A rise in commodity prices does not frustrate a contract; parties must fulfill contractual obligations despite financial challenges.

JUDGMENT

Vibhu Bakhru, J. (ORAL)--The petitioner, Hindustan Petroleum Corporation Ltd. (hereafter `HPCL') has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the `A&C Act') impugning an Arbitral Award dated 28.11.2019 (hereafter the `impugned award') rendered by the Arbitral Tribunal comprising of a Sole Arbitrator. The impugned award was rendered in the context of disputes that had arisen between HPCL and the respondent (DTC) in respect of a contract for supply of lubricants.

2. DTC is a corporation engaged in providing public transport services. HPCL is one of the public sector oil marketing company. DTC had issued a limited inquiry inviting tenders from four public sector oil marketing companies, including HPCL, for supply of lubricants (in all thirteen items). Pursuant to the said invitation to tender, HPCL submitted its bid dated 23.10.2007 quoting firm rates for supply of certain lubricants on the given terms and conditions. HPCL's bid was declared the lowest and was accepted. Consequently, separate purchase orders dated 08.11.2007, 10.01.2008, 18.01.2008, 25.01.2008, 28.01.2008 and 26.03.2008 were placed by DTC on HPCL. HPCL was required to supply the lubricants in terms of delivery schedule on a staggered basis during the year 2008-09.

3. On 19.06.2008, HPCL sent a letter to DTC, inter alia, stating that oil prices in the international market had risen and it may not be able to hold the current prices for future supplies. HPCL requested that the prices of the lubricants be increased by Rs.20.50 per litre. HPCL stated that after 15.07.2008, it would not be in a position to execute the indents at the existing rates. DTC did not agree to increase the prices and sent a letter dated 16.07.2008 contending that the prices tendered by HPCL were to remain firm till completion of the contract. The said letter is not placed on record. However, the learned counsel for HPCL does not dispute that, DTC had, in fact, sent a letter dated 16.07.2008 declining HPCL's request for any increase in the agreed prices. DTC sent another letter dated 28.07.2008 once again reiterating that HPCL's demand for increasing the prices was in contravention with the contract. DTC also informed HPCL that its inventory was depleted and was making it difficult to meet the demands of running of the fleet of buses. DTC called upon HPCL to resume the supply. However, HPCL did not comply. HPCL has also not placed the said letter on record.

4. Since HPCL had declined to supply the lubricants at the price agreed by it, DTC floated another tender inquiry in August, 2008 and procured lubricants at the lowest prices, as offered by the tenderers. The learned counsel appearing for HPCL states that HPCL also participated in the fresh tender and supplied lubricants at the tendered prices, which were significantly higher than as earlier agreed by HPCL.

5. DTC claims that it had to incur extra cost of Rs.1,09,22,527.42/- for procuring lube oil at prices higher than those, as agreed with HPCL.

6. Accordingly, DTC issued a notice dated 13.05.2010, inter alia, stating that because of non-supply of oil, DTC was compelled to call fresh limited tenders for the balance quantity in August, 2008. The rates offered pursuant to the said tender were approximately 57% to 84% higher than the agreed rates. It further alleged that despite being called upon to do so, HPCL had failed to resolve the disputes amicably or refer the matter to the Secretaries appointed by the Central Government for re