Delhi District Court Union Of India vs M/S Derpa Industries Polymers (P) Ltd on 30 November, 2021 IN THE COURT OF SH GURVINDER PAL SINGH, DISTRICT JUDGE (COMMERCIAL COURT)02, PATIALA HOUSE COURT, NEW DELHI OMP (Comm.) No. 192/2019 Union of India Through Director General DGOS Army Headquarters, MGO Branch, CP Cell, Procurement Section, OSPII, New Delhi110010 ...Petitioner versus M/s DERPA Industries Polymers (P) Ltd. Through its Director 56, Rural Industrial Estate, Loni; District Ghaziabad201102 ...Respondent Date of Institution : 18/10/2019 Arguments concluded on : 30/10/2021 Decided on : 30/11/2021 Appearances : Sh. Ashish Sharma, Ld. Counsel for petitioner. Sh. B.S Mathur, Ld. Counsel for respondent. JUDGMENT 1. Petitioner had filed the present objection petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), impugning the findings in respect of issue nos. (v) and (vi) in arbitral award dated 23/07/2019 passed by Sh. K. Venkatraman, Ld. Sole Arbitrator in ARB. Case DAC/2020/0418 titled M/s Derpa Industrial Polymers (P) Ltd. vs Union of India. Ld. Sole Arbitrator awarded Rs.5,23,179/ with interest @ 7.5% per annum with effect from 09/07/2015 till the date of its actual payment to respondent/claimant payable by OMP (Comm.) No. 192/2019 Union of India vs M/s Derpa Industries Polymers (P) Ltd. Page 1 of 28 petitioner. 2. I have heard Sh. Ashish Sharma, Ld. Counsel for petitioner; Sh. B.S Mathur, Ld. Counsel for respondent and perused the record of the case including the reply filed by respondent, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of petitioner as well as on behalf of respondent and given my thoughtful consideration to the rival contentions put forth. 3. Factual matrix of the case of parties in brief is as follows: Tender Enquiry/Request for Proposal (RFP) was floated by petitioner and respondent/claimant participated in it and submitted its quotation. The quotation of claimant was found lowest one and after completion of other formalities, a rate contract dated 31/01/2013 for supply of item Jungle Shoes 13,500 @ Rs. 645.90 per pair, total value Rs. Rs.87,19,650/ was placed upon claimant/respondent. Claimant/respondent accepted the same and furnished bank guarantee of Rs.8,71,965/ (i.e., 10% of total value of contract) valid up to 10/03/2015 along with letter dated 11/03/2013 as per terms and conditions of the contract. The supplies were to be completed in four installments and last installment was to be delivered on or before 30/11/2013. Request was made on behalf of claimant/respondent to extend the delivery period, which were accepted by petitioner. As per petitioner, it were so accepted subject to imposition of liquidated damages and therefore, 31/12/2013 was fixed as last date by which stores were to be delivered. Respondent/claimant supplied the quantity of stores in different quantity of lots and on different OMP (Comm.) No. 192/2019 Union of India vs M/s Derpa Industries Polymers (P) Ltd. Page 2 of 28 dates. The Board of Officers (BOO) of petitioner formulated as per the contract, opined that material used in each lots were of low and inferior quality and also lacked in parameters such as laces, finish, texture, shape, sole, toe, weight and discrepancy were clear on the face of it or on visual parameter. Show cause notice/letter dated 25/04/2014 was issued by petitioner to respondent/claimant. As per petitioner, no reply was received from claimant/respondent for aforesaid notice. Petitioner cancelled the contract on 11/03/2015 and forfeited the performance bank guarantee (PBG) of Rs.8,71,965/. Respondent/claimant opposed the forfeiture of PBG. Respondent/ claimant filed an application under Section 11 of the Act before Delhi High Court and Ld. Sole Arbitrator was appointed by Delhi High Court. Arbitral proceedings concluded in passing of impugned arbitral award. 4. Petitioner through Counsel has impugned the arbitral award mainly on the following grounds. Award is in violation of principle of natural justice. Ld. Sole Arbitrator applied the formula of "reasonableness" which is not only against the clear terms and conditions of the contract but also conclusion/ calculation of 40% 60% of PBG is non speaking, unreasonable and contradictory to other findings of Ld. Sole Arbitrator. Ld. Sole Arbitrator himself failed to explain how only 40%