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IN THE HIGH COURT OF DELHI
Vibhu Bakhru, J.
Tamil Nadu Tele-Communication Ltd. - Appellant
Versus
Railtel Corporation of India Ltd. - Respondent
O.M.P. (COMM) No. 379 of 2020
Decided On : 27-10-2021
An arbitral award can only be set aside for patent illegality; the court cannot overturn the tribunal's factual findings or reappraise evidence.
Headnote:(A) Arbitration & Conciliation Act, 1996 - Section 34 - Arbitration award - Disputes regarding defects in supplied cables under Purchase Order - Claims regarding the quality of supplied OFC and the obligation of the supplier to replace defective items outlined in contractual terms - Pre-dispatch inspection conducted - Warranty applicable - Court affirms the tribunal's findings and directions for inspection and replacement based on evidence of defects. (Paras 19-24)
(B) The party seeking to set aside an arbitral award must demonstrate a patent illegality or error of law; the court does not reappreciate evidence or intervene in findings of fact made by the arbitral tribunal. (Paras 20-23)
Facts of the case:
The appellant filed a petition challenging an arbitral award, alleging that a decision to replace defective optical fibre cables was beyond the contract’s scope and not backed by adequate inspection evidence. Respondent claimed defects developed shortly after delivery.
Findings of Court:
The Arbitral Tribunal held that the cables did not meet specifications and that the appellant was required to replace defective cables within the warranty period.
Issues: The main issues included whether the tribunal’s decision was within contractual bounds and whether defects were manufacturing-related.
Ratio Decidendi: The court held that findings of the tribunal were supported by evidence, including contractual warranty terms and inspection results, and did not find any basis for overturning the tribunal's decision.
Result: Petition dismissed.
| Table of Content |
|---|
| 1. factual basis of the dispute (Para 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. claims of defects and demand for replacements (Para 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17) |
| 3. summary of railtel's claims (Para 18) |
| 4. ttl's arguments against the award (Para 20 , 21 , 22) |
| 5. court's affirmation of tribunal's findings (Para 23 , 24) |
JUDGMENT
Vibhu Bakhru, J. The petitioner (hereafter `TTL') has filed the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereafter the `A&C Act') impugning an Arbitral Award dated 03.10.2012 (hereafter the `impugned award') rendered by the Arbitral Tribunal comprising of a Sole Arbitrator.
2. The impugned award was rendered in the context of disputes that had arisen between the parties in connection with the purchase of 559 kms of 24 Fibre Armoured Optical Fibre Cable. TTL is a manufacturer of Optical Fibre Cables (hereafter `OFC') and supplies the said product to various government and non-government agencies in India as well as overseas. It is stated that petitioner uses the Fujikura brand fibre to manufacture the OFC and, has supplied over 3000 kms. of OFC to the Railways since the past decade.
3. The disputes in the present case arise in connection with the Purchase Order dated 09.12.2005 (hereafter `the PO') placed by the respondent (hereafter `RailTel') on TTL for the supply of 559 kms. of 24 OFC conforming to Research Design & Standards Organization (RDSO) Specification no. IRS: TC-55/2000 with the fibre as per ITU G652D Spec.
4. RailTel had issued a Notice Inviting Tender (NIT) for the supply of OFC of the aforesaid specifications. TTL had submitted its bid pursuant to the said notice and was declared as the successful bidder. Thereafter, RailTel issued the PO for supply of OFC of the aforesaid specifications at a value of Rs.2,06,83,000/- (plus octroi, as per actual).
5. TTL accepted the PO on 12.12.2005 and also submitted the Performance Bank Guarantee (hereafter the `PBG') for a sum of
Rs.21,43,34,000/- being 10% of the PO value. The delivery period was first extended till 28.02.2006 and thereafter, to 07.03.2006.
6. The annexure to the PO setting out the material terms is reproduced below:
| "Tamilnadu Telecommunications Ltd. | Annexure | ||
| 1 | Description of the item: | 24F Armoured Optical Fibre Cable | |
| 2 | Specification: | IRS-TC-55/2000 (latest) with Fujikara make of Fibre as per ITU G 652D specs. Fiber has been tested by RailTel. | |
| 3 | Quantity: | 559 KM. | |
| 4 | Rate | Rs.37,000/- per Km. excluding Octroi & Entry Tax | |
| 5 | Break up of rates: | ||
| i) | Basic rate: | Rs.29,965.41 per Km. | |
| ii) | Excise duty: | Rs.4,890.36@16.32% on basic price | |
| iii) | Sales Tax/CST/VAT: | Rs.1,394.23@4% against Form-C | |
| iv) | Transportation charges: | Rs.750/- per Km of OFC | |
| v) | Insurance: | Included | |
| vi) | Octroi | Maximum of 4% Bhusawal, Jalgaon & 3% for Manmad on Basic + ED + ST + Transportation + Insurance. Not applicable/payable for other areas. | |
| vii) | Entry Tax | Nil | |
| viii) | Other charges: | Nil | |
| 6 | Total value: | Rs.2,06,83,000/- (Rupees Two Crores Six Lacs & Eighty Three Thousand Only) excluding Octroi duty as per details in 5(vi) above. | |
| 7 | Price variation clause: | No variation in price shall be applicable | |
| 8 | F.O.R | Destination | |
| 9 | Consignee particulars: | ||
| Sections | Consignee | Qty. | |
| i) | Itarsi - Bhusaval | Consignee details address to be informed by RGM/Western Region | 332 Km |
| ii) | Manmad - Jalgaon | Consignee details address to be informed by RGM/Western Region | 175 Km |
| iii) | Kolkata Area | Consignee details address to be informed by RGM/Western Region | 52 Km |
| Total | 559 Km | ||
| 10 | Inspection: RDSO Inspection charges shall be borne by RailTel, CO | New Delhi. | |
| 11 | Delivery period: | Within 60 days from the date of issue of P.O. | |
| 12 | Warranty: | 12 Months | |
| 13 | Payment terms: 90% on receipt of material at site and balance 10% on expiry of warranty period/submission of BG of equivalent amount to be submitted in the Regional Office where the bill is submitted for payment. | ||
| 14 | Bill paying & passing authority: | RGM/RailTel/Mumbai and Kolkata." |
7. In terms of the PO, the OFC supplied was required to be inspected by RDSO prior to its dispatch. There is no dispu
