Time is not the essence of a contract when the contract itself provides for extension of time and having regard to the nature of the contract.

( 1 ) ON 14tn of April 1980 there was an agreement between the petitioner Union of India and the respondent M/s. Panipat Foods Ltd. with respect to the supply of tinned vegetable fruits/dehydrated foodstuff. The contract provided for extension of time in delivery period on payment of liquidated damages. According to the respondent, owing to accute shortage of power and non allocation of diesel in Haryana, the respondent could not make the supply on or before 14th of May 1980 and the respondent made a request for extension of time upto 14th of June 1980 and the same was agreed to by the petitioner-Union of India on payment of liquidated damages of 0. 2% per month. The respondent by its letter dated 10th of June 1980 requested the petitioner to grant another extension of one month s time from 14th of June 1980 to 14th of July 1980.

( 2 ) BY letter dated 20th of June 1980 the petitioner granted extension subject to payment of liquidated damages upto 30th of June 1980. The respondent supplied 30 metric tonnes of fruit products as against 50 metric tonnes agreed to by it. According to the respondent, if extension had been granted upto 14th of July 1980 they would have supplied the balance 20 metric tonnes. After 30th of June 1980 the petitioner did not serve any performance notice upon the respondent. On 15th of November 1980 the petitioner issued a notice cancelling the contract and floated what is called the risk purchase inquiry on 16th of March 1981. The respondent also made an offer and that was ignored and the risk purchase was made.

( 3 ) THE petitioner-Union of India claim Rs. 47,306. 38 as the loss on account of the breach committed by the respondent and because of the risk purchase.

( 4 ) THIS dispute was REFERRED TO to arbitration. The Arbitrator in the first instance passed an award on 17th of September 1984. The Arbitrator Mrs. R. Lakshmanan passed the following award :-

"the claim of the Union of India for Rs. 47,306. 38 (Rupees forty seven thousand three hundred six and paise thirty-eight only) is allowed. I direct the contractor to pay the said amount to Union of India and direct the Union of India to pay the contractor the amount of money, if any, withheld by them on account of the aforesaid claim. "this was set aside by this Court and the matter was remitted. Before the Arbitrator Mr. K. D. Singh, the Company relied upon the decision of the Supreme Court in MI s. Hind Construction Contractors by its sole proprietor Bhikamchand Mulchand Jain (dead) by L. R s v. State of Maharashtra, AIR 1979 S. C. 720 and contended that time was not the essence of the contract and the claim of the Union of India on the ground of risk purchase was not in accordance with law and, therefore, the claim of Union of India could not be entertained in law. The Company also made a counter claim for Rs-2,85,762. 26 alongwith interest amounting to Rs. 55,723. 64. The Arbitrator passed the award on 26. 2. 93 allowing the claim made by the Union of India and rejecting the counter claim made by the Company.

( 5 ) THE Company had objected to the award in I. A. 9538/93. With reference to the sum of Rs. 47306. 38 the argument was that the time was never intended to be the essence of the contract and the Union of India never made any demand on the Company respondent to perform this obligation under the contract and having cancelled the contract on 15th of November 1980 making a risk purchase inquiry in March 1981 was a gross misuse of power and on that basis no liability can be fastened on the respondent.

( 6 ) THE Arbitrator having noticed the judgment of the Supreme Court would observe that he had gone through the correspondence of the parties and on the facts and circumstances of this case time was intended to be the essence of the contract.

( 7 ) AFTER 30th of June 1980 when the extended period expired there has been no correspondence. No reply from the Union of India extending the time atleast upto 14th of July 1980 by which time