M/S AROSAN ENTERPRISES LTD. versus UNION OF INDIA AND ANR.

Citation: [1999] SUPP. 2 S.C.R. 621 · Decided: 16-09-1999 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

MIS AROSAN ENTERPRISES LTD. 
A 
v. 
UNION OF INDIA AND ANR. 
SEPTEMBER 16, l 999 
[B.N. KIRPAL AND UMESH C. BANERJEE JJ.] 
B 
Contract Act 1872-Section 55-Time as essence of the contract-
Contractor for supply of sugar within specified time-But contract also 
provided for extension of time-Buyer not fulfilled some of ~is obligations-
Neither the port of discharge named nor the surveyor appointed-Further C 
buyer cancelled the contract for non-supply within time and later withdrew 
the cancellation order and again cancelled contract-Held, time is not the 
essence of contract and mere fixation of time for delivery of goods will not 
make it essence of contract-Jn such a case agreement shou.ld be read as 
whole alongwith corresponding obligations of the parties in order to gather D 
the true intention-Further, no presumption about extension of time or 
presumed acceptance of a renewed date would arise-More so, withdrawing 
of cancellation order of the contract by the buyer amounted to wavier of non-
performance by seller-Further, silence on the part of the buyer to the 
repeated request of the seller for extension of time forfeited his right under 
the contract and does not entitle the buyer to cancel the contract. 
E 
Letter of Credit-Bank cannot raise a dispute as to whether the gooqs 
have been supplied within time or not-It is rule of prudence to have extended 
delivery date on the letter of credit by way of amendment and the counter 
guarantee should stipulate the delivery date-Buyer must state whether 
amendment in the letter of credit was necessary or not. 
F 
Arbitration Act, 1940-Section 30 and 33-Court's interference with 
the arbitration award-Scope of-Default, time if essence of contract, quantum 
of damages are issues of fact-Held, courts have no authority to interdict an 
award on factual issues-Further, in case of speaking award, unless there is G 
total perversity court cannot set aside the award by reappraising the 
evidence. 
Respondents entered into a contract with the appellants for supply of 
sugar within specified time. The shipment within the contracted delivery 
period was to be the essence of contract. In case of delay the appellants were H 
621 
622 
SUPREME COURT REPORTS [1999] SUPP. 2 S.C.R. 
A deemed to be in contractual default with a right to the respondents to cancel 
the contract. Appellants furnished bank guarantee. TherJafter, the 
respondents assigned the contract to the Food Corporation of India. Then, the 
Corporation opened a letter of credit for full value of the contract; however, 
its authentication was not effected within the delivery date. Even then, the 
B respondents cancelled the contract for non supply of sugar within time. 
Subsequently they withdrew the cancellation order but the letter of withdrawal 
did not contain any new date of delivery. Appellants reminded the corporation 
to fax the delivery date and take steps to effect the payment But the respondents 
and corporation maintained total silence. Respondents cancelled the contract 
on the ground of failure on the part of the appellants to fulfil its contractual 
C obligations within the stipulated time. The performance bank guarantee of 
the appellants was also forfeited. By the reason of forfeiture the matter was 
referred to the arbitrator. The arbitrator published the award to the effect 
that the appellants were entitled to refund of performance bank guarantee 
amount This arbitral award was sustained by the Single Judge. In appeal, 
the Division Bench held that the respondents had accepted the new date of 
D delivery by which the appellants were bound to deliver and the failure of the 
appellants to supply by the said date amounted to breach of contract and thus, 
set aside the order of the Single Judge and also the arbitral award. Hence 
this app~al. 
E 
Allowing the appeal, the Court 
HELD: 1.1. Where time is essence of the contract there is no question 
of any presumption or presumed extension or presumed acceptance of a • 
renewed date. When there is no specific date available in the course of 
conduct of the parties, then courts are not left with any conclusion but a 
finding that the parties themselves by their conduct have given a go-by to the 
F original term of contract as regards the time being essence of the contract 
[632-E-G] 
1.2. When the contract provides for extension of time, th_e same cannot 
be termed to be essence of the contract and default in such a case does not 
G make the contract void

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