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American Refrigeration Co. Ltd. Vs. the All India Institute of Medical Sciences - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit Appeal No. 700A of 1978
Judge
Reported in17(1980)DLT66
ActsArbitration Act, 1940 - Sections 13 and 30
AppellantAmerican Refrigeration Co. Ltd.
RespondentThe All India Institute of Medical Sciences
Advocates: P.P. Malhotra,; P.D. Bhargava and; B.K. Bhargava, Advs
Cases ReferredAlopi Parshad and Sons Ltd. vs. Union of India
Excerpt:
.....when the contract expressly stipulated for the payment of charges at rates specified therein, we fail to appreciation what ground, the arbitrators could ignore the express convenants between the parties, and award to the agents amounts which the union of india had not agreed to pay to the agents......of the agreement the court can come to the conclusion that the arbitrator was wrong in refusing to award sales tax to the petitioner, it must be held that there is error apparent on the face of the award. no argument is needed to support the petitioner's claim for sales tax. no record of proceedings is required to be referred to determine whether there is error apparent on the face of the award. when the arbitrator has given his award and if a reference to the agreement suggests that there was an unambiguous agreement whereby the respondent agreed to pay sales tax to the petitioner it appears to me that the arbitrator was not justified in ignoring the specific agreement between the parties. if an error can be found out by mere making a reference to the award and the agreement between the.....
Judgment:

Sultan Singh, J.

(1) The All India Institute of Medical Sciences, New Delhi the respondent invited tenders for the supply and installation of Air Conditioning Plant, air handling units, weather makers, fancoil units, pipe lines and other accessories in the main plant room, ward block, paying bed wards etc. By a letter dated 24th April, 1967, M/s American Refrigerator Co. Ltd. the petitioner offered to supply and install the air conditioning plant etc. wherein the petitioner besides giving the price of the plant and installation charges also mentioned the sales tax payable on various items of materials to be used in the plant. The entire machinery of plant and its installation is divided into seven sub-heads and the sales tax payable under various subjects was stated as under :

____________________________________________________________________________ S. No. 700-A/1978 Sub Head I : Sales Tax ____________________________________________________________________________ Installation of the refrigeration machines in the main plant room. -- ____________________________________________________________________________ Sub Head Ii : ____________________________________________________________________________ Supply and installation, cooling towers and centrifugal pump. 34,745.00 ____________________________________________________________________________ Sub Head Iii : ____________________________________________________________________________ Piping and Insulation work. 5,418.00 Sub Head IV: ____________________________________________________________________________ Electrical Works: 10,000.00 Sub Head V : ____________________________________________________________________________ Air handling equipment for Wards block. 1,27,472.50 Sub Head VI: ____________________________________________________________________________ Handling Units for paying beds. 26,423.60 ____________________________________________________________________________ Sub Heads VII: Air handling Units for OPD. 17,820.75 ____________________________________________________________________________

(2) The petitioner in its letter dated 9th February, 1968 gave the break up of the total price of different items mentioned in its offer dated 24th April, 1967. The value of the material to be used and the labour Charges for various items were given separately. It was also mentioned that the rate of sales tax applicable was ten per cent. The respondent by letter dated 21st February, 1963 accepted the tender of the petitioner. The petitioner's tendered amount was Rs. 25,49,398.35. On 21st November, 1968, a formal agreement was drawn between the parties wherein reference to the petitioner's said letters dated 24th April, 1967. 10th January, 1968, 9th February, 1968 besides others was made. All these letters were agreed to farm part of the agreement. A portion of the petitioner's letter dated 24th April,1967 as regards liability of respondent to pay sales tax is in these words.

'Oat prices are exclusive of sales tax, octroi or any other tax which shall be charged extra as applicable at the time Of delivery.'

