Union of India Vs Jindal Rail Infrastructure Limited (Delhi High Court)
Facts- The petitioner (Ministry of Railways) invited tenders for the manufacture and supply of some wagons. The respondent (JIRL) submitted the bid and was declared the lowest bidder. Accordingly, the petitioner issued a Letter of Acceptance to the respondent for the supply of wagons.
Thereafter, the parties entered into the contract and the petitioner issued an order for supply of 1871 wagons. In terms of the Optional Clause, the petitioner reserved the right to increase/decrease the ordered quantity up to 30% of the ordered quantity during the currency of the Agreement, on the same price and terms and conditions, with a suitable extension in the delivery period for the optional quantity.
Accordingly, the petitioner awarded a contract for supply of 1075 wagons to L-2 tenderer at the rates quoted by the said tenderer. Aggrieved by the dual pricing followed by the petitioner, the respondent raised its grievance with the petitioner and sought parity of treatment and fixation of uniform pricing for the wagons.
In the meantime, another tender was floated by the petitioner and the respondent was awarded another contract for supply and manufacture of 292 BOXNHL wagons.
The respondent again requested the petitioner to agree to its demand and increase the price of the wagon under the additional order. On receiving no positive response, the respondent invoked the arbitration clause for the adjudication of its claims qua the dual pricing of wagons. The respondent nominated its executive director as sole arbitrator. Accordingly, the respondent filed a petition Section 11 of the A&C Act for appointment of an arbitrator the said petition was allowed. The Arbitral Tribunal awarded a sum of INR 18,35,20,000 being difference in value of 496 numbers of wagons at the contract price and market price. Aggrieved by the impugned award, the petitioner has filed the present appeal.
Conclusion- It is not necessary that all contracts yield a profit; some result in a loss as well. This is not a factor to permit a party to avoid its contractual obligations.
In cases where it is found that the terms of the contract do not clearly express the intentions of the parties, it is open to seek recourse to various tools of interpretation. This would include interpreting a contract in a manner that would make commercial sense as it is assumed that men of commerce would have intended it so. However, it is not open to re-work a bargain that was struck between the parties on the ground that it is commercially difficult for one party to perform the same.
The decision of the Arbitral Tribunal to award the difference between the price quoted by the tenderers and the price quoted by JRIL, is unsustainable. It amounts to re-writing the contract between the parties. The impugned award is in conflict with the fundamental policy of Indian law and is vitiated by patent illegality.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioners have filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the ‘A&C Act’) impugning the arbitral award dated 01.03.2019 (hereafter the ‘impugned award’) rendered by the Arbitral Tribunal comprising of a Sole Arbitrator (hereafter the ‘Arbitral Tribunal’).
2. The impugned award was rendered in the context of disputes that had arisen between the parties in connection with an agreement dated 12.06.2015 entered into between petitioner no.1 (hereafter ‘the Railways’) and the respondent (hereafter ‘JRIL’).
Factual Background
3. JRIL is, inter alia, engaged in the manufacture of Railway Rolling Stock for the Indian Railways.
4. On 13.01.2015, the Railways issued a ‘Bid Invitation and Schedule of Requirement’ [E-Tender bearing no 2014/RS(I)/954/36 (TC)] followed by the Corrigendum dated 25.03.2015, inviting electronic bids, for the manufacture and supply of the following wagons: –
