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2008 Supreme(Gau) 771
IN THE HIGH COURT OF GAUHATI
Iqbal Ahmed Ansari and H. Baruah, JJ.
M.R. Power Projects - Appellants
Vs.
State of Arunachal Pradesh and Anr. - Respondent
Decided On: 06.11.2008
Headnote:
The Court held that the award was not in conflict with the public policy of India and set aside the order of the Deputy Commissioner.
Fact of the Case:
The appellant, a contractor, entered into an agreement with the respondent, a government department, for the supply and installation of hydel sets. The appellant supplied the hydel sets but failed to install them due to the respondent's failure to identify the sites and return the approved drawings. The appellant claimed payment for the hydel sets and interest, while the respondent filed a counterclaim for damages. The arbitrator awarded the appellant the principal amount and interest, but the Deputy Commissioner set aside the award.
Finding of the Court:
The Court held that the appellant was entitled to payment for the hydel sets as the contract had been frustrated due to the respondent's failure to identify the sites and return the approved drawings. The Court also held that the appellant was entitled to interest as per the terms of the agreement. The Court further held that the respondent's counterclaim was not sustainable.
Issues: 1. Whether the appellant was entitled to payment for the hydel sets. 2. Whether the appellant was entitled to interest. 3. Whether the respondent's counterclaim was sustainable.
Ratio Decidendi: 1. The Court held that the appellant was entitled to payment for the hydel sets as the contract had been frustrated due to the respondent's failure to identify the sites and return the approved drawings. The Court relied on the principle that a party is excused from performing a contract if the other party fails to perform its obligations. 2. The Court held that the appellant was entitled to interest as per the terms of the agreement. The Court relied on the principle that a party is entitled to interest on money that is owed to it. 3. The Court held that the respondent's counterclaim was not sustainable as the respondent had failed to prove its case.
Final Decision: The Court allowed the appeal and set aside the order of the Deputy Commissioner. The Court restored the impugned award, dated 2.12.1994.
I.A. Ansari, J.
A challenge has been made by this appeal against the order, dated 18.11.2004, passed by the learned Deputy Commissioner, Papumpare District, Arunachal Pradesh, in Misc. Arbitration (Appeal) No. 1/2003, whereby the award has been set aside by invoking the provisions of Section 34 of the Arbitration and Conciliation Act, 1996.
The material facts, which gave rise to the present appeal, may, in brief, be set out as follows:
2. FACTS LEADING TO ARBITRATION:
(i) A Notice Inviting Quotation, dated 18.8.1993, was issued by the Chief Engineer, Department of Power, Government of Arunachal Pradesh, for supply of 30 Hydel Power Generating Sets (in short, hydel sets) of 20KW, 30KW and 50KW capacity meant for supply of electricity to remote areas of Arunachal Pradesh. The hydel sets, to be so procured by the Government, were to be utilized with the help of natural water sources and springs for production of electricity. The appellant herein submitted its proposal, on 29.9.1993, to the Chief Engineer (Power) for supply of the 30 hydel sets. This offer of the appellant had three distinct features, namely, (i) prices F.O.R. Itanagar, (ii) 75% on the strength of indemnity bond/undertaking/proof of dispatch, and (iii) commissioning, if sought for. Following a meeting, held on 28.4.1994, between the appellant, on the one hand, and the Chief Engineer, Department of Power, Govt. of Arunachal Pradesh, on the other, the appellant confirmed that it would install the hydel sets within a period of seven days on receipt of the sites. In consequence of the meeting, so held; the appellant, in its communication, dated 28.4.1994, agreed to do the following:
1. We are maintaining all spares parts that may be required.
2. We even have spare T/G sets and in the event of major problem in the supplied sets within the Guarantee period the same shall be replaced altogether.
3. We shall arrange to provide suitable training to Departmental staff/village people as desired by you. This training shall be provided free of cost.
4. The penstock offered by us are of GRP pipes which are suitable for such remote areas for their light weight. This will simplify the transportation and laying and no maintenance is required.
5. On receipt of site the set can be installed within a period 7 days.
6. In view of the light weight and small dimension of the sets, the size and cost of the Power House and installation shall be considerably low.
7. We shall be able to supply 15 sets per months commencing 2 months from the date of order as per the terms and conditions.
(ii) Pursuant to further negotiations, which took place between the parties concerned, the appellant issued, on 19.5.1994, a communication undertaking, inter alia, free installation and commissioning of the sets at the site including, free of cost, construction of power house. This communication, dated 19.5.1994, further clarified that the rate charged would be F.O.R. project site. The main features of this communication, dated 19.5.1994, issued by the appellant were as follows:
1. Free Installation and commissioning at site.
2. Power house building will be constructed free of cost from pre fabricated structure.
3. Rate will be F.O.R. project site.
4. We will supply pen stock pipe up to 200mm dia pipe free of cost subject to 100 mtr. each project.
5. Our offer against the above referred NIT will be valid up to 30th July, 1994.
(iii) On the same date, i.e., 19.5.1994, the appellant issued yet another communication undertaking to survey, free of cost, all the sites, identity the sources of power from its hydrologist and prepare survey data, etc., in association with the Department concerned. For the sake of convenience, the relevant portion of the second communication, dated 19.5.1994, is quoted hereinbelow:
Further, we also confirm that we will survey all the sites free of cost and identify source from our Hydrologist and prepare survey data etc., in association with your department.
(iv) On the basis of the post-tender
