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Thursday, October 29, 2015

Arbitral Tribunal was not competent to determine the price ?.=The submission that the Arbitral Tribunal was not competent to determine the price is also not well founded. It is a finding of fact by the learned Arbitral Tribunal that the price quoted was more than the price at which the same products/tools were supplied by the same supplier in Andhra Pradesh and therefore, after considering the relevant evidence, the Arbitral Tribunal determined a particular price i.e. Rs. 115 per kg. It cannot be said that determination of said price by the Tribunal in the aforestated circumstances was improper. The suppliers were bound as per the undertakings executed by them and as they had not acted as per their undertaking, it was open to the learned Tribunal to find out the correct lower price at which the tools of the same specifications, which were manufactured by the suppliers were available in the State of Andhra Pradesh and if in the aforestated circumstances, the Arbitral Tribunal determines the price, in our opinion, it cannot be said that the Arbitral Tribunal had exceeded its jurisdiction. - no fraud had been committed as alleged. If higher price had been charged by the suppliers in the contract than the price at which their products were sold in the State of Andhra Pradesh, it cannot be said that the suppliers had committed any fraud while entering into the contract. The parties may determine the price in the manner agreed upon by them. In the instant case, there was an undertaking in the nature of a proviso that if the price fixed in the contract is more than the price at which tools of same specifications manufactured by the same supplier were available in the State, the supplier would be entitled to the lesser rate. In our opinion, the manner of price determination by the Arbitral Tribunal, in the light of the undertakings executed by the suppliers, cannot be said to be irrelevant, incorrect or beyond jurisdiction.



                                                              NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO.8918 OF 2015
             (@ Special Leave Petition (Civil) No.15187 of 2010)



M/s. Chebrolu Enterprises

Rep. by its Proprietor Smt. Ch. Lakshmi Sesha Kumari

                                                   ….Appellant

                                VERSUS

Andhra Pradesh Backward Class Cooperative
Finance Corporation Ltd.                                …..Respondent



                                    WITH
                    C.A.No.8919/2015 @ SLP© No.15408/2010
                    C.A.No.8920/2015 @ SLP© No.15719/2010
                    C.A.No.8921/2015 @ SLP© No.15734/2010
                                     AND
                    C.A.No.8922/2015 @ SLP© No.18290/2010




                               J U D G M E N T

ANIL R. DAVE, J.



1.    Leave granted.
2.    In all these appeals validity of a common judgment delivered in  Civil
Misc. Appeal Nos. 973-995 of 2005 and 539, 674 and 675 of  2006  dated  14th
December, 2009 has been challenged.

3.    The aforestated Civil Miscellaneous Appeals  had  been  filed  in  the
High Court of Judicature, Andhra Pradesh at Hyderabad under  Section  37  of
the Arbitration and Conciliation Act, 1996 (hereinafter referred to as  ‘the
Act’) against a common order dated 14.03.2005 passed in  different  original
petitions, by the XIV  Additional  Chief  Judge,  City  Civil  Court  (FTC),
Hyderabad, dismissing the  original  petitions.  The  High  Court  vide  its
common judgment dated 14.12.2009 dismissed the aforestated appeals.

4.    Being aggrieved by the  said  common  judgment,  the  appellants  have
approached this Court by way of these appeals.