(3) The work under the agreement was completed but disputes arose between the parties and thereforee Shri C.P. Malik was appointed as Sole Arbitrator by the respondent to decide disputes mentioned in letter dated 1,6th August, 1975 as modified by letter dated 25th October, 1975. He gave his award on 18th May, 1978, which is as follows :

'IN the matter of arbitration between: M/s American Refrigerator Co. Ltd. 20-A,ShivajiMarg, New Delhi-110015. The All India Institute of Medical Sciences, Ansari Nagar, New Delhi-110016.. Respondents. 'Regarding the work, 'Supply (Except Refrigeration Machinery) and installation or air-conditioning plant, air handling units weather makers, fan coil units, pipe lines and other accessories in the main plant room, ward block, paying bed wards and O.P.D. at Aiims, New Delhi.'

Whereas I, C.P. Malik of C-4/38, Safdarjang Development Area, New Delhi-110016, was appointed as S:)le Arbitrator by Dr. V. Ramalingaswamy, on behalf of the Estate Committee of the A.1.1.M.S. and as its Member Secretary vide his letter No. Engg./Elect./WB/17/Arb./5433-34 dated l6th August, 1977, to decide the disputes that had arisen between the two parties mentioned above in respect of the work quoted above. The disputes were shown in the statement enclosed with his letter of 16.8.1977, which were partly modified vide his letter No. Engg,/Elect./WB-17/Arb/7t42-43 dated 25th October, 1977; and Whereas I entered on references on 17.8.1977; and whereas the parties hive consented to extent the time to make and publish the award till 31.5.1978 and Whereas I have read and considered the pleadings and documents filed by the two parties and have heard and considered the arguments advanced by them. Now, thereforee, I hereby make and publish my award as follows :

____________________________________________________________________________ Dispute/Claim No. Award ____________________________________________________________________________ Claim No. 1. On account of Sales The claimants have not Tax Etc. Rs. 211834.90 modified beenable to establish this later on to Rs. 256787.50 by claim. member Secretary vide his letter of 25th October, 1977. . ____________________________________________________________________________ Claim No. 2. On account of Ex- The claim is justified but cise Duty increased by an Act of to the extent of Rs. Parliament, Rs. 36,306,44 which 37,455.15paiseonly. ____________________________________________________________________________ figure was changed to Rs. 37,475.15 vide ARCO's letter dated 3rd February,1978. ____________________________________________________________________________ Claim No. 3. On account of Octroi The claim is justified to Duty Rs. 1,712.48. the extent of Rs. 1548.90 only. ____________________________________________________________________________ Claim No. 4. Wrong deduction on The deduction is justic account of Water Charges Rs.5,000.00 . fied. ____________________________________________________________________________ Claim No. 5 Deducted amount for The respondents have not bill for repairs to false ceiling been able to justified this Rs. 1,000.00. deduction. ____________________________________________________________________________ Claim No. 6. On account of re- The recovery of Rs. 714.00 covery of Income Tax Rs.714.00 . on account of income tax This claim was later on amended to is justified. The amount '15th and final bill (minus recovery of final bill viz. Rs. of Rs. 714.00 on account of 2% in- 35,715.00 is payable to the come tax) dated 25th March, 1975 claimants. prepared by Assistant Engineer (AC and R) Rs. 35.715.00 ' vide Member Secretary's letter dated 25th October, 1977. ____________________________________________________________________________ Claim No. 7. On account of Security This amount of Rs. by Deposit Rs. 25.000.00 . 25,000/. should berefunded to the claimants. ____________________________________________________________________________ Interest: A sum of Rs. 11,700.00, is awarded to claimants as interest up to the date of this award. ____________________________________________________________________________ The parties to bear their own costs. ____________________________________________________________________________ Now, thereforee, on consideration of the claim, I do hereby make this award that the respondents. The All India Institute of Medical Sciences, AnsariNagar,NewDelhi-IIOOt6,dopay to the claimants, M/s American Refrigerator Company Ltd. 20-A, Shivaji Marg, New Delhi-11,0015. Rs, 1,11,414.05 (Rupees one lakh, eleven thousand, four hundred and fourteen and paise five only) and the claimants do pay to the respondents Rs. 5,714.00 (Rupees five thousand seven hundred and fourteen only). In witness whereof I have signed this award at New Delhi this 18th day of May, 1978. sd/- C.P. Malik, Arbitrator'

