Rishabh Agro Industries Ltd. Vs. Union of India - Court Judgment

Excerpt:
the case debated on the effect of finality clause in the dispute for extension of period of contract of supply under sections 20&33 of the arbitration act, 1940, with respect to the terms and condition - it was observed that the decision was made final in this regard under terms of the contract - hence it was ruled that decision of the extension was not subject matter of the arbitration, thereforee the petition for arbitration was not maintained - devinder gupta, j. (1) this is a petition under section 20 of the arbitration act praying for filing of arbitration agreement in court and for referring the disputes which have arisen for adjudication through the process of arbitration. (2) the admitted facts arc that tenders were invited by the respondent for purchase of fresh liquid milk on annual contract basis for the period from 1.1.1994 to 31.12.1994 and the petitioner was awarded the contract for supply of the milk for the said period. petitioner was conveyed the decision of the respondent in accepting its tender through letter dated 31.12.1993. it is not in dispute that as per terms and conditions of the agreement between the parties contract period was from 1.1.1994 to31.12.1994 which could be further extended for a period of ninety days on the same rates, terms and conditions, at the sole discretion of the general manager of the respondent. clause 5 of the contract reads as under : '(5)period of contract: the contract shall be operative for the period from 1st january, 1994 to 31st december, 1994. you are required to commence the supply of milk w.e.f. 1st january, 1994. the contract can further be extended for a period of 90 days. the contract can further be extended for a period of 90 days on the same rates, terms and conditions of the a/t at the sole discretion of general manager, delhi milk scheme, w.e.f. the date of expiry of the initial contract period.' (3) the agreement specifies the rate payable by the respondent to the petitioner for supply of milk. different rates are provided for different period. (4) it is the petitioner's case that there has been strike in the plant of the petitioner w.e.f. 24.12.1994 and as such the petitioner could not supply milk after 24th december, 1994 for a period of about six to seven days of the contracted period. it is also alleged that during 1994 there were unprecedented events and due to several reasons and factors, beyond the control of contractor, there was short supply of milk in delhi. it was not possible to procure milk and supply the same to the respondent on the rates specified in the contract. respondent no. 2 had also realized the difficulty faced by the contractors in maintaining supply of the contracted quantities of milk. in this background the petitioner has alleged that there are disputes which have arisen amongst the parties in terms of the arbitration clause 11.5 in schedule ii of the tender form. following disputes, according to the petitioner, have arisen which are referable for arbitration. '(a)whether the contract was for a period of one year or more? (b) what is the effect of strike in the plant and factory of the petitioner duly notified to the respondent vide letter dated 27.12.1994 by the petitioner. (e) the respondent justified in issuing the letter dated 28.12.1994, copy enclosed as annexure 'l' in view of the facts and circumstances set out in this petition particularly when the respondents are purchasing milk at a very high cost from the market, instead of rs. 6.90 p., the respondent is paying rs. 10.30 per kg. at a landed rate and it is hence beyond the control of the petitioner to supply milk to the respondents. (d ) is not the action the respondents arbitrary and discriminatory particularly when they offered to themselves have purchase milk at the rate of rs. 8.69 during the flush period. rs. 9.69 in transitory period and rs-10.49 in the loan period for the year beginning w.e.f. 1.1.1995 and as against this the respondents are now asking the petitioner to sell them the milk at the rate of rs. 6.90 for flush period and rs. 7.90 for the transitory period. (e) is not the order passed by the respondents oppressive, arbitrary, illegal and liable to be set aside.' (5) in nutshell, according to the petitioner, issuance of letter dated 23.12.1994 by the general manager of the respondent in extending the period of supply on the stipulated rates is oppressive and the respondent cannot compel the petitioner to supply the milk at the same rates and the disputes according to the petitioner are connected with the issuance of letter by which the petitioner was asked to continue supply during the extended period on the specified rates, on which adjudication is requited through the process of arbitration. in reply, respondent's version is that there is in fact no dispute. general manager has acted in accordance with the terms of the agreement between the parties and the so called disputes cannot be made subject matter of reference to the arbitrator in terms of arbitration clause. (6) i have heard the learned counsel for the parties and have been taken through the documents on record. (7) it is not in dispute that as per terms of the arbitration clause all disputes and difference arising amongst parties relatable to the contract are referable for adjudication through the process of arbitration. clause 11.10 of schedule ii of the tender document is the arbitration clause and it reads: '11.10.arbitration clause: all disputes and differences arising out of or in any way touching or concerning this agreement whatsoever except where it is specifically stated that decision of general manager, delhi milk scheme shall be final and binding, shall be referred to the sole arbitration of any arbitrator nominated by the secretary, ministry of law, deptt. of legal affairs, govt. of india. it will be no objection to any nomination that the person nominated by him is a govt. servant that he has to deal with the matters to which this agreement relates and that in the course of his duties as govt. servant he had expressed views on all or any of the matter in disputes or difference. the award of the arbitrator, so nominated shall be final and binding on the parties to the agreement.' (8) the opening para of clause 11.10 states that all disputes and differences touching and concerning the agreement are referable for arbitration except those decision of the general manager, delhi milk scheme, which as per terms of the agreement shall be final and binding. (9) as per clause 5 of the terms of the agreement, it is the decision of the general manager to extend the time or to extend the period of contract by 90 days on the same rates, terms and conditions which has been made final and not questionable. when the clause says that the decision to extend period of contract will be at the sole discretion of the general manager, it implies that same cannot be challenged by the petitioner and in case such a decision of the general manager cannot be questioned by the petitioner, the decision is final. (10) in view of the decision of supreme court in vishwanath sud v. union of india, : [1989]1scr288 reading clause 5 together with clause 11.10 the conclusion would be that the matter of extension of time extending the period of contract for supply of milk on the same rates as envisaged in the tender will be a matter which has to be adjudicated upon by the general manager in accordance with clause 5 which cannot be referred for adjudication through the process of arbitration under clause 11.10 and as per learned counsel for the petitioner since it is the sole dispute as regards the decision of the respondent to extend the period of contract by 90 days for supply of milk on the same rates, the same not being referable, petition deserves to be dismissed and is hereby dismissed. is 775/95 dismissed as infructuous.