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IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
CMI Limited - Appellant
Versus
Mahanagar Telephone Nigam Ltd and another - Respondent
Original Miscellaneous Petition (Comm) No. 134, 198 of 2016
Decided on : 14-03-2019
Arbitration - Sales Tax - Arbitration and Conciliation Act, 1996 - 34 - The judgment discusses the dispute arising from the issuance of 'C' forms or reimbursement of 6% of sales tax amount deposited in respect of supplies made to MTNL. The court analyzed the NIT, LOI, and purchase order to determine the binding contract between the parties. The court held that the purchase order constituted the final contract, and the terms and conditions in the NIT/LOI were subservient to the purchase order. The court also found that MTNL, as the purchaser, had the authority to change the terms of the concluded contract, and the supplier was aware of the sales tax conditions in the purchase order. The court set aside the award granting reimbursement of 6% sales tax and dismissed the objections of the supplier regarding non-grant of interest.
Fact of the Case:
The dispute arose from the issuance of 'C' forms or reimbursement of 6% of sales tax amount deposited in respect of supplies made to MTNL. The supplier challenged the award on the ground of non-grant of interest on the awarded amount.
Finding of the Court:
The court found that the purchase order constituted the final contract, and the terms and conditions in the NIT/LOI were subservient to the purchase order. The court held that MTNL, as the purchaser, had the authority to change the terms of the concluded contract, and the supplier was aware of the sales tax conditions in the purchase order. The court set aside the award granting reimbursement of 6% sales tax and dismissed the objections of the supplier regarding non-grant of interest.
Issues: The main issues were the determination of the binding contract between the parties and the authority of MTNL to change the terms of the concluded contract.
Ratio Decidendi: The court held that the purchase order constituted the final contract, and the terms and conditions in the NIT/LOI were subservient to the purchase order. The court also found that MTNL, as the purchaser, had the authority to change the terms of the concluded contract, and the supplier was aware of the sales tax conditions in the purchase order.
Final Decision: OMP COMM 198/2016 is allowed, and the award dated 2nd December, 2010 is set aside. OMP COMM 134/2016 is dismissed. However, there are no orders as to the costs.
Prathiba M.Singh, J.
The present petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter, the “Act” have been filed challenging the impugned award dated 2nd December, 2010. The dispute arises on the short question as to whether CMI- the supplier ('CMI') 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 (COMM) 198/2016 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. OMP (COMM) 134/2016 filed by CMI Limited (hereinafter “CMI”) is on the non-grant of interest on the awarded amount.
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. CMI was one of the successful bidders. The Letter of Intent was placed by DOT on CMI for supplies on 22nd January 1997. As per the LOI, the purchase orders were to be placed by the various circles. CMI made supplies in respect of various telecom circles across the country. Disputes arose in respect of supplies made to MTNL in the Delhi region.
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.
12.2 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 the 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
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