(4) On May 30, 1978 the said arbitrator modified his award and he sent the following letter to the parties : '(1) Dr. V. Ramalingaswamy, 30.h May, 1978. Member Secretary, Estate Committee, All India Institute of Medical Sciences, Ansari Nagar, New Delhi-110016. (2) M/s. American Refrigerator Co. Ltd. 20-A, Shivaji Marg, New Delhi-110015. Subject : In the matter of arbitration between M/s. American Refrigerator Co. Ltd. New Delhi, and the Aiims on the work 'Supply (except Refrigeration Machinery), and Installation of air-conditioning plant air-handling units, weather makers, fan coil units, pipe lines and others accessories in the main plant room ward Block, paying bed wards and O.P.D. at Aiims, New Delhi. Dear Sir, Please refer to my letter of 18th May, 1978 with which a copy of the award made and published by me in this case on 18th May, 1978 and had been sent to you. Shri K.C. Manglani of M/s. American Refrigerator Co. Ltd. rang me up on 29.5.1978 to say that the amounts of deduction of Rs.5,000.00 and Rs. l,000.00 mentioned in claim Nos. 4 and 5 respectively had already been deducted and that the amount of the final bill viz. Rs. 35.715.00 had been arrived at after making these deductions. This was confirmed by a representative of the Aiims when he also reng me up in this very connection. In view of what is stated above, the last but one para of the award is hereby modified to read as follows :

'NOW, thereforee, on consideration of the Claims, I do hereby make this award that the respondents, the All India Institute of Medical Sciences, Ansari Nagar, New Delhi-110016 do pay to the claimants, M/s American Refrigerator Co. Ltd. 20-A, Shivaji Marg, New Delhi, 110015 Rs.1,12,414-05 (Rupees one lakh, twelve thousand, four hundred and fourteen and paise five only) and the claimants do pay to the respondents Rs. 714.00 (Rupees seven hundred and fourteen only)'.

(5) By letter dated 30th May, 1978 the respondent was directed to pay to the petitioner a sum of Rs. 1,12,414-05 and a sum of Rs 714.00 was ordered to be paid by the petitioner to the respondent.

(6) The arbitrator filed the award dated 18th May, 1978 and the letter dated 30th May, 1978, in court along with the proceedings. Notice of the filing of the award was given to the parties. The petitioner filed objections, (I.A. No. 3323 of 1978) claiming that the petitioner was entitled to the sales tax as per agreement, that the arbitrator has erred in rejecting the petitioner's claim for payment of Rs. 2,56,787-50 on account of sales tax, that the arbitrator erred in refusing to grant future interest, that the award be modified accordingly. The respondent filed objections, (I.A. No. 3322 of 1978) to the effect that the arbitrator having given his award dated 18th May, 1978 had no jurisdiction to modify the same by his letter dated 30th May, 1978.

