LexBHARAT SANCHAR NIGAM LTD. & ANR. versus MOTOROLA INDIA PVT. LTD.
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[2008] 13 S.C.R. 445 BHARAT SANCHAR NIGAM LTD. & ANR. A v. MOTOROLA INDIA PVT. LTD. (Civil Appeal No. 5645 of 2008) SEPTEMBER 15, 2008 B ~' i [TARUN CHATTERJEE AND LOKESHWAR SINGH PANTA, JJ.) Arbitration and Conciliation Act, 1996: s.11 - Excepted matter- Agreement speaking of /iabil- c ity of supplier to pay liquidated damages to purchaser on ac- count of delay in delivery - But not pmviding for any adjudi- catory process for determining delay- Levy of liquidated dam- ages - Held: Is not excepted matter and hence is arbitrable. s.11 - Appointment of arbitrator - Limitation - lmposi- D tion of liquidated damages by supplier - Notice by purchaser for appointment of arbitrator - Supplier/Appointing authority failing to act within time prescribed under the Act - Petition under s.11 by purchaser- Right of supplier to appoint arbitra- E tor - Held: Once minimum of 30 days had expired and peti- tion under s.11 is filed in the court, appointing authority loses right to make appointment. Contract Act, 1872: s.28 - Restraint of legal proceed- ~· ings - Provision in agreement that quantification of Liquidated F Damages by purchaser would be final and cannot be cha/- /enged - Held: Such provision would be in violation of s. 28 and s. 7 4 of the Act. The appellant awarded the tender for turnkey project in favour of respondent and issued an Advance Purchase G Order. The Purchase Order provided the terms for pay· ment and the schedule for delivery of the goods. It also provided for liquidated damages in the event of failure on the part of respondent to meet with the delivery sched- 445 H 446 SUPREME COURT REPORTS [2008] 13 S.C.R. A ule. Clause 16.2 of the general conditions of the tender document provided for liquidated damages to the extent of 0.5% of the value 'of the delayed quantity of the goods and services for each week of delay or the part thereof for a period of upto 10 weeks and thereafter charge 0.7% B of the value of delayed quantity or part thereof, for a pe- • . riod of upto 10 weeks thereafter. It was the case of appel- lants that the respondent failed to complete phase I and phase II of the project within the schedule as provided in the tender document, and therefore, liquidated damages c were imposed by the appellant under clause 16.2 of the tender document. The respondents denied any such de- lay and objected to the levy of liquidated damages. On 24th of March, 2006, the respondent invoked the arbitra- tion clause by sending a letter to the appellants. The ap- D pellants in their reply did not concede and justified the imposition of liquidated damages. The respondent filed an arbitration application be- fore the High Court for appointment of arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 in E respect of the liquidated damages assessed by the ap- pellant. The appellant alleged that the liquidated damages assessed and quantified by the appellant under clause 16.2 of the tender document was an excepted matter as per clause 20.1 of the said document and, therefore, not F arbitrable. The High Court held that the imposition of liq- » uidated damages by the appellant was not an "excepted matter" and therefore, was subject to arbitration. Hence the present appeal. Dismissing the appeal, the Court G HELD: 1.1. From a bare reading of clause 16.2 of Sec- tion Ill of the tender document, it is clear that if the ten- derer fails to deliver the goods and services on turnkey basis within the period prescribed, the purchaser shall H be entitled to recover liquidated damages and the quan- BHARAT SANCHAR NIGAM LTD. &ANR. v. 447 MOTOROLA INDIA PVT. LTD. tum of the liquidated damages assessed and levied by A the purchaser would be final and not challengeable by the supplier. The question to be decided is whether the liability of the respondent to pay Liquidated Damages and the ,~ntitlement of the appellant, to collect the same from the respondent is an excepted matter for the purpose of B clause 20.1 of the General Conditions of contract. The au- thority of the purchaser to quantify the Liquidated Dam- ages payable by the supplier arises once it is found that the supplier is liable to pay the damages claimed. The decision contemplated under clause 16.2 of the agree- c ment is the decision regarding the quantification of the Liquidated Damages and not any decision regarding the fixing of the liability of the supplier. [Paras 9, 10]
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