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2012 Supreme(Del) 1168
189 (2012) DLT 264
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, J.
UNION OF INDIA - Plaintiff
Versus
PEECO HYDRAULIC PVT LTD. - Defendant
CS (OS) 1242/1991 & IA No.13851 of 1992
Decided On : May 1, 2012
Mr. Girish Aggarwal and Mr. Y.R. Sharma, Advocates.
The main legal point established in the judgment is that the absence of consent for the extension of time for making the Award can vitiate the arbitration proceedings.
Headnote:
Arbitration Act - Objections to Award - Sections 30 and 33 of the Arbitration Act, 1940 - Summary of Acts and Sections: The court discussed the implications of Clause 14 of the tender documents, the acceptance of the offer under Section 7 of the Contract Act, and the authority to extend the time for making the Award under Clause 3 of the Schedule to the Arbitration Act 1940.
Fact of the Case:
The case involved objections by Peeco Hydraulic Private Limited (PHPL) to an Award passed by the sole Arbitrator in disputes arising from a tender issued by the Directorate General of Supplies & Disposal (DGS&D) for the supply of an Oil Hydraulic Spring Testing Machine.
Finding of the Court:
The court found that PHPL's objection to the arbitration proceedings based on the absence of consent to arbitration by an officer appointed by the Ministry of Law was not valid as PHPL had acted on the acceptance containing an arbitration clause without protest. The court also set aside the impugned Award due to the lack of consent for the extension of time for making the Award.
Issues: The issues included PHPL's objection to the arbitration proceedings and the validity of the extension of time for making the Award.
Ratio Decidendi: The court held that the acceptance of the offer under Section 7 of the Contract Act need not be conditional, and the absence of consent for the extension of time for making the Award vitiated the arbitration proceedings.
Final Decision: The objections of PHPL were allowed, and the suit was disposed of accordingly.
S. MURALIDHAR, J :
1. These are objections by Peeco Hydraulic Private Limited (‘PHPL’) under Sections 30 and 33 of the Arbitration Act, 1940 (‘Act’) to an Award dated 18th January 1991 passed by the sole Arbitrator in the disputes between the parties arising out of an acceptance of a tender by the Directorate General of Supplies & Disposal (‘DGS&D’) issued on 23rd June 1980 whereunder PHPL was to supply an Oil Hydraulic Spring Testing Machine.
2. According to the objector, Clause 14 of the tender documents contained a question whether the tenderer agreed to sole arbitration by an officer of Ministry of Law to be appointed by the DGS&D as provided in Clause 24 of the General Conditions of Contract (‘GCC’) Form DGS&D-68 (Revised). It was stated that omission to answer the question would be deemed as acceptance to the Clause. PHPL answered the question in the negative.
3. On 7th August 1992, the DGS&D cancelled the tender and invited fresh tenders in which PHPL again was the lowest. DGS&D reinstated the old tender of 30th December 1982 and cancelled it again on 14th June 1983.
4. One of the objections to the impugned Award by PHPL is that inasmuch as it never consented to the arbitration by an officer appointed by the Ministry of Law, the arbitration proceedings were bad in law. This issue came to be decided against PHPL by this Court by an order dated January 2002 of this Court. It was held in paras 17 and 18 as under:-
“17. The conclusions therefore from the aforesaid are clear and unambiguous. Under Section 7 of the Contract Act the acceptance of the offer has to be absolute but need not be conditional. However, if there is a conditional or counter offer and it is acted upon without protest and the acceptance has been conveyed subject to that, to which there is no dispute raised, this amount to a concluded contract.
18. With this backdrop one can refer back to the present case again. Even if while filling the document for tender the objector had stated that he does not agree to arbitration but still when the contract was accepted and conveyed it contained an arbitration clause. Admittedly, the objector at no stage protested to it and acted on the same. In that view of the matter once acceptance contained an arbitration clause to which there was no protest an attempt was made to complete the contract. The conclusion would be that it was an accepted contract with the said stipulation pertaining to the agreement. It is too late in the day to rake up this plea at this stage in court for the first time. It must therefore be held in the peculiar fact of the present case that there was an arbitration agreement between the parties and it is decided accordingly.”
5. Aggrieved by the above order, PHPL filed FAO (OS) No.53 of 2002 in which there was a stay granted of the further proceedings in the suit. The appeal was disposed of by the Court ultimately on 5th January 2012 with the following order:
“After arguing for some time, learned counsel for the appellant does not press the appeal and the application and states that he will argue his objections on merit to the award before the learned Single Judge. Dismissed as withdrawn. Interim order dated 14.02.2002 stands vacated. Parties to appear before the learned Single Judge in suit no.1242/1991 on 23.01.2012.”
6. Consequently, the above objection to the impugned Award no longer survives.
7. It is next submitted on behalf of PHPL that the first Arbitrator (earlier to the one who passed the impugned Award) had passed on order dated th September 1989 adjourning the proceedings sine die after noting that the time for pronouncing the Award had expired and that parties had to seek extension of time. That Arbitrator continued till his resignation on th July 1990. It is submitted that thereafter only a competent court could have appointed an arbitrator and not the persona designata in terms of Clause 24 of the conditions of the Contract. Moreover, PHPL never mutually agreed to extend the
