/1985. The award of the Arbitrator is reproduced forthe sake of convenience and reference :-380reasons FOR THE AWARD :
CLAIM No. 1 : The claimants claimed a sum of Rs. 21420. 41on account of sales tox @ 4 per cent due to increase in the pricesof pig iron and hard coke. Respondents have admitted thisamount in their counter statement of facts. Hence, I allow a sumof Rs. 21420. 41 in favour of the claimants.
CLAIM No. 2 : The claimants claimed a sum of Rs. 234097. 41on account of increase in the prices of hard coke with effectfrom 14-2-81. Claimants stated that in pursuance of a noticeinviting tender for supply of goods floated by the respondents,the claimants submitted their offer by their letter dated 12-2-81on the terms and conditions quoted therein including the pricesescalation clause. Thereafter, protracted negotiations took placebetween the claimants and the respondents when by letter dated6-5-81 the respondents intimated to the claimants that theiroffer was acceptable on the terms and conditions mentioned inthe said letter dated 6-5-81. However, further negotiations wereheld between the parties as the said acceptance letter dated6-5-81 required certain clarifications. Accordingly, both theparties held discussions and the claimants by their letter dated13-5-81 clarified the outstanding points.
( 3 ) THEREAFTER, the terms and conditions were incorporated inthe letter dated 13-5-81 and the same was made as part of theagreement executed on 14-5-81 between the parties. It wasfurther stated by the claimants that it was unequivocally agreedand understood by and between the parties that the prices quotedby the claimants for supply of contracted goods was based onthe prices of pig iron and hard coke prevailing on 12-2-81 andany increase after 12-2-81 was to be paid by the respondents. The respondents gave their own calculations which showed thaton the basis of the increase in prices of hard coke w. e. f. 14-2-81the figure of Rs. 234097. 41 is correct. However, respondentsdenied their liability to pay this amount on the grounds that it isnot payable in terms of the agreement. The respondent statedthat the claimants submitted the tender after JPC announcementof 14-2-81 and they were supposed to have given their rates onthe prices prevailing on the date of submissions of tenders. Secondly, it was clear from their letter of negotiations dated16-4-81 that the claimants were knowing the fact of increase inprice of coke. They should have revised their rates at the timeof negotiations. On careful consideration of facts placed beforeme and submissions advanced in the pleadings as well as arguments, I am of the view that the claim is justified for the reasonsgiven below :--
(I) It is undisputed that an increase in the prices ofhard coke took place w. e. f. 14-2-81. The claimantshave in their offer dated 12-2-81 clearly mentionedthat the prices are based on the prevailing pricesof premium hard coke and pig iron. Based on thisoffer of the claimants further negotiations took placebetween the parties. The increase in question tookplace w. e. f. 14-2-81. There is no price escalationclause contained in the NIT similar to clause 10 (c)of form Public Witness D-7 which is otherwise there is DDAcontracts. The ver