(7) The question for consideration is whether there is any error apparent on the face of the award and as such the award is liable to be set aside or modified. Counsel for the petitioner has raised the following points; (a) That the modification of the award dated 18th May, 1978 by the arbitrator's letter dated 30th May, 1978 is valid and in any case as there are clerical mistakes or efforts arising from accidental slip or omission the same may be corrected by the court. (b) That there is error apparent on the face of the award in as much as the arbitrator disallowed the petitioner's claim No. 1 regarding sales tax, although under the arrangement the respondent had agreed to pay the same and that the award be modified allowing sales tax to the petitioner. By Arbitrator's letter dated 30th May, 1978 modifying the award it appears that the amounts of Rs. 5.000.00 and Rs. l,000.00 under claims Nos. 4 and 5 respectively were deducted by the respondent from the amount of the final bill i.e. Rs. 35,715.00 . Under claim No 5 the arbitrator held that deduction of Rs. l,000.00 by the respondent on account of repairs to false ceiling was not justified. In other words the petitioner was held to be entitled to Rs. l,000.00 from the respondent. The total amount/ awarded to the petitioner was under claims Nos. 2,3,5,6,7 and on account of interest as above comes to Rs. l,12,414.00 and not Rs. l,ll,414.00 and as this is a clerical mistake it has been rightly corrected by the arbitrator by letter dated 30th May, 1978. Underclaim No. 4 the petitioner claimed that the deduction of Rs 5.000.00 on account of water charges was wrong but the arbitrator held that it was not wrong, meaning thereby that the petitioner is not entitled to claim this amount of Rs. 5,000.00 from the respondent. In the award dated 18th May, 1978 the arbitrator held that Rs 5714.00 apparently being the figures under claims Nos. 4 and 6 decided against the petitioner, is due to the respondent. But the respondent having already recovered water charges from the final bill is not entitled to recover again. The arbitrator in his letter dated 30th May, 1978 has held that this amount of Rs.5000.00 has already been deducted from the amount of the final bill and thereforee he reduced the amount of Rs 5714.00 to Rs.714/. as the amount due to the respondent from the petitioner. These two items which have been corrected by the arbitrator by his letter dated 30th May, 1978 are clerical mistakes or have arisen out of accidental slip when determining the total amount due to the petitioner from the respondent and vice versa.

(8) Section 13 of the Arbitration Act is as under : 'S. 13. The arbitrator or umpire shall, unless a different intention is expressed in the agreement, have power to : (a) Administer oath to the parties and witnesses appearings; (b) State a special case for the opinion of the court on any question of law involved or state the award, wholly or in part, in the form of a special case of such question for the opinion of the court; (e) Make the award conditional or in the alternative; (d) Correct in an award any clerical mistake or error arising from any accidental slip or omission; (e) Administer to any party to the arbitrator such interrogatories as may, in the opinion of the arbitrators or umpire, be necessary.' Under this provision the arbitrator is entitled to correct clerical mistaken and errors arising from any accidental slip or omission. By letter dated 30th May, 1978 the arbitrator corrected the errors arising from accidental slip. The learned counsel for the respondent argued that once an award has been made the arbitrator ceases to have jurisdiction to make any correction in the award. This is not correct.. Under Section 13(d) of the Arbitration Act the arbitrator has power to correct such mistakes in the award. It is, thereforee, held that the modification of the award dated 18th May, 1978 by the arbitrator as per this letter dated 30th May, 1978 is in accordance with law.

(9) RE. Claim No. 1. The contention of the petitioner's counsel that there is error apparent on the face of the award His argument is that mere reading of the agreement between the parties discloses that there is no ambiguily relating to respondent's liability to pay sales tax. The respondent has specifically agreed to pay all the amounts as detailed in the petitioner's letter dated 24th April, 1967. The figures given in the agreement show the price of the material labour charges and the amount of sales tax separately. If by mere reading of the agreement the court can come to the conclusion that the arbitrator was wrong in refusing to award sales tax to the petitioner, it must be held that there is error apparent on the face of the award. No argument is needed to support the petitioner's claim for sales tax. No record of proceedings is required to be referred to determine whether there is error apparent on the face of the award. When the arbitrator has given his award and if a reference to the agreement suggests that there was an unambiguous agreement whereby the respondent agreed to pay sales tax to the petitioner it appears to me that the arbitrator was not justified in ignoring the specific agreement between the parties. If an error can be found out by mere making a reference to the award and the agreement between the parties which is the basis of the award it seems to mi that there is an error apparent on the face of the award. The learned counsel for the respondent urged that there is no error apparent on the face of the award. He says that agreement cannot be looked into and if the agreement is to be looked into the contract is for a composite work, ie., the price of machinery and its installation charges. I do not agree. The court can look into the agreement between the parties, as it is the basis of the award. The price of machinery, labour charges and sales tax have been given separately in the agreement. Sales Tax at the rate of 10% has been claimed in the agreement on the value of machinery only. When Labour charges and price of machinery are mentioned separately one cannot say that it is a composite .contract of installation.

