Director General School Education-Cum-State Project Director vs. M/S Unifab Textiles And Another

Facts

The Director General School Education-cum-State Project Director (appellant) invited bids for the supply of school uniforms. M/s Unifab Textiles (respondent) was the successful bidder, agreeing to supply 5 lakh sets by March 31, 2019. The appellant extended the deadline to April 8, 2019. Subsequently, the appellant issued a show cause notice for non-compliance, alleging only 2,83,383 sets were supplied by April 15, 2019. The respondent's reply was deemed unsatisfactory, leading the appellant to forfeit the bank guarantee, blacklist the company, and withhold further payments. The respondent-manufacturer then filed a petition for arbitration, resulting in the appointment of a Sole Arbitrator. The Arbitrator awarded the respondent `8,02,54,075/- minus deductions for delayed delivery, declined claims for delivery and transportation costs, but allowed the claim for the forfeited bank guarantee of Rs. 1.5 crore with interest. The appellant's objection petition under Section 34 of the Arbitration and Conciliation Act, 1996, was dismissed by the Additional District Judge-cum-Commercial Court.

Held

The Court held that the Additional District Judge had jurisdiction to pass the impugned order. Regarding the technical specifications and delivery time, the Court found that the Arbitrator had rightly observed that the appellant had made part payment by imposing penalties and had accepted the uniforms, which were used by the students. The Arbitrator's view that the payment for remaining uniforms could not be withheld entirely and should be released subject to penalty was deemed just and equitable. The Court agreed with the Arbitrator that the delay in supply was adequately dealt with by imposing penalties, and the dismissal of objections by the Additional District Judge was based on equity. The Arbitrator was found to have acted within the terms of the agreement, passing a reasoned award. The contention regarding parity was implicitly rejected as the Court found the present appeal devoid of merit. The Court found no reason to set aside the Arbitrator's findings under Section 34 of the Act.

Key Issues

1. Whether the Additional District Judge had jurisdiction to pass the impugned order as a 'commercial dispute' under the Commercial Courts Act, 2015, given the relevant notifications designating specific Additional District Judges as Commercial Courts? The appellant argued that the designated court lacked jurisdiction. 2. Whether the Arbitrator's findings regarding the technical specifications of the fabric and the time period for delivery were perverse and patently illegal, particularly in light of Clauses 17 and 18 of the e-tender document? The appellant contended that the Arbitrator erred in holding that the penal clause could not be invoked and that the respondent was entitled to payment, failing to appreciate the distinction between "supply" and "acceptance" of goods. 3. Whether the dismissal of objections and acceptance of the Award were sustainable on grounds of parity, given that other similar awards in favour of other manufacturers were set aside? The appellant argued that the Award in favour of the respondent was upheld despite similar circumstances where other awards were set aside. The respondent did not record specific arguments on this point.