5.    The circumstances which gave rise to the present litigation in a  nut-
shell are as under:-

       The  Government  of  Andhra  Pradesh  had  launched  a  scheme  named
‘ADARANA’ under which certain tools  of  trade  necessary  for  Blacksmiths,
Carpenters, Dhobis etc. were to be  supplied  to  the  rural  artisans.  The
Government  was  to  purchase  the  tools  through  A.P.  Backward   Classes
Cooperative Financial Corporation Limited, a corporation set up for  welfare
of  the  persons  belonging  to  downtrodden  classes,  controlled  by   the
Government and  the  ‘State’  within  the  meaning  of  Article  12  of  the
Constitution of India. The  Respondent-Corporation  had  invited  quotations
for supplying iron boxes, iron  ring  used  for  placing  the  iron;  boxes,
buckets and bannas required in the  process  of  washing  clothes  etc.  The
present appellants had agreed to supply the “Razaka tools” at  a  particular
rate.  We do not go into the details as to  how  the  rates  were  finalized
after several meetings held  among  the  suppliers  of  the  tools  and  the
officers of the Respondent-Corporation. Suffice is to state  at  this  stage
that the suppliers, after several meetings and bargaining on both the  sides
had agreed to supply the tools at the rate of Rs.165 per kg in  six  coastal
districts   of   Andhra   Pradesh    namely,    Srikakulam,    Vizianagaram,
Visakhapatnam, East Godavari, West Godavari and  Krishna,  whereas  for  the
other remaining districts, the rate had been fixed at Rs.189.75 per  kg  and
the above rates were exclusive of sales tax.

6.    It is pertinent to note that when the agreement had been entered  into
with regard to supply of the tools by  the  appellants  to  the  Respondent-
Corporation, it was also agreed among the parties that  the  rate  at  which
the tools were offered was the lowest  rate  at  which  the  suppliers  were
selling the tools of the same specification in the State of Andhra Pradesh.

7.     Each  appellant  (who  has  been  referred  to  hereinafter  as  ‘the
supplier’) had also filed an undertaking stating that the prices quoted  for
supply of the tools were the lowest possible  prices  and  that  nowhere  in
Andhra Pradesh, the supplier was selling  those  products  at  prices  lower
than the price quoted. They had also undertaken to refund the difference  of
amount arising on account of any price difference in  the  price  quoted  by
them and lower price offered by them in the open market  in  Andhra  Pradesh
in respect of the tools.  One such undertaking  dated  22.04.1999  given  by
one of the suppliers is reproduced herein below:

                             “UNDERTAKING

“…..I, Smt. CHEBROLU  LAKSHMI  SESHA  KUMARI  Proprietor  of  M/s.  CHEBROLU
ENTERPRISES, hereby declare that the prices quoted for  the  supply  of  our
Products under ADARANA Project being implemented by Andhra Pradesh  Backward
Classes Cooperative Finance Corporation are the lowest possible  prices  and
nowhere in Andhra Pradesh,  we  are  selling  our  products  with  the  same
specifications at prices lower than the prices  we  have  quoted  under  the
said project.

I also  undertake  to  refund/authorizes  Andhra  Pradesh  Backward  Classes
Cooperative Finance Corporation to  deduct  excess  amount  paid  to  us  on
account of any price differential between higher prices quoted by  us  under
ADARANA  Project  and  lower  prices  offered  in  open  markets  in  Andhra
Pradesh……”



8.    Ultimately, the tools had  been  supplied  by  the  suppliers  to  the
respondent-Corporation but it was  found  that  the  rates  which  had  been
charged by the suppliers were neither reasonable  nor  were  the  lowest  at
which the suppliers had sold their products similar to the  one  which  they
had supplied to the Respondent-Corporation  and  therefore,  a  dispute  had
arisen among the parties and the dispute had been referred  to  an  Arbitral
Tribunal, as agreed upon by the parties in the agreement  dated  22.04.1999.
The aforestated facts are not in dispute.

9.    The learned Arbitral Tribunal ultimately came to the  conclusion  that
the amount charged by the suppliers was excessive  and  therefore,  made  an
Award dated 11.03.2002  in  favour  of  the  Respondent-Corporation  to  the
effect that the suppliers were entitled to only Rs.115 per kg towards  price
of the tools supplied by them and the claim exceeding the  said  amount  had
been rejected.  It was also provided in the Award that the  amount  be  paid
with interest @ 6% per annum with effect from the  date  of  claim  petition
i.e. 26th April, 2001 till the date of the payment.