(10) In Beant Singh v. Union of India and others : [1977]2SCR122 , it has been held that an error to be apparent must be one which does not take prolonged arguments to bring it to the surface. The Supreme court is also observed that this proposition is quite well established. In the present case one has to refer to the agreement alone and to no other document and by simple reading of the agreement one can come to the conclusion that there is no ambiguity regarding the payment of sales tax on the price of machinery. It appears that as no agrument is required on this question it must be held that there is an error apparent on the face of the award. The term regarding payment of sales tax is unambiguous. The respondent agreed to pay the price of the material detailed in the agreement, the labour charges and sales tax.

(11) Now the nixt question is the court can look into the agreement. I think, the court can do, so. In M/s Alopi Parshad and Sons Ltd. vs. Union of India AIR. 1950 S.C.588 the court in para 19 observed as follows:

'WHEN the contract expressly stipulated for the payment of charges at rates specified therein, we fail to appreciation what ground, the arbitrators could ignore the express convenants between the parties, and award to the agents amounts which the Union of India had not agreed to pay to the agents. The award of the arbitrators. awarding additional expenses under the head of establishment and contingencies together with interest thereon is on the face of it erroneous'.

(12) In this case before the Supreme Court establishment and contingency charges were expressly stipulated and there was no dispute that the Government paid to the Agents those charges at the stipulated rate. inspire of this agreement the arbitrator allowed the enhanced amount to the contractor. The Supreme Court after referring to the agreement held that the arbitrator could not ignore express covenents between the parties and it was held that awarding of additional expenses was on the face of it erroneous.

(13) In the present case also there is a specific agreement between the parties regarding the payment of sales tax by the respondent to the petitioner The court can look into the agreement. The arbitrator cannot ignore the express term contained in the agreement to pay sales tax. It is thereforee held that refusal by the arbitrator to allow sales tax to the petitioner in spite of express agreement is an error apparent on the face of the award. The petitioner is entitled to sales tax.

(14) The award of the arbitrator on claim No. 1 is, thereforee, invalid. This part of the award is distinct and separate from the rest of the award. As this portion of the award is separate from the other parts of the award there is no justification for remitting or setting aside the entire award. Normally award ought to be remitted bank to the arbitrator to correct it in the light of the judgment but it is likely to involve undue delay and expenses. The contract is of April. 1967, under the agreement there cannot be two opinions on the question of liability of the respondent to pay agreed sales tax.

(15) The learned counsel for the petitioner submitted that this court should amend the award. The learned counsel for the respondent objected to this course but no cogent reason was given why this court should not adopt a course which was normally in the interest of justice. I, deem it fit and proper in the facts of the present case to amend the award by allowing afurther sum of Rs.2,56,787.50 on account of sales tax to the petitioner. The arbitrator has held Rs. 1,12,414 05 as due to the petitioner from the respondent and after adding the amount of sales tax Rs. 2,55,787.50 a total sum of Rs. 3.69,201.55 is held to be due to the petitioner from the respondent. After deducting the sum of Rs. 714.00 awarded to the respondent a net sum of Rs.3,68,487.55 is determined as payable by the respondent. In The Upper Ganges Valley Electricity Supply Co. Ltd. The Electricity Board. U. P., : [1973]3SCR107 , the Supreme Court in similar circumstances amended the award.

(16) I accordingly dismiss the objections filed by the respondent and accept the objections of the petitioner and after amending the award in the manner as stated above, the same is made a rule of the court and a sum of Rs. 3,68,487.55 is held to be payable to the petitioner by the respondent. A decree for Rs. 3,68,487.55 is passed in favor of the petitioner against the respondent. Under Section 29 of the Arbitration Act, I further award interest to the petitioner against the respondent at 12/o per annum on Rs. 3,68,487.55 from the date of the decree till realisation. The petitioner shall also be entitled to costs of these proceedings.


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