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2019 Supreme(Del) 915
IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
Delton Cables Ltd - Appellant
Versus
Department Of Telecommunications - Respondent
Original Miscellaneous Petition (Comm) No. 194 of 2016
Decided on : 14-03-2019
Advocate Appeared:
G. Tushar Rao, Adv., Nitinjay, Adv., Mayank Sharma, Adv., Ravi Sikri, Adv., Deepak Yadav, Adv., Arun Sanwal, Adv., Sunieta Ojha, Adv.
The main legal point established in the judgment is that the purchase order constitutes the binding contract between the parties, and subsequent clarifications or letters seeking clarifications after making supplies cannot form the basis for seeking benefits.
Headnote:
Arbitration and Conciliation Act - Challenge to Impugned Award - NIT Clauses - Sales Tax Liability - Purchase Order as Binding Contract
Fact of the Case:
The case involves a petition challenging an award rejecting claims of Delton Cable Limited against the Department of Telecommunications (DOT) and MTNL. The dispute arose from the sales tax liability in a purchase order issued by MTNL, which departed from the tender conditions.
Finding of the Court:
The court found that the purchase order constituted the binding contract between the parties, and the supplier could not seek benefits based on letters seeking clarifications after making supplies. The court upheld the Ld. Arbitrator's findings that the supplier was not entitled to relief due to the clear terms of the purchase order.
Issues: The main issue was whether the purchase order or the tender conditions constituted the binding contract, and whether the supplier could seek benefits based on subsequent clarifications.
Ratio Decidendi: The court held that the purchase order constituted the final contract, and the supplier could not seek benefits based on subsequent clarifications or letters seeking clarifications after making supplies.
Final Decision: The court dismissed the petition, upholding the Ld. Arbitrator's findings that the supplier was not entitled to relief due to the clear terms of the purchase order.
Prathiba M. Singh, J.
The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the “Act”) challenges the impugned award dated 14th February, 2007 passed by the Ld. Sole Arbitrator rejecting the claims of Delton Cable Limited (hereinafter “Delton”) against the DG, DOT and MTNL.
2. The brief background of the petition is that the Department of Telecommunications (hereinafter “DOT”) issued notice inviting tenders bearing tender number 14-21/94-MMT(MMS) for supply of underground cables and other forms of cables on 30th November, 1994. Delton Cables Limited was one of the bidders, which submitted the bid in respect of the said tender. The bid was awarded to it. Disputes arose in respect of supplies made to MTNL in the Delhi region. The first purchase order was placed on Delton on 11th December, 1995. The second purchase order was placed on 12th August, 1996. Disputes in the present case relate to the second purchase order.
3. On the issue of sale tax, there was a departure in the purchase order from the tender conditions. As per the purchase order, the sales tax was to be deposited by Delton over and above the price and Delton, thus, sought clarifications, which were not given. Several letters were written by Delton seeking clarification, to which there was no reply. Supplies were completed in 1997. Delton then invoked the arbitration clause. Ld. Arbitrator rejected the claims of Delton, hence the present petition.
4. The notice inviting tender had the following important clauses.
“SECTION II INSTRUCTIONS TO BIDDERS
1. DEFINITIONS :
(a) “The Purchaser” means the Department of Telecommunications acting on behalf of the President of India.
(b) .... (d) ... ...
(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.
... ... ... ... ... ... ... ... ... ... ...
9.2 The prices of the goods shall be quoted exfactory. Excise duty, Sales Tax, and other statutory taxes payable shall be quoted separately item wise.
11.3 For purpose of compliance to be furnished pursuant to clause 11.2(c) above, the bidder shall note that the standards for workmanship, material and equipment and reference to brand names or catalogue number, designated by the Purchaser in its Technical Specifications are intended to be descriptive only and not restrictive.
... ... ... ... ... ... ... ... ...
27. ISSUE OF ADVANCE PURCAHSE ORDER:
27.1 The issue of an Advance Purchase Order shall constitute the intention of the Purchaser to enter into the contract with the bidder. Purchase orders will be issued over the period of 2 years for the requirements of the Purchaser.
27.2 The bidder shall within 30 days of issue of the Advance Purchase Order, give his acceptance along with performance security in conformity with section IX provided with the bid documents.
28. SIGNING OF CONTRACT:
28.1 The issue of Purchase Order shall constitute the award of contract on the bidder.
28.2 Upon the successful bidder furnishing the performance security for the first year purchase pursuant to Clause 27 the purchaser shall discharge 50% of the bid security. The remaining bid security shall be discharged upon the bidder furnishing the performance security for the last purchase order.”
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 s