10.   The suppliers, being aggrieved by the Award, challenged  the  validity
of  the  Award  by  filing  original  petitions  before  the  Court  of  XIV
Additional Chief Judge, City  Civil  Court  (Fast  Track  Court),  Hyderabad
under the provisions of Section 34 of the Act. After hearing  the  concerned
parties, the said original  petitions  were  dismissed  and  therefore,  the
suppliers  approached  the  High  Court  with  the  above   referred   Civil
Miscellaneous Appeals.  The  said  appeals  have  also  been  dismissed  and
therefore, the present appeals have been filed by the suppliers before  this
Court.

11.   The issues that fall for determination in these  appeals  are  whether
the suppliers had committed any fraud or fraudulent  misrepresentation  upon
the Respondent-Corporation and whether  any  breach  of  contract  had  been
committed either by the  suppliers  or  by  the  respondent-Corporation  and
further, whether the price fixed by the Arbitral Tribunal was reasonable  or
whether it was open to the Arbitral Tribunal to determine the price  of  the
tools  which  had  been  supplied  by  the  suppliers  to  the   respondent-
Corporation.

12.   We have heard  the  learned  counsel  appearing  for  the  parties  at
length.  Upon hearing the learned counsel, looking at the facts of the  case
and upon perusal of the relevant documents, including the agreement  entered
into  between  the  suppliers  and  the   respondent-Corporation   and   the
undertakings given by the suppliers in relation to supply of  tools  at  the
lowest price in the State, we are of the view  that  the  impugned  judgment
delivered by the High Court is just and proper.

13.   The price at which the tools had to be supplied had been  fixed  after
negotiations and efforts were made to bargain on the  subject  of  price  by
both the sides. Ultimately, a particular price  had  been  determined  as  a
result of the negotiations and the agreements  with  different  parties  had
been entered into by the respondent-Corporation for purchase of the tools.

14.   The  most  important  factor  to  be  considered  is  the  undertaking
executed by each supplier to the  effect  that  the  tools  which  the  said
supplier had agreed to  supply  to  the  respondent-Corporation  was  to  be
charged at the lowest rate at which the said supplier had sold his tools  in
the State of Andhra Pradesh.  In other words,  the  supplier  had  not  sold
tools to anybody at a price lower than the price offered by the supplier  to
the respondent-Corporation.

15.   A  copy  of  the  undertaking  executed  by  each  supplier  has  been
reproduced hereinabove. By virtue of the  said  undertaking,  the  suppliers
had assured the respondent-Corporation that the prices quoted for supply  of
the tools under ADARANA project were the lowest prices and that  nowhere  in
Andhra Pradesh, they had sold their tools with the  same  specifications  at
prices lower than the prices which had been quoted by  them  for  supply  of
the tools to the respondent-Corporation for ADARANA project.

16.   The effect of the undertaking was that if  the  rate  which  had  been
quoted by the suppliers in their agreement was more than the rate  at  which
the said tools were sold by  them  in  the  State  of  Andhra  Pradesh,  the
suppliers  would  refund  the  excess  of  price  charged  by  them  to  the
respondent-Corporation.

17.   The contract entered into  by  the  suppliers  on  one  hand  and  the
respondent-Corporation  on  the  other  was  subject  to   the   aforestated
undertaking given by  the  suppliers.   So,  if  the  price  quoted  in  the
agreement is ‘X’ per kg. for the tools supplied by the suppliers but if  the
tools of the same specifications were being sold by  the  suppliers  in  the
State of Andhra Pradesh for a price lower than ‘X’, say at  price  ‘Y’,  the
respondent-Corporation was supposed to pay rate ‘Y’ and not ‘X’,  which  had
been agreed upon in the contract.

