Bharat Sanchar Nigam Ltd.& Anr vs Motorola India Pvt.Ltd

4. The relevant facts, which would assist us in appreciating the controversy involved are narrated in a nutshell, which are as follows:

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% of the value of delayed quantity or part thereof, for a period of upto 10 weeks thereafter. It is the case of the appellants that the respondent had failed to complete phase I and phase II of the project within the schedule as provided in the tender document, and therefore, liquidated damages were imposed by the Tamil Nadu Circle of the appellant on 21st of May, 2004 under clause 16.2 of the tender document, quantification of which was 4 beyond the purview of the arbitration agreement. There was an exchange of correspondence between the Tamil Nadu Circle of the appellant alleging the delay in the purchase of goods and the respondents denying any such delay and objecting to the levy of liquidated damages. On 24th of March, 2006, the respondent invoked the arbitration clause by sending a letter through its counsel to the appellants to which they did not concede and justified the imposition of liquidated damages. The respondent filed an arbitration application before the High Court of Kerala at Ernakulam for the appointment of arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 in respect of the liquidated damages assessed by the appellant. In the counter affidavit filed in the High Court, 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 arbitrable. The High Court, as noted herein earlier, by the impugned 5 judgment allowed the arbitration request of the respondents holding that the imposition of liquidated damages by the appellant was not an "excepted matter"

There will be no objection to any such appointment on the ground that the arbitrator is a Government Servant or that he has to deal with the matter to which the agreement relates or that in the course of his duties as a government servant he has expressed his views on all or any of the matters in dispute. The award of the arbitrator shall be final and binding on both the parties to the agreement. In the event of such an arbitrator to whom the matter is originally referred, being transferred or vacating his office or being unable to act for any reason whatsoever, the CGM, Kerala Telecom Circle, BSNL or the said officer shall appoint another person to act as an arbitrator in accordance with the terms of the agreement and the person so appointed shall be entitled to proceed from the stage at which it was left out by his predecessors.........."

20.For the reasons aforesaid, we are of the view that the High Court was justified in passing the impugned judgment and there is no infirmity in the impugned order for which we can interfere with the order of the High Court. The appeal is therefore dismissed. There will be no order as to costs.