TaxTMI 
TaxTMI 
2008 (9) TMI 878
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....r document will prevail over clause 16.2 of the general conditions of the contract. 4. The relevant facts, which would assist us in appreciating the controversy involved are narrated in a nutshell, which are as follows:- The appellant had issued a notice inviting tender dated 4th of January, 2001, calling upon the eligible bidders for turnkey project on planning, engineering, supply, installation and commissioning of Indian Mobile Personal Communications System in the telecom circles of Kerala, Karnataka, Tamil Nadu and Andhra Pradesh. The respondent submitted its bid in response to the notice inviting tender and after the technical, commercial and financial bid evaluation, the respondent was awarded the tender and an Advance Purchase Order (APO) dated 5th of September, 2001 for phase I and Phase II was issued to it by the appellant. The purchase order provided, inter alia, the terms for payment and the schedule for delivery of the goods. It also provided for liquidated damages in the event of failure on the part of the respondent to meet with the delivery schedule. Clause 16.2 of the general conditions of t....
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....er fail to deliver the goods and services on turn key basis within the period prescribed, the purchaser shall be entitled to recover 0.5% of the value of the delayed quantity of the goods & services, for each week of delay or part thereof, for a period upto 10 weeks and thereafter at the rate of 0.7% of the value of the delayed quantity of the goods and services for each week of delay or part thereof for another 10 weeks of delay. In the present case of turn key solution of supply, installation and commissioning, where the delayed portion of the delivery and provisioning of services materially hampers effective user of the systems, Liquidated Damages charged shall be levied as above on the total value of the concerned package of the purchase order. Quantum of liquidated damages assessed and levied by the purchaser shall be final and not challengeable by the supplier." Clause 20.1 which is the arbitration clause and provides for excepted matters, i.e., those matters the decision to which is specifically provided in the agreement itself reads as under:- 20.1 In the event of any question, dispute or difference arising under this agreement or in connection there-with (except as t....
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....idated damages at the rates as defined in the General conditions of contract as contained in Section III for any delay in the turnkey job entrusted to the bidder. However he shall be provided an incentive @ 0.5% of the cost of the network of each service area (Telecom Circle), for each week of early commissioning of the entire network in that service area, subject to a maximum of 3% of the value of the contract of the circle". 6. Since this appeal arises out of an order, which appointed an arbitrator, to decide the dispute referred to by the respondent, we, in this appeal, need to decide that whether in view of the arbitration clause in the tender document provided under clause 20 of the said document, the breach specified in 16.2 is an "excepted matter". 7. Mr. Gopal Subramaniam, Additional Solicitor General of India appearing on behalf of the appellant contended that in view of the decision of this Court in Vishwa Nath Sood vs. UOI [(1989) 1 SCC 657], a conjoint reading of clause 16.2 and clause 20.1 would clearly show that clause 16.2 is covered under the excepted matters as provided in clause 20.1 of the tender document. He further contended that the High Court had erred in h....
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.... the event the claims arising within the ambit of excepted matters, question of assumption of jurisdiction of any arbitrator either with or without the intervention of the court would not arise; the parties themselves have decided to have the same adjudicated by a particular officer in regard to these matters; what are these exceptions however are questions of fact and usually mentioned in the contract documents and forms part of the agreement as such there is no ambiguity in the matter of adjudication of these specialized matters and termed in the agreement as the excepted matters....." Keeping the aforesaid principles in mind, let us proceed further. We may keep on record that the appellants alleged that respondents had not completed phase I and phase II of the project within the schedule as provided in the tender document whereupon the appellants had to impose liquidated damages and invoke clause 16.2 of the tender document. But the respondents refuted these allegations. The contention of the respondent in this case was that the delay, if any, was caused due to the appellant's delay in supplying necessary inputs to the respondent. So the respondent contends that it had performe....
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....eral Conditions of contract. The High Court has pointed out correctly that the authority of the purchaser (BSNL) to quantify the Liquidated Damages payable by the supplier Motorolla arises once it is found that the supplier is liable to pay the damages claimed. The decision contemplated under clause 16.2 of the agreement is the decision regarding the quantification of the Liquidated Damages and not any decision regarding the fixing of the liability of the supplier. It is necessary as a condition precedent to find that there has been a delay on the part of the supplier in discharging his obligation for delivery under the agreement. It is clear from the reading of clause 15.2 that the supplier is to be held liable for payment of liquidated damages to the purchaser under the said clause and not under clause 16.2. The High Court in this regard correctly observed that it was not stated anywhere in clause 15 that the question as to whether the supplier had caused any delay in the matter of delivery will be decided either by the appellant/BSNL or by anybody who has been authorized on the terms of the agreement. Reading clause 15 and 16 together, it is apparent that clause 16.2 will come ....
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.... a breach of condition does not include a right to adjudicate upon a dispute relating to the very breach of conditions and that the power to assess damages is a subsidiary and consequential power and not the primary power. 11.Clause 20.1 regarding excepted matters reads "In the event of any question, dispute or difference arising under this agreement or in connection there-with (except as to the matters, the decision to which is specifically provided under this agreement)...". Therefore it is clear from this provision, matters which will not fall within the arbitration clause are questions, disputes or differences, the decision to which is specifically provided under the agreement. Clause 16.2 is not a clause where in any decision making power is specifically provided for with regard to any question, dispute or difference between the parties relating to the existence of breach or the very lack of liability for damages, i.e. the levy of Liquidated Damages. 12.The learned senior counsel for the appellant relied on the decisions of this court in Vishwanath Sood vs. UOI [(1989) 1 SCC 657], and General Manager, Northern Railway vs. Sarvesh Chopra [(2002) 4 SCC 45]. These cases, we are....
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....seeking to exclude, from arbitration, what it has agreed to arbitrate in the first place. 14. The appellant contended that it has the unilateral right to determine the Liquidated damages under clause 16.2 and that the quantum of Liquidated Damages decided by the appellant, even if it is exorbitant, would be final and cannot be challenged. We find the contention of the respondent that if the said contention of the appellant is supported, it would mean that a party would be held liable to damages of whatever amount the other party demands without recourse to a remedy, to be relevant and should be given due importance. Such a contention by the appellant would be in violation of Section 28 and Section 74 of the Indian Contract Act. 15.The learned counsel of the appellants had submitted before this court that it was the appellant, which had the right to appoint the arbitrator. This submission cannot be accepted. The respondent had invoked the arbitration clause on the ground that there was no delay on its part by sending a letter to this effect to the appellants on 24th of March, 2006. On 25th April, 2006, the appellants/BSNL replied stating that they had rightly recovered the Liquida....