18.   As there was a dispute with regard to the price and as the respondent-
Corporation had found out that rate quoted in the contract was  higher  than
the rate at which the tools of the same specifications had been supplied  by
the suppliers in the State of  Andhra  Pradesh,  the  respondent-Corporation
had withheld the payment and in  the  circumstances  the  dispute  had  been
raised and the suppliers had made their claim before the  Arbitral  Tribunal
for payment of the remaining amount of price.

19.   The learned Arbitral Tribunal considered all factors and the  evidence
which was adduced before it and came to the conclusion that the price  which
had been quoted by the suppliers and which  had  been  agreed  upon  in  the
contract  was  higher  than  the  price  at  which   tools   of   the   same
specifications were sold by the suppliers in the State  of  Andhra  Pradesh.
In the circumstances, the learned Arbitral Tribunal came to  the  conclusion
that the suppliers were entitled to the price of tools lesser than  the  one
which had been agreed upon in the  contract  because  the  same  quality  of
tools, which had been manufactured by the suppliers, were sold  by  them  in
the State of Andhra Pradesh at a lower price.

20.   Determination of price in the aforestated  manner  is  a  question  of
fact.  This Court or even the  Appellate  Court  would  not  look  into  the
finding of facts unless they are perverse. In the instant case, neither  the
City Civil Court in the proceedings filed before it under Section 34 of  the
Act nor the High Court in the proceedings under Section 37 of the Act  could
find anything wrong with the finding of facts arrived  at  by  the  Arbitral
Tribunal. This Court under Article 136 of the Constitution  of  India  would
not like to  interfere  with  the  concurrent  finding  of  facts,  save  in
exceptional circumstances or unless the finding is perverse.

21.   For the aforestated reasons, in  our  opinion,  the  determination  of
price by the Arbitral Tribunal cannot be faulted with.

22.   The submission  that  the  Arbitral  Tribunal  was  not  competent  to
determine the price is also not well founded.  It is a finding  of  fact  by
the learned Arbitral Tribunal that the price quoted was more than the  price
at which the same products/tools were  supplied  by  the  same  supplier  in
Andhra Pradesh and therefore, after considering the relevant  evidence,  the
Arbitral Tribunal determined a particular price i.e. Rs.  115  per  kg.   It
cannot be said that determination of said  price  by  the  Tribunal  in  the
aforestated circumstances was improper.  The suppliers  were  bound  as  per
the undertakings executed by them and as they had not  acted  as  per  their
undertaking, it was open to the learned Tribunal to  find  out  the  correct
lower price at which the  tools  of  the  same  specifications,  which  were
manufactured by the suppliers were available in the State of Andhra  Pradesh
and if in the aforestated circumstances, the  Arbitral  Tribunal  determines
the price, in our opinion, it cannot be said that the Arbitral Tribunal  had
exceeded its jurisdiction.

23.   In our considered opinion, no fraud had been committed as alleged.  If
higher price had been charged by the suppliers  in  the  contract  than  the
price at which their products were sold in the State of Andhra  Pradesh,  it
cannot be said that the suppliers had committed  any  fraud  while  entering
into the contract.  The parties  may  determine  the  price  in  the  manner
agreed upon by them.  In the instant case, there was an undertaking  in  the
nature of a proviso that if the price fixed in the  contract  is  more  than
the price at which tools of same specifications  manufactured  by  the  same
supplier were available in the State, the supplier would be entitled to  the
lesser rate.

24.   In our opinion, the manner of  price  determination  by  the  Arbitral
Tribunal, in the light  of  the  undertakings  executed  by  the  suppliers,
cannot be said to be irrelevant, incorrect or beyond jurisdiction.

25.   For the aforestated reasons, we do not find  any  substance  in  these
appeals and the same are dismissed with no order as to costs.



                                                              ……..……………………J.
                                          (ANIL R. DAVE)


                                                             ……..…………………….J.
                                            (VIKRAMAJIT SEN)

NEW DELHI;
OCTOBER  28, 2015.

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