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2019 Supreme(Del) 911
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
Mahanagar Telephone Nigam Ltd - Appellant
Versus
Haryana Telecom Ltd - Respondent
Original Miscellaneous Petition No. 1113 of 2012
Decided on : 14-03-2019
Advocate Appeared:
Ravi Sikri, Adv., Deepak Yadav, Adv., Arun Sanwal, Adv., Abhishek Sharma, Adv.
The main legal point established in the judgment is that the purchase order constituted the final contract between the parties, and the terms and conditions in the NIT, APO, and LOI were subservient to the main contract. The court emphasized that HTL was well aware of the stipulation relating to sales tax when the purchase order was placed, and the withdrawal of the concession of the sales tax to MTNL was an increase in tax that HTL had to bear.
Headnote:
Arbitration and Conciliation Act - Sales Tax - [Arbitration and Conciliation Act, 1996] - [Section 34] - Summary of the acts and sections referenced and discussed by the court: The court discussed the Arbitration and Conciliation Act, 1996, specifically Section 34, in the context of a dispute regarding the entitlement to 'C' forms or reimbursement of 6% of sales tax amount deposited in respect of supplies made to the purchaser, Mahanagar Telephone Nigam Limited (MTNL). The court analyzed the terms and conditions of the Notice Inviting Tenders (NIT), the Purchase Order, and the General Conditions of Contract annexed to the NIT, to determine the binding contract between the parties. The court also considered the clarifications issued by the Department of Telecommunications (DOT) and the Sales Tax Department, and their impact on the contractual obligations of the parties. The interpretation of the contract and the legal principles governing the formation and modification of contracts were central to the court's decision.
Fact of the Case:
The dispute arose from a petition challenging an arbitral award regarding the entitlement to 'C' forms or reimbursement of 6% of sales tax amount deposited in respect of supplies made to MTNL. The petitioner, HTL, contended that the prices were quoted on the basis of 'C' forms to be issued by MTNL, entitling HTL to a benefit of 6% sales tax. MTNL, however, maintained that the purchase order clearly stipulated that the prices quoted were all inclusive and no 'C' form would be issued. The court analyzed the terms and conditions of the NIT, the Purchase Order, and the General Conditions of Contract annexed to the NIT, to determine the binding contract between the parties.
Finding of the Court:
The court found that the purchase order constituted the final contract between the parties, and the terms and conditions in the NIT, APO, and LOI were subservient to the main contract. The court held that HTL was well aware of the stipulation relating to sales tax when the purchase order was placed, and the withdrawal of the concession of the sales tax to MTNL was an increase in tax that HTL had to bear. The court set aside the arbitral award, concluding that the purchase order was the concluded contract between the parties, and HTL's claim based on the hope that MTNL would clarify in its favor could not form the basis of claims.
Issues: The issues involved in the case included the determination of the binding contract between the parties, the interpretation of the terms and conditions of the NIT, APO, LOI, and Purchase Order, and the impact of clarifications issued by DOT and the Sales Tax Department on the contractual obligations of the parties.
Ratio Decidendi: The court's decision was based on the interpretation of the terms and conditions of the NIT, APO, LOI, and Purchase Order, and the legal principles governing the formation and modification of contracts. The court emphasized that the purchase order constituted the final contract between the parties, and HTL was well aware of the stipulation relating to sales tax when the purchase order was placed. The court held that HTL's claim based on the hope that MTNL would clarify in its favor could not form the basis of claims.
Final Decision: The court set aside the arbitral award, concluding that the purchase order was the concluded contract between the parties, and HTL's claim based on the hope that MTNL would clarify in its favor could not form the basis of claims. OMP 1113/2012 was allowed, and there were no orders as to the costs.
Prathiba M. Singh, J.
The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter, the “Act”) has been filed challenging the impugned award dated 28th July, 2012. The dispute arises on the short question as to whether M/s Haryana Telecom Ltd.- the supplier ('HTL') is entitled to 'C' forms or reimbursement of 6% of sales tax amount deposited in respect of supplies made to the purchaser- Mahanagar Telephone Nigam Limited (hereinafter “MTNL”).
2. OMP 1113/2012 has been filed by MTNL challenging the award on the ground that the purchase order clearly contained a stipulation that the price quoted by the bidder would be inclusive of sales tax and the issuance of “C” forms was not applicable to MTNL. The Ld. Arbitrator held against MTNL.
3. The background of the present petition is that the Department of Telecommunications (hereinafter “DOT”) issued notice inviting tenders bearing tender number 14-21/94-MMT(MMS) for supply of Polythene Insulated Jelly Filled (PIJF) underground cables on 30th November, 1994. HTL was one of the successful bidders. Letters of Intent was placed by DOT on HTL for supplies on 3rd June, 1996, 15th October, 1996 and 22nd January 1997. As per the LOI, the purchase orders were to be placed by the various circles. HTL made supplies in respect of various telecom circles across the country.
4. The NIT consisted of the following clauses:
“(a) “The Purchaser” means the Department of Telecommunications acting on behalf of the President of India.
(e) “The Advance Purchaser Order”, means the intention of Purchaser to place the Purchase Order on the bidder.
(f) “The Purchase Order” means the order placed by the Purchaser on the Supplier signed by the Purchaser including all attachments and appendices thereto and all documents incorporated by reference therein. The purchase order shall be deemed as “Contract” appearing in the document.
(g) “The Contract price” means the price payable to the Supplier under the purchase order for the full and proper performance of its contractual obligations.
5. In addition to these clauses in the NIT, the NIT also required the supplier to provide a bid security. The relevant clause reads as under:
“12. BID SECURITY:
12.1 Pursuant to Clause 7 the bidder shall furnish, as part of his bid, a bid security for an amount of Rs. 20,00,000 (Rupees Twenty lakh only) The bidders (Small scale Units) who are registered with National Small Scale Industries Corporation under SINGLE POINT REGISTRATION SCHEME; are exempted from Bid security as per the existing policy of Govt. of India. A proof regarding current registration with NSIC for the TENDERED ITEM will have to be attached along with the bid document.
12.1 The bid security is required to protect the Purchaser against the risk of bidder's conduct which would warrant the security's forfeiture, pursuant to para 12.7.
12.3 The bid security shall be in the form of a Bank Guarantee issued by a scheduled bank in favour of he purchaser, valid for a period of 240 days.
6. The NIT also provided for the terms and conditions relating to placement of orders by the purchaser. The relevant clauses are extracted below:
“24. AWARD OF CONTRACT:
24.1 The Purchaser shall consider placement of orders for commercial supplies on those bidders whose offers have been found technically, commercially and financially acceptable and whose goods have been Type Approved/Validated by the Purchaser.
24.2 The procurement against the tender is for two years requirement and the terms & conditions of this tender shall be operative for the two years from date of issue of first Advance Purchaser Order.
25. PURCHASER'S RIGHT TO VARY QUANTITIES AT THE TIME OF AWARD:
The Purchaser reserves the right at the time of award of contract to increase or decrease by upto 25% of the quantity of goods and services specified in the Schedule of Requirements without any change in unit price of the ordered quantity or either terms and conditions.
26. PURCHASER'S RIGHT TO ACC
