1. Present petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act, 1996”) for setting aside the arbitral Award dated 30th January, 2009 passed by the Sole Arbitrator, Mr. Justice C.L. Chaudhry (Retd.).

2. The only issue that arises for consideration in the present proceedings is whether levy of liquidated damages by petitioner-objector is to be on the total value of the Purchase Order inclusive of duties and taxes or whether duties or taxes have to be excluded. Learned Arbitrator in the impugned Award has rejected the petitioner-objector's argument for levy of liquidated damages on the Purchase Order inclusive of duties and taxes. The relevant portion of the impugned Award reads as under :-

“5 …………Clause 11 of P.O. is reproduced herein below for the sake of convenience:- Clause 11- “Liquidated Damages: should the firm fail to deliver the stores or any consignment thereof within the period prescribed for delivery, the purchaser shall be entitled to recover ½% of the value of the delayed supply for each week of delay or part thereof subject to maximum of 5% of the value of delayed supply (on basic value excluding duties and taxes) provided that the delayed portion of the supply does not in any way hamper the commissioning of the systems. Where the delayed portions of supply materially hampers commissioning of the system, LD charges shall be levied as above on the total value of the purchase order (Basic value excluding duties and taxes)” Value of cables as given in LOI and P.Os. is the basic value and rates were exclusive of excise duty and sales tax which shall be paid extra. In view of the above said clause, the deductions in the form of liquidated damages on the excise and sales tax component is impermissible under the terms of the agreement and contract between the parties. xxxx xxxx xxxx xxxx

9. In a similar case of arbitration between M/s Continental Telepower Ltd. vs Union of India (Department of Telecom), where Rajasthan Circle has deducted liquidated damages from them on excise and sales tax component of the value of cables, in a arbitration proceedings it was held that “Claimant indicated that Rajasthan Circle in P.O. dated 30.7.1996 in Clause 11 of LD has provided that LD would be recovered on basic value excluding duties and taxes. P.O. is the essence of the contract. Therefore in view of the aforesaid specific agreement Rajasthan Circle cannot be allowed to levy LD on the duties and taxes.”

The aforesaid award passed by Shri N.K. Gupta, Sole Arbitrator, was upheld by Hon'ble Delhi High Court by Hon'ble Justice J.D. Kapoor vide order dated 20.3.2002 passed in OMP No.83/2002. The copy of the award as well as the order passed by Hon'ble High Court is already part of the present Arbitration proceedings. xxxx xxxx xxxx xxxx

15.2………In my opinion, the purchase order is the essence of the contract. The cables were to be supplied to the respondent in terms of the purchase order and the price of the material was to be paid in terms of the purchase order. Regarding levy of liquidated damages, clause 11 was inserted in the purchase order. Extension for delivering the cables were given by the respondent in terms of Clause 11 of the purchase order. Clause 15 of the tender document regarding levy of liquidated damages fall in Section 111 of the tender document which prescribes General Conditions. Clause 11 of the Purchase order regarding levy of liquidated damages was inserted in place of Clause 15 Section 111 of the tender document in a modified form. Clause 11 of the Purchase Order is a special clause which will prevail over Clause 15 of the tender document which falls under Section 111 of the tender document prescribing General Conditions. In the absence of any clause regarding levy of liquidated damages in the purchase order, the respondent could rely upon Clause 15 of the tender document as part of General Conditions. But in the presence of a clau