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2019 Supreme(Del) 801
IN THE HIGH COURT OF DELHI AT NEW DELHI
NAVIN CHAWLA, J.
Dhampur Sugar Mills Ltd - Appellant
Versus
Bharat Petroleum Corporation Ltd - Respondent
Original Miscellaneous Petition No. 281 of 2015
Decided On : 01-04-2019
Advocate Appeared:
Prasenjit Keswani, Adv., Raghvendra Pratap Singh, Adv., S.S. Ray, Adv., Vaibhav Gulia, Adv.
The petitioner must prove actual damage or loss suffered due to a breach of contract to claim damages, and the Agreement terms govern the entitlement to interest on delayed payments.
Headnote:
Arbitration and Conciliation Act - Dispute on Clause 5 of Agreement - [TAKE OR PAY / SUPPLY OR PAY] - [Section 34 of the Arbitration and Conciliation Act, 1996] - [Clause 5 of the Agreement]
Fact of the Case:
The petitioner challenged an Arbitral Award regarding a dispute on the interpretation and effect of Clause 5 of the 'Agreement for supply of indigenous anhydrous ethanol in State of Haryana'. The petitioner claimed that the respondent failed to place indents for full supply, leading to an obligation to pay liquidated damages under Clause 5(v) of the Agreement.
Finding of the Court:
The Arbitrator rejected the petitioner's claim, concluding that the delay in obtaining requisite permissions from the Excise Department was not due to negligence by the respondent. The Arbitrator also found that the petitioner did not show any loss incurred due to the respondent's default.
Issues: Dispute on interpretation and effect of Clause 5 of the Agreement, obligation to pay liquidated damages, and claim for interest on delayed payments.
Ratio Decidendi: The delay in obtaining requisite permissions was not due to negligence by the respondent, and the petitioner failed to prove any loss incurred due to the respondent's default. The Agreement did not provide for payment of interest on delayed payments.
Final Decision: The court dismissed the petition, finding no merit in the petitioner's claims.
NAVIN CHAWLA, J.
1. This petition under Section 34 of the of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') has been filed by the petitioner challenging the Arbitral Award dated 30.12.2014 passed by the Sole Arbitrator adjudicating the disputes that have arisen between the parties in relation to the 'Agreement for supply of indigenous anhydrous ethanol in State of Haryana' dated 11.10.2010 executed between the parties.
2. The primary dispute between the parties is on the interpretation and effect of Clause 5 of the Agreement, which is reproduced hereinunder:
"5. TAKE OR PAY / SUPPLY OR PAY:
The both parties agree to supply/uplift minimum 90% of the order quantity. In case of failure from either party, this "Take or Pay/Supply or Pay" clause shall be applicable in addition to the other terms & conditions of the contract. The modalities shall be as under.
i. The Location shall place monthly indents/schedule for supplies of ethanol by the Suppliers.
ii. The Supplier will make the supplies as per the indents/schedule placed by the purchaser. The Supplier shall strictly adhere to the supply schedule. In case of failure to supply, the committed quantity shall reduce on prorata basis for the period so delayed. For the purpose of calculating prorata quantity, date of receipt at location shall be taken as date of supply and scheduled date provided by the location shall be considered as requirement date for this purpose.
iii. The above reconciliation of quantity supplied vise-a-vis a indents/schedule and settlement of accounts under this clause shall be done on financial quarter basis by the Indenting locations.
iv. Amount of Rs.2700/- per KL (Rupees Two Thousand Seven Hundred Only per KL) (equivalent to 10% of the basic rate) shall be payable by the Supplier for the undelivered quantity from minimum quantity of 90% of the indented quantity on financial quarter basis.
v. Amount of Rs.2700/- per KL (Rupees Two Thousand Seven Hundred Only per KL) (equivalent to 10% of the basic rate) shall be payable by the Purchaser for the un-indented quantity from minimum 90% of the prorata purchase order quantity minus prorata quantity arrived as per clause 5(ii) above on financial quarter basis.
vi. State Excise controls the movement of ethanol. The delay in issue of requisite permissions/clearances by State Excise shall affect the indents/schedule of supplies. The both parties agree that delays and prorata quantity thereof due to non-availability of requisite permissions/clearances by Statutory Authorities shall be reconciled on case-to-case basis."
3. It was the case of the petitioner that in terms of Clause 5 of the Agreement as reproduced hereinabove, the respondent was under an obligation to place the indents/schedule on the petitioner on a pro-rata basis on financial quarter basis. Immediately on execution of the above Agreement, the petitioner had called upon the respondent to obtain necessary permissions from the excise authorities for import of Ethanol so that the supply is not effected. However, the respondent was able to obtain the import permission from the Excise Department at Haryana only on 11.11.2010 and thereafter obtain the export permission from the Excise Department in the State of UP only on 08.12.2010. As both the permissions were obtained within the first quarter, the respondent was obliged to place an indent /schedule on the petitioner for the full quarter supply determined on the above basis. As the respondent failed to place indent for full supply, it was under an obligation to pay the liquidated damages under Clause 5(v) of the Agreement.
4. Counsel for the petitioner submits that in spite of this admitted default and stipulation for payment of liquidated damages, the Arbitrator has rejected the claim of the petitioner on an incorrect basis that for the delay in grant of permission from the Excise Department, the indents are being put for reconciliation on a case to case basis and as the res
