1. Mahanagar Telephone Nigam Limited (‘MTNL’) has filed this petition under Section 34 of the Arbitration & Conciliation Act, 1996 (‘Act’) challenging an Award dated 12th March, 2003 passed by the Arbitral Tribunal (‘AT’) in the disputes between MTNL and the Respondent, Haryana Telecom Limited (‘HTL’).

2. The background facts are that MTNL floated a tender dated 4th March, 1994 for procurement of 55 LCKM of underground Jelly Filled Telephone Cables ranging between 10 to 2400 pairs. Pursuant to the above tender, HTL submitted an offer which was accepted by MTNL. Pursuant thereto, MTNL issued the following Purchase Orders (‘Pos’) to HTL:

(a) 20-80(527)/94-MM/HTL/94-95/56 dated 16-8-1994.

(b) 20-80(527)/94-MM/HTL/94-95/89 dated 21-9-1994.

(c) 20-80(527)/94-MM/HTL/94-95/91 dated 29-9-1994.

(d) 20-80(527)/94-MM/HTL/94-95/108 dated 18-10-1994.

3. The relevant clauses in the Contract pertaining to delays in the supplier’s performance and levy of liquidated damages (‘LD’) read as under:

“15. Delays in the supplier's performance

15.1 Delivery of the goods and performance of services shall be made by the supplier in accordance with the time schedule specified by the purchaser in its purchase order.

15.2 Delay by the supplier in the performance of its delivery obligations shall render the supplier liable to any or all of the following sanctions; forfeiture of its performance security, imposition of liquidated damages and/or termination of the contract for default.

15.3 If at any time during performance of the contract, the supplier or its sub-contractors should encounter conditions impending timely delivery of the goods and performance of service, the supplier shall promptly notify the purchaser in writing of the fact of delay, its likely duration and its causes. As soon as practicable after receipt of the supplier's notice, the purchaser shall evaluate the situation and may at its discretion extend the discussion with the supplier.

15.4 In case of delayed supplies period, the advantage of after delivery reduction of taxes/duties shall be passed on to the purchaser i.e. MTNL and no benefit of increase will be permitted to the suppliers.

16. Liquidated damages

16.1 The date of delivery of the stores stipulated in the acceptance of tender should be deemed to be the essence of the contract and delivery must be specified completed not later than the therein. Extension will dates not be given except in exceptional circumstances. Should, however, deliveries be made after expiry of the contract delivery period, without prior concurrence of the Purchaser, and be accepted by the consignee, such deliveries will not deprive the purchaser of his right to recover liquidated damages under clause 16.2 below. However, when supply is made within 21 days of the contracted original delivery period, the consignee may accept the stores and in such cases the provision of clause 16.2 will not apply. The grace period of 21 days shall be applicable only "for delivery of stores and not for inspection.

16.2 Should the tenderer fail to deliver the stores or any consignment thereof within the period prescribed for delivery the Chairman and Managing Director, MTNL shall be entitled to recover 1/2% of the value of the delayed supply for each week of delay or part thereof, subject to maximum of 10% of the value of the delayed supply, provided that delayed portion of the supply does not in any way hamper the commissioning of the system. Where the delayed portion of the supply material hampers installation and commissioning of the system, liquidated damages (not as a penalty) shall be levied as above on the total value of the contract.”

4. It is stated that HTL failed to adhere to the delivery schedule. There was a delay of about 1 to 8 months in making the supplies. It is stated that at the request of HTL, MTNL granted extension letters/amendments to the POs from time to time subject to conditions regarding deduction of LD charges. Clause 9 of the Contract dated 16